What Is Brand Cannibalization? Why Is It Dangerous to the Retailer

Question

Examlex · Accepted Answer

The Answer is Answers will vary. Brand cannibalization refers to the reduction of sales for one brand as the result of the introduction of a new product or promotion of a current product by another brand. Brand cannibalization is dangerous to the retailer for two reasons. First, the retailer incurs significant expense in executing the promotion itself. Second, the promotion creates inaccurate sales forecasts for both the promoted and cannibalized products, leading to stockouts of the promoted brand and financial losses from discounting surplus inventory of the cannibalized brand. The latter types of losses can sometimes be significantly greater than the cost of the promotion itself. Therefore, retail managers should design their promotional activities carefully, with gaining new customers being the primary objective.

What Is Brand Cannibalization? Why Is It Dangerous to the Retailer

Definitions: