How to Calculate Cannibalization Rate

Product Cannibalization Rate Calculator

Results

Cannibalized Sales: 0 units

Cannibalization Rate: 0%

function calculateCannibalization() { var newSales = parseFloat(document.getElementById("newProductSales").value); var expectedOld = parseFloat(document.getElementById("expectedOldSales").value); var actualOld = parseFloat(document.getElementById("actualOldSales").value); var resultDiv = document.getElementById("calcResults"); if (isNaN(newSales) || isNaN(expectedOld) || isNaN(actualOld) || newSales <= 0) { alert("Please enter valid positive numbers. New Product Sales must be greater than zero."); return; } var lostSales = expectedOld – actualOld; // If actual sales are higher than expected, cannibalization is effectively zero if (lostSales 50) { msg = "High Cannibalization: More than half of your new product's volume is coming at the expense of your existing line."; } else if (rate > 20) { msg = "Moderate Cannibalization: Your new product is significantly impacting your existing inventory."; } else { msg = "Low Cannibalization: Most of your new product sales appear to be incremental growth."; } document.getElementById("analysisMsg").innerText = msg; resultDiv.style.display = "block"; }

How to Calculate Cannibalization Rate

Market cannibalization occurs when a new product launch reduces the sales volume or market share of a company's existing products. Understanding the cannibalization rate is vital for product managers and marketers to determine if a new launch is generating incremental growth or simply shifting customers from one internal brand to another.

The Cannibalization Rate Formula

Cannibalization Rate = (Loss in Sales of Old Product) / (Sales of New Product) x 100

Key Components

• Expected Sales of Old Product: This is a forecast of what the old product would have sold during the period if the new product had not been released.
• Actual Sales of Old Product: The recorded sales of the existing product during the launch window of the new one.
• Loss in Sales: The difference between expected and actual sales (Expected – Actual).
• Sales of New Product: The total sales volume generated by the new offering.

A Practical Example

Imagine a beverage company that sells 10,000 units of "Classic Cola" monthly. They launch "Cola Zero" and sell 4,000 units in the first month. During that same month, "Classic Cola" sales drop to 8,000 units.

1. Loss in Old Sales: 10,000 (Expected) – 8,000 (Actual) = 2,000 units lost.
2. New Sales: 4,000 units.
3. Calculation: (2,000 / 4,000) x 100 = 50% Cannibalization Rate.

In this scenario, 50% of the sales for the new "Cola Zero" were actually just existing customers switching over, rather than new customers entering the brand ecosystem.

Why Tracking This Metric Matters

While some cannibalization is often expected (planned obsolescence), a rate that is too high can lead to decreased profit margins, especially if the new product has lower margins than the original. Conversely, if the cannibalization rate is low, it indicates strong market expansion and successful targeting of a new customer segment.