There are a lot of new product development research projects that I do, where one of the most important questions is “do we think that this new product will cannibalize existing sales of the same product category, or could this new product attract a new group of customers, who up until this point have not purchased this type of product" (thus growing the entire market for that type of product).
This distinction is critical to Product Marketing Managers as they develop new products – because if the new product is going to cause a new type of customer to enter an established product in a profitable way, it probably makes a lot of sense. However, there are other cases where a new product is being considered that might simply cannibalize that same company’s existing products (resulting in SKU proliferation and reduced profit margins for the company overall!) In most cases this doesn’t make much sense unless it’s a defensive move to protect the product line from a competitor stealing market share because the current product line is insufficient.
Here’s an innovative product distribution model that forces the question about whether it will grow the market overall by bringing in new customers, or if it will simply cannibalize current sales. I was walking through the San Francisco airport a couple of weeks ago when I saw these enormous vending machines. However they were selling some very high end products (such as Blaupunkt headsets, a Sony digital camera, a number of Ipods, voltage converters) as well as products that you would more traditionally expect to see in a vending machine. The vending machines accepted credit cards and had a very impressive video display that walked the customer through the key benefits of each product that they sold.
So what do you think? Will these vending machines cannibalize sales or grow the market? Evidently the companies that are putting their products in these vending machines are betting that this distribution model will reach new customers who might buy their products on an impulse.
Chris Hawkes
