How to Not Cannibalize Your Existing Product With a New One
Companies producing products that are well received with consumers are very tempted to model their next product closely to the first. Even I am guilty of falling into this trap. When I was designing challenge coins and selling them on eBay in 2006, I would think “What if I just changed this a little and make even more money?”, and it was always a bad idea. Most of the time it just resulted in less sales of the original and I reduced the perceived value of my offerings. I learned my lesson quickly and prevented that from happening again by documenting timelines and trying to introduce new products with dips in sales. I also never designed “like” products again unless they were sets.
You can always research and try to prevent missteps while introducing a new product. I can offer a few ideas on how to avoid that situation as well. If you have 2 similar products then you need to really understand both of their impacts on your market. Making slight variations of products for the sake of having more or hoping for more reach is a bad way to build your offerings. In fact, if you are small enough, it can quickly crush your business.
Here are some quick questions you should ask yourself. Once you have answered these yourself, you can ask someone close to you the same questions to make sure you have a sanity check. You can never have enough sanity checks!
- Why am I creating this new product?
- Does this new product solve the same problem as the previous one does?
- Does it look similar or even remotely close to the older one?
- Should I/we discontinue the older product and sell this one as an upgrade?
- Have I done any market research to find out if the new product has consumer reach?
Of course, I could add a hundred more questions to the list. The point is, if the new product doesn’t bring a different value then it’s not needed. A good example of solving different problems is the spork. It’s not a fork or a spoon, but it’s close enough. The primary selling point is that it’s only one utensil. The food industry loves this because it’s cheaper. KFC is a huge customer of the spork and that’s just one of many businesses that purchase a lot of sporks! It’s just different enough not to cannibalize the sale of forks and spoons on the consumer level, otherwise we wouldn’t see them on shelves.
Making a product just to make one isn’t enough. If you make a blue fork, then 6 months later you make a green one, you will have cannibalization. The colors don’t solve a problem, the function still remains. So, if you want to avoid cannibalization, make sure it solves the problem better, or differently.
I ran a t-shirt business in 2008 and I had about 600 different designs to throw a shirt in the heat press and seal the design onto the material. Each week the design companies would call or I would get the new catalog in the mail to see all the new stuff they had to sell me. Something in my head said to me that I had to keep adding inventory so I had something for everyone. I didn’t want to miss a sale. All the while, I was cannibalizing my business. Instead of selling 20 of this design, I was selling 1 of 20 different designs. I wasn’t getting anywhere with this method. Eventually I saw what was going on and trimmed down rapidly by selling some of the stock designs to other heat press businesses in the area. I may have had a loss from it, but I gained that experience to share the story with you.
Brand loyalty can assist in overcoming cannibalization. For example, each new iPhone is almost the same as the previous one, but it’s changed enough to solve newer issues. Perhaps it’s multi-touch or a snappier processor. Maybe the purchase this year is because of the style and prestige. Some people will just naturally want anything you create because they love you. That’s an amazing achievement. All businesses want this result, and you can have it as long as you have products that scream highest quality and popularity.
Brand loyalty might not be enough though. Consider soda. Coke makes different drinks, but they know that one product will cannibalize the others so they just adjust for that. Not everyone can survive such a tactic, but they have the money to ensure they can. These large corporations have saturated their markets so the only thing they can do is create diversity and hope people drink more. If you are reading this, then you probably haven’t reached Coca-Cola’s popularity.
I always try to go for brand loyalty because of the long game. Some companies can do just fine for a bit by just focusing on quantity. That’s the “Here, buy this cheap widget” approach know full well that the customer probably won’t be back due to low quality, high volume. B2C and B2B are always on the hunt for better and cheaper. Your brand will always suffer if you choose price over quality so keep that in mind. Quality can help prevent the erosion on your products when you increase your catalogue.
Research, Test, Poll
The largest part of avoiding the cannibalization effect is doing the right research and analysis upfront. You might be developing Widget A for years to only find out there is no market for it. Instead we look at the competitive landscape and find problems your products can solve. That’s the correct way to address a need. You should never try to create a need or a hype to solve an issue. A prime example of this recently is the app Meerkat. There was this fake media hype that this app was needed by everyone. They had a lot of people talking about it and pushing hard to get a buzz going. Then, Twitter introduced Periscope. It did the same thing as Meerkat, but had a huge presence behind it. Sometimes size matters.
Meerkat still exists for now, but the likelihood of them overcoming Twitters app is unlikely. Meerkat had millions in investments from people and companies that believed they had something special. I have no doubt they did, but the false media attention that was undoubtedly created by the investors and Meerkat collapsed once Periscope was revealed. There is a prime example of not knowing your playing field. People didn’t really want it, didn’t really understand it, and ultimately didn’t download it. If the correct research and market testing had been done they would have known this ahead of time.
This is why you see app developers inviting beta testers or even using a service like Fiverr to buy testers to get feedback on the product. You can find the people to give you honest feedback and if you can’t then you need to pay some testers. That’s the cost of doing business. This initial step can’t be overemphasized. There is countless products that were amazing, offered for sale, and realized no one wanted one.
There are solutions to protect you from cannibalization. The most effective methods are going out and doing street testing. You can do control test with volunteers. You can split test A/B, or find your own methods to see if the target consumer base sees each product separately or not. If they do enjoy both, then you successfully created two products that stand on their own. Ultimately, your business’s future depends on your tenacity to correctly gauge your market and customer base. Sometimes harsh business practices play a part as well, but I will reserve that for a future post.
I am glad you read this and I hope this helps you think about where you are in your product development and team building. Everyone wants to succeed, but the harsh reality is 9 out of 10 small businesses fail for one reason or another. Don’t let this be one of them.
- A/B Split Testing
- Control Testing
- Street Testing
- Mail Products to Reviewers
- Look for Influencers That Can Give You an Online Audience
- Great Marketing
- Solve New Problems
- Hire a Team to Research