How To Catch Product Cannibalization Before You Launch

Imagine you run an ice cream company and your chocolate ice cream is a top seller. 

It would only make sense to double down on that finding and launch a “double chocolate” version — extra rich, more indulgent. 

But, what happens? The visitors who used to buy regular chocolate just switch to the double. You didn't bring in any new customers with your new offering. You just made your existing chocolate fans even happier. Same customers, different SKU, but no growth. This is product cannibalization in action.

Product cannibalization happens when a new product eats into the sales of an existing one you offer. Instead of attracting new customers by launching a new SKU, that new SKU ends up being a substitute for a purchase that would have already been made from your current lineup.

In short: You didn't grow the pie, you're just slicing it differently.

Sounds scary.  And it can be.  Because the damage can go beyond just flat sales.

If product cannibalization makes customers move in the wrong way, it can kill your margins (i.e., customers trading down to cheaper options).  

It can also weaken your brand's competitive edge by confusing buyers who can't decide between too many similar products.

When you've invested millions in R&D, marketing, and shelf space, discovering through sales data that you've only rearranged existing purchases rather than created new ones is devastatingly expensive. The solution? Test your assumptions before betting millions on them!

How Conjoint Analysis Predicts and Prevents Cannibalization

At Numerious, we help companies predict product cannibalization before it happens using conjoint analysis, a research method that simulates real shopping decisions.

Instead of asking people what they want (which rarely matches what they actually buy), conjoint puts them in realistic scenarios where they have to choose between your new product, your current offerings, and competitors' options. Just like in the real world, they can't have everything at the perfect price. They have to make trade-offs.

The result is a powerful simulation tool that gives you market share projections for which products would perform better when competing head-to-head. This simulation answers critical questions like:

• Will launching this new SKU cannibalize my hero product?

• How much share would I gain at this price point with a this new SKU?

• Should I keep the old SKU or remove it entirely when launching the new one?

• Does this new SKU bring in new customers or is it just shifting existing ones?

With a simulator tool, you can test out all the different launch scenarios (keeping your old product versus retiring it, pricing high versus low, different feature combinations) and see what might happen.  Better yet, you can do all this in a competitive environment — with your brand and SKU options pitted against the competition. This helps you understand exactly where customers will come from and where they'll go.

And if you’re really savvy, you can turn the insights from these simulations into revenue projections. The simplest approach is to take the market share predictions from the simulator and multiply it by your planned pricing.  Once you do this for all the scenarios, you can compare the financial impact of each option. Better yet — factor in your costs, and you can identify which strategy will be most profitable.  Seems like a no brainer to me! 🤓

Real-World Success Story: B2B SaaS Platform

A leading B2B software company came to us with what their C-suite thought was a stroke of genius. They currently offered only “full user” licenses, but they wanted to add a "view-only" license — stripped-down of its features and at a significantly lower price point.

The logic seemed bulletproof. Companies could add more users to the subscription without hitting budget constraints, creating deeper organizational engagement and stickier renewals. With this expansion, they'd sell more licenses, generate more revenue... 

or so they thought.

After running a conjoint experiment with their target audience, we set out to simulate these two scenarios.  One with only full user licenses and one with both full and view-only licenses.  Looking at the results across various company sizes and use cases, the results shocked everyone. The viewer-only option didn't attract new users as expected. Instead, it triggered a mass migration.

Companies looked at their existing full-license users and started making cuts: Sarah from accounting? She didn't really need FULL access. And the marketing team? They could get by with just reading the reports.

One scenario after another painted the same picture. Rather than expanding their user base, the company would have simply watched existing customers downgrade to cheaper seats, textbook product cannibalization. The "revenue growth" strategy would have become a revenue killer. But because they tested the strategy with conjoint analysis before launch, they avoided product cannibalization and saved millions in lost revenue.

If this doesn’t teach you to run research before making a pricing and packaging decision, I don’t know what will.  

And if you’re a B2B software company considering new licensing strategies — this doesn’t mean expanding your offering will result in cannibalization.  But it does mean you should test it to make sure!  Because your customers’ decisions are more complex than a spreadsheet. Test first. Learn fast. Then launch with confidence.

When Product Cannibalization Actually Works

Now, I know I just spent this entire article telling you how to avoid cannibalization. But … plot twist!  Sometimes you actually want it!  

Take Apple's deliberate move to cannibalize their iPod sales with the launch of the iPhone. They placed a big bet on the idea that the iPhone would eventually kill standalone music players, so they chose to kill their own product before someone else did.

Tesla pulled a similar play when they launched the Model 3, knowing it would steal buyers from their premium Model S. Musk was willing to cannibalize his high-end sales to dominate the broader EV market and get as many people as possible driving electric.

The difference? These weren't accidents — they were strategies.

Apple understood the technology shift coming and positioned themselves to lead it. Tesla wanted to accelerate the world's transition to sustainable transport. Both companies cannibalized intentionally, with clear strategic goals that went beyond protecting existing sales.

The key insight here is that cannibalization becomes a problem when it's unplanned and undermines your business goals. But when it's deliberate and serves a larger strategy, like market expansion, competitive defense, or driving industry transformation, it can be brilliant.

The Bottom Line on Product Cannibalization

The most successful companies share one thing in common: they test their assumptions before betting millions on them. Product cannibalization represents one of the biggest blind spots in new product development. Conjoint analysis eliminates this guesswork.

By simulating real market conditions, you can see how customers will likely respond to your new offering before you commit resources. Will it steal from your bestsellers or compete with rivals? Will it attract fresh buyers or just shuffle existing ones? These aren't questions you want to answer with live sales data.

The earlier you model cannibalization, the more flexibility you have to adjust features, optimize pricing, reposition products, or pivot entirely. Your next launch doesn't have to be a leap of faith. Make it a calculated win.

Ready to walk into your next launch with confidence? Get in touch with Numerious to learn how conjoint analysis can guide your next product decision.