Cannibalization

As new versions of an existing products are introduced, they have the potential to “cannibalize” the current version’s demand; that is, consumers begin to buy more of the new version and less of the old. This effect manifests itself through a characteristic decay in demand that occurs faster than may be observed using traditional life cycle modeling techniques. By capturing this effect, it can then be further explored to fit their individual business cases.

Cannibalization is a life cycle modeling technique that examines how an existing product will be affected by the introduction of a successor product. Available only for Life Cycle demand models, it uses several unique parameters to explore how the new product can potentially influence the life cycle curve of the existing product. These include:

• New Product Launch Date - Date on which new product is launched, after which the demand series is cannibalized.
• End of Life Date (optional) - If known, the cannibalized demand is truncated at a desired date.
• Innovator Impact Threshold - Reflects the impact that innovators have on demand in delaying the purchase of a new product. After the New Product Launch Date, the demand series is cannibalized once the cumulative demand meets or exceeds [Innovator Impact Threshold] * [maximum growth] as estimated by life cycle modeling.
• Cannibalization Rate, A multiplicative effect that can be applied to the derived cannibalization rate. Values greater than 1 or less than 1 reflect increased or decreased cannibalization rates, respectively.

The use of the Cannibalization technique is entirely optional and can be used to evaluate a specific time series.