Degree Of Cannibalization Research Articles

Joint pricing and inventory decision under a probabilistic selling strategy

This study examines whether probabilistic selling could enhance inventory management considering market size uncertainty in a rather general setting. We propose to study the impact of probabilistic selling on the profit, price and order quantity within a newsvendor framework. By comparing probabilistic selling against traditional selling, we find that probabilistic selling could generally increase firm’s expected profit. Moreover, the firm will increase the price and the order quantity for the component product. The impact of various aspects, i.e. the demand variance, the unit cost and the degree of cannibalization, on the pricing and order decisions are investigated through numerical experiments.

Impact of Digital Distribution in the Publishing Market: A Synthetic Control Approach

Digitization has dramatically transformed the landscape of content distribution. Yet, little is known about the disruption caused by digitization in one of the most important content products: books. In particular, there has been scant research on how ebooks influence the existing print channel, especially in non-US markets. The goal of the current study is to fill this gap and provide a comprehensive understanding of the economic impacts of the ebook channel on the print book channel. We argue that in less mature ebook markets, consumers may not have yet developed clear preferences with respect to the new digital channel vis-a-vis the existing print channel, thereby resulting in a lesser degree of segmentation. This in turn can lead to more severe cross-channel competition and cannibalization by the ebook channel, compared to mature ebook markets. Specifically, we address the following research questions: (1) Does the introduction of an ebook cannibalize the sales of its print version? and (2) If so, is the degree of cannibalization affected by ebook distribution strategies (i.e., ebook discount rates and ebook release timing) and book characteristics (i.e., the number of pages and reading time)? By employing the synthetic control approach to analyze actual sales and revenue data obtained from a large book retailer, we found that, on average, an ebook release decreases weekly print sales by 1.34%. Interestingly, the total dollar revenue, including both print books and ebooks, slightly increases after an ebook release, indicating that the additional revenue from the new ebook demand outweighs the loss of print book revenue due to cannibalization. We also found that 1) a higher discount rate for an ebook has no statistically significant impact on the degree of cannibalization, while delaying ebook releases mitigates the cannibalization effect; and 2) books with a longer reading time tend to experience more severe cannibalization, whereas the number of pages does not influence the degree of cannibalization. Our findings are robust to a series of sensitivity analyses. The contributions and managerial implications of these findings are discussed.

Kookaburra Cricket Bats: Dealing with Cannibalization

This exercise is one in a series intended to help students learn how to perform financial calculations in marketing contexts.Kookaburra, a maker of cricket equipment popular in Australia, New Zealand, the United Kingdom, South Africa, and India, was considering two strategies for positioning a new cricket bat in India. Both strategies would cannibalize current sales, and Lulu Popplewell, category manager responsible for the Indian market, needed to calculate the financial impact of both to determine which one she would recommend.This exercise poses a fictional problem about branding strategy on a new product, and asks students to consider the financial impact of different branding strategies and cannibalization rates.After completing the exercise, students should be able to: Calculate the impact of cannibalization on units and profit for a new product launch Determine break-even cannibalization rates Understand how different branding decisions may impact the degree of cannibalization they should expect from a new product launch

Pricing, market coverage and capacity: Can green and brown products co-exist?

Environmental strains are causing consumers to trade up to greener alternatives and many brown products are losing market coverage to premium-priced green rivals. In order to tackle this threat, many companies currently offering only brown products are contemplating the launch of a green product to complement their product portfolio. This paper provides strategic insights into and tactical ramifications of expanding a brown product line with a new green product. Our analysis explicitly incorporates a segmented consumer market where individual consumers may value the same product differently, the economies of scale and the learning effects associated with new green products, and capacity constraints for the current production system. It is shown that a single pricing scheme for the new green product limits a firm’s ability to appropriate the value different customers will relinquish in a segmented market and/or to avoid cannibalization. A two-level pricing structure can diminish and even completely avoid the salience of cannibalization. However, when resources are scarce, a firm can never protect his products from the threat of cannibalization by just revising the pricing structure which can spell the end of his brown product’s presence in the market or preclude the firm from launching the green product. At this point, the degree of cannibalization is higher for the brown product when the green product offers a sufficiently differentiated proposition to green segment consumers.

Proposal of New Objective Measures for Mining Association Rules: Cannibalization and Unexpectedness

In view of the problems that a few of the existing measures for association rules does not directly meet user’s requirements, and association mining algorithms produce huge number of trivial rules, this paper proposes two new objective measures for mining association rules to solve the problems. The first measure is the degree of cannibalization between itemsets, which is bounded up with marketing strategy, and the second is the objective measure that intends to discover unexpected rules in the database. Experimental studies with application to public dataset and comparison of running time using synthetic datasets demonstrate the validity and effectiveness of the proposed measures.

Product Portfolio Strategies: The Case of Multifunction Products

Motivated by the proliferation of multifunction products, we investigate product portfolio decisions of a single firm by analyzing the impact of three major factors. First, because multifunction products provide complete or partial functionalities of single‐function products, we incorporate substitution or cannibalization effects between the potential products. Second, we explicitly model the variable costs of manufacturing the single‐function and multifunction products. Third, we examine the firm's pricing decisions because of their impact on the degree of cannibalization between the multifunction product and one or more single‐function products. Using an economic model, we first characterize the firm's optimal product portfolio (through a quantity‐based decision), which in turn determines the market equilibrium prices for each product in its portfolio. Some of the unique insights stemming from our analysis are: (a) the optimal product portfolio choice is driven primarily by maximum profit margins for the single‐function products weighted by the demand substitution effects; and (b) from a product design perspective, the complete functionality of the base single‐function product is always included in the optimal product offering, but this is not necessarily the case with the complete functionality of the nonbase single‐function product.