Cannibalization#
When a new offering eats into sales of an existing one.
Important
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What it is#
Cannibalization is the reduction in sales or revenue of an existing product, service or channel caused by introducing or promoting a new one from the same company. Put plainly: your new sales come at the expense of your own old sales, not from genuine market growth.
Two examples#
A discount campaign cuts 20% off a product; many loyal customers who would have paid full price simply buy at the discount, so the apparent uplift is really full-price sales shifted into discounted ones. A product launch does the same across a portfolio: when a company releases its newest phone, part of that model’s strong sales comes from customers who would have bought the previous model anyway — the new revenue cannibalises the old.
The formula#
In uplift and ROI analysis, cannibalization enters as a negative adjustment:
where the cannibalization loss is the revenue lost from existing products because of the treatment.
Why it matters#
Ignore it and campaigns look more successful than they are — the overestimation risk. Accounting for it forces whole-portfolio thinking rather than single-product metrics, so true impact is incremental gain minus treatment cost minus cannibalization. In short, cannibalization is stealing from yourself: the hidden downside of a promotion or launch that must be subtracted from uplift to find the real net benefit.
Theme: Business & Growth Analytics · All terminology
Hint
Mind map — connected ideas
Revenue net of treatment cost · Incremental Revenue · Treatment Cost · ROI (Return on Investment) · Incremental Gain · Conversion Rate Uplift
Hint
More in Business & Growth Analytics
Blended CAC (Customer Acquisition Cost) · CAC (Customer Acquisition Cost) · Channel-Specific CAC (Customer Acquisition Cost) · Churn · Cohort · Cohort-Based LTV (Simple Version) · Conversion Rate (CR) · Cost-Per-Click (CPC) Models · Cross-Selling · CTR (Click-Through Rate) · Customer Lifetime · Customer Segmentation · D2C (Direct-to-Consumer) · FTEs
See also
Source article Adapted (context, re-expressed) in our own words from: Cannibalization (insightful-data-lab.com).