Estimating Cannibalization Rates for Pioneering Innovations
Presentation
Based on Marketing Science article: Van Heerde, Harald J., Shuba Srinivasan, and Marnik G. Dekimpe (2010), "Estimating Cannibalization Rates for Pioneering Innovations," Marketing Science, 29 (6), 1024-1039.
Teaching Objective
To evaluate the success of a new product, managers need to determine how much of its new demand is due to cannibalizing the firm's other products. This paper develops a new model that allows managers to decompose the demand for a pioneering innovation into cannibalization, brand switching, and primary demand expansion. The new methodology is applied to the introduction of the Lexus RX300. Demand is shown to originate from different sources, with considerable cannibalization of Lexus sedan sales. Managers of the pioneering brand can use the proposed approach to evaluate the net sales of the new product.
Keywords: new product, cannibalization, aggregate response models, time-series models, missing data