Cannibalization: It is a process of creating different sub-brands of the parent brand so that the parent brand can grow its customer base by targeting large numbers of customers. Most of the time, after launching a new product, the new product “eats” up the sales and demand for an old popular product.
Few interesting examples:
Since 2007, Apple has launched a new iPhone every year. What happens to the sales of the existing models? They reduce. But why do the companies do this then?
If you don't cannibalize yourself, someone else will !
When the tech giant invents a new iPhone, it doesn’t shy away from releasing it into the market. It ensures that their newer version is available in all their chain stores. It causes the sales of their older iPhones to drop significantly. However, Apple makes up for this loss by capturing its competitors’ current customers, hence increasing its customer base.
Digestive introduced a low-fat version of its brand. It knows some of its sales will be cannibalized from the original brand, but it hopes to expand its market share by appealing to health-conscious consumers who otherwise would buy a different brand.
Coca-Cola launched different flavors in the hope of acquiring a bigger market share not caring about the initial cannibalization. Over time, Coca-Cola realized that loyal customers still preferred the original formula, which prompted them to react by revising their strategy to marketing the original formula as the “Classic Coke” and the rest of the flavors as either seasonal or festive beverages.
The "Starbucks on every corner” is suffering of cannibalization of sales through overexpansion. It had become difficult for Starbucks to maintain its status as a premium brand because it was “everywhere”.