Decoding Cannibalization
If you are dealing with a product suite here’s how you ought to plan & factor in the after-effects of a possible cannibalization…
What’s the biggest challenge that product orgs. have been facing since time immemorial & do face on a day-to-day basis even to date?
Of course, when one happens to pop this question to cofounders, one is bound to get a varied set of responses highly specific to problems that they may be facing at that given moment. Having said that there’s one problem that could hold good for all businesses universally at almost all times / phases across the lifecycle of the org. & I think this visual here by [Brad Sugars] sums it up pretty well.
Not just 10, the problem befalling cofounders could run into multiples of that number. But the one challenge that’s right there on the top of the list “FINDING AND MAINTAINING CUSTOMERS” is easily one of the most common challenges any business in general or product org. in particular could face over the course of their whole existence.
“The success of any org. would boil down to the [NUMBER OF ACTIVE CUSTOMERS] (number of paying customers in most cases) which could be summarized by one metric & that is RETENTION”
But here are a few million-dollar questions…
· Would it suffice for a product org. to build a “single-feature product” & roll it out so as to gun for a market share that’s good for eternity?
· If not, how would one go about the job of keeping the users enticed?
· Would it be possible that an org. thinks of building a product that can totally overhaul / replace its own best-selling product?
There could be many cases where orgs. envision & build a product that could be designed to eat into their own market share that they gained from prior releases, which in its sole essence is the very theory of Market Cannibalization.
Definition:
Market cannibalization is the act of strategically crafting & launching a new product with a deliberate purpose that is to overlap with a market captured over previous product / feature release(s), ultimately devouring their own market share in the process
For example:
An org. known for its line of bulky sophisticated music players (boom boxes) strategically launch a new AI-enabled dock that doesn’t just store & play music effortlessly but also connects seamlessly to other devices & the internet to access & share music.
As an aftermath of that strategic move, one would obviously witness a decline in sales of those bulky music players but the Dock could then quickly take-over its position & become the de-facto product for music in the market.
Having said that, this is also where things may go terribly wrong for most as it could be pretty easy to mess it all up. If you’re thinking of cannibalization as a strategy, here are a few aspects / angles you ought to deeply consider & weigh-out before you go ahead:
1. User experience
There’s absolutely no doubt that your users are going to feel the brunt of this move. Given how of your users may have made some deep emotional connections with your product / feature, it is possible they feel mentally fatigued about this whole decision, after-all resistance to change comes naturally to every user & the ones who are willing to accept it could be down to just a few. Ensuring that the users don’t feel out of place & constantly hitting them up with content that can help them figure how this change is targeted at their own betterment is going to be prove to be paramount over this scenario.
2. Continual value addition
How you’re going to provide continual value addition with this new product / feature release would be on prying the back of every user’s minds with some even choosing to get pretty vocal about it all, however major / minor their contribution to your revenues are. You ought to decipher ways that could help you convey how you are going to add value to them & that ought to include a solid content strategy alongside a pretty sophisticated marketing strategy as well. Why it makes sense for the users to switch to the new product in spite of being loyally associated to an existing one for a long-term is the question one ought to be able to find an answer for.
3. Onboarding strategy
Finalizing an onboarding strategy & baking all the understanding thus gathered into mentally preparing the users to make the move sans any sort of inhibitions ought to be the final step now. Even the experienced users may face some teething troubles over dropping a certain user flow that they have got used to all along & adopting to something entirely new. There could be a lot of handholding needed, detailed walkthroughs, connecting with the users via some remarketing so as to help clear any sort of clout.
“Cannibalization can never be good or bad all by itself, it is the strategy & the purpose behind employing it that often goes on to define the magnitude of its success”
If you think about it from a product team’s / leader/ entrepreneur’s standpoint, why would someone do something that would mean losing out on a significant portion of their own market share?
Gaining market share isn’t akin to a throw of a dice. It’d often take a pathbreaking product / a feature rollout which could obviously be a result of some hardcore research leading to an acute understanding of the collective behaviors & attitudes of the people ideally constituting the whole user base. And if it means the new product launch eating into the existing product’s market share, most times it could end up looking like a decision right out of a madman’s diary. But there could also be a huge bright side you may be missing out on if you come from that train of thought.
Just for ex: Apple launched iPhone post the runaway success of the iPod. When it meant a lot of traction on the new launch “the phone”, OTOH it also meant the iPod losing out badly & what happened post the phone’s launch is etched in history.
Staunch adopters of the iPod may not have liked the move at all, given how it’d have meant that they ought to bear the burden of carrying 2 devices in the pocket when the iPhone user just managed the entire thing with one of them. But the org. had multiple reasons to go ahead with the move, leading to the syndication of the iPod.
“It often takes a lot of proactive thinking to be able to envision, prepare & factor in the aftermath of a possible cannibalization & strategize towards driving it one’s favor. And one way or another some time, someone would come out with something else better than what the world is clinging on to now, it is always better if you are the one driving that change…”
So there are instances where such cannibalization strategies tend to augur well for the products & the org. so to speak.
Let’s run through some of them here:
1. Trump the Competition
Staying ahead in the competition could happen over 2 contingents.
First type would fairly compete with the other players in a product / market area, more often having to deal with navigating all the logjam generated as a result of the other’s market share, piercing through the loyal customers of the competition.
Second type would underpin innovation & ideate, build & launch a product that could revolutionize the way the users tend to function or achieve an outcome.
2. Ride the Market Tide
Your initiatives & strategy ought to obviously cater to a market, no doubt. And if there’s enough rationale pointing towards a new market whether it happens to be sparingly tapped / totally untapped there’s more meaning in pivoting on that, not just to ride the first mover advantage but also to gain handsome market share & maintain it for as long as possible.
The secret sauce here in this case could be deeply nuanced & immersive research towards helping plot the user behaviors & factoring in their attitudes.
3. Leading the Innovation
It’s never the case that a product launch can gain an org. a market share that’s good for life. With investments being poured in into innovation & breakthroughs happening at the pace of knots, it is important that an org. keeps innovating itself & its line of products on a regular cadence whilst also keeping pace with the market & their expectations.
By pinning on innovation to keep rolling out products that can mesmerize the target audience, orgs. tend to strategically phase out their existing products onboarding the users on to the new ones as they are launched. Also, with Tech advancements dictating innovation, it is possible that orgs devise strategies to deliberately keep rolling out new products that eat into the market share held by their existing products. No better way to steer clear & march miles ahead of the rat race.