What is product displacement?

Product displacement, also known as cannibalization or substitution, is a phenomenon wherein a new product introduced by a company reduces the sales of an existing product in the market. This can happen due to various reasons, such as the introduction of a superior product by a competitor, changes in consumer preferences, or the introduction of a more economical alternative for an existing product.

Product displacement can be both beneficial and detrimental to a company. On one hand, it can lead to increased sales and revenue through the introduction of a new product. On the other hand, if the new product cannibalizes the sales of an existing product, it can reduce the overall revenue of the company.

To avoid product displacement, companies must carefully evaluate the potential impact of introducing a new product on their existing product line. They must also focus on product differentiation and innovation, so that customers have a reason to choose their existing products over the new ones. Strategic pricing and marketing can also help to mitigate the impact of product displacement on sales.