3 Tips for Avoiding Market Cannibalization at Your Small Business

When launching a new product or service for your brand, it's easy to become your own worst enemy.
businessplanning
Self-destruction is a small business's biggest adversary. Avoid it with planning and preparation. (Photo: crazystocker/Shutterstock)

Your small business is going swimmingly — so well, in fact, that you’ve decided to add new products or services to your offerings. But have you thought through how these new goods will impact sales of your existing products? Could you be unintentionally cannibalizing your own business?

Market cannibalization is when a new product “eats up” the sales and demand for an existing product, potentially reducing overall sales, even if sales of the new product are increasing.

Deborah Ginsburg

“Goal setting is valuable, take the time to look three to five years down the road and anticipate where the market will be.” -Deborah Ginsburg (Photo: Deborah Ginsburg)

According to Deborah Ginsburg, owner of boutique agency Strategia Design, self-cannibalization is a surprisingly common mistake for small business owners. “There is an eagerness to expand, launch and build the family of flavors or brands as soon as possible,” she said.

If you’re considering adding a new menu item, product or service to your existing offerings, follow these tips from Ginsburg to avoid market cannibalization at your small business.

Related: 3 Affordable Ways to Market Test a New Product or Service

Plan, research and plan again

One of the biggest mistakes leading to market cannibalization is poor planning, said Ginsburg. Fear that consumer engagement will peak, plateau and recede often leads businesses to expand their offerings without thoroughly looking to see how the new products will affect current sales.

Business plans are valuable. Goal setting is valuable,” she said. “Take the time to look three to five years down the road and anticipate where the market will be, what trends are emerging and evaluate objectively where your brand fits in.”

Thoroughly research the current market and what your competitors are doing, “but do not react yet,” Ginsburg advised. “Make sure you hold to your brand message and don’t try to morph into your competitors just because they are popular at the moment.”

Related: How to Keep Your Customers When a Competitor Moves In

Staying in tune with your business plan — and revisiting it regularly — will help ensure that any new products or services you add to the menu are well thought out and make sense with your overall strategy.

Follow the 80/20 rule

80-20

When choosing products to sell, it is important to remember that only about 20 percent of your products will deliver 80 percent of your profits. (Photo: seanbear/Shutterstock)

“When a product is successful, there is a lot of excitement and fear,” Ginsburg explained. “The excitement comes from a burst of sales and increased revenue, increased brand recognition and good reviews. It is like the endorphins you get from compliments, exercise and joy. Sometimes with the excitement comes this urge to bring more to market.”

When considering adding something new to your product lineup, look at your current sales for the category and know that only 20 percent of those products will deliver 80 percent of your profit, said Ginsburg. For example, a fashion boutique may not need to sell 20 different styles of black pants — four distinct styles may be enough.

Related: 7 Fashion Trends with Staying Power According to Google Data

“Be smart,” said Ginsburg. “Don’t force your customer to price shop within your own brand. As a brand delivers new sizes, flavors, etc., a customer unknowingly begins to price compare, offerings within the brand versus against the brand.”

Differentiate yourself

Simply knowing what sets your brand apart from the competition can also help you avoid cannibalizing your own business.

“Establishing the brand is key to longevity. The brand itself, what it stands for, the mission, vision, etc., is what consumers connect with. The flavor or varietal nature of the offerings is the next level of engagement. A strong brand can introduce and discontinue items seamlessly without damaging the core brand.”

Copying others won’t get you ahead, she continued. “Companies that add to their brand to make them deliver the same as their competitor do not strengthen the brand, they dilute it.”

Related: How to Boost Sales with Customized Products

Make sure that any new product or service fits in with (and contributes to) your business’s unique value proposition. Sometimes it can be helpful to invest in a consultant who can facilitate strategy meetings and keep you on track, without being “too close” to the project, said Ginsburg.

Consumers like trying new things, so keep in mind how a new offering could impact sales from your existing products — otherwise, you may end up eating your own profits.

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