Sibling Rivalry: Estimating Cannibalization Rates for Innovations

J. van Heerde Harald (), Srinivasan Shuba () and Dekimpe Marnik G. ()
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J. van Heerde Harald: University of Waikato, New Zealand
Srinivasan Shuba: Boston University School of Management, USA
Dekimpe Marnik G.: Tilburg University, The Netherlands / Catholic University Leuven, Belgium

NIM Marketing Intelligence Review, 2012, vol. 4, issue 2, 32-41

Abstract: To evaluate the success of a new product, managers need to determine how much of its new demand is due to cannibalizing the company’s other products, rather than drawing from competition or generating primary demand. A new model allows managers to estimate cannibalization effects and to calculate the new product’s net demand, which may be considerably less than its total demand. The new methodology is applied to the introduction of the Lexus RX 300 using detailed car transaction data. This case is especially interesting since the Lexus RX 300 was the first crossover SUV, implying that its demand could come from both the SUV and the Luxury Sedan categories. As Lexus was active in both categories, there was a double cannibalization potential. Indeed, demand is shown to originate from different sources and to vary over time. The results contain valuable insights for evaluating and managing brand extensions.

Keywords: Innovation Management; Product Introduction; Cannibalization; Category Management; Line Extension; Response Models; Time Series Analysis; Dynamic Linear Models (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:gfkmir:v:4:y:2012:i:2:p:32-41:n:6

DOI: 10.2478/gfkmir-2014-0033

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