Definition

Cannibalization refers to the reduction in sales (or revenue) of an existing product, service, or channel caused by the introduction or promotion of a new product, campaign, or channel from the same company.

In other words:

when your new sales come at the expense of your own old sales, not from genuine market growth.

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Example 1 – Retail Promotion

• You run a 20% discount campaign on Product A.
• Many loyal customers who would have bought at full price instead buy with the discount.
• Revenue uplift appears high, but in reality, you just shifted full-price sales into discounted sales → cannibalization.

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Example 2 – Product Launch

• Apple launches the iPhone 15.
• Sales of the iPhone 15 increase, but some customers would have bought the iPhone 14 anyway.
• iPhone 15 revenue looks strong, but part of it cannibalizes iPhone 14 sales.

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Mathematical Treatment

In uplift/ROI analysis, cannibalization is a negative adjustment:

$\text{Net Revenue} = \text{Incremental Revenue} – \text{Treatment Cost} – \text{Cannibalization Loss}$

Where:

• Cannibalization Loss = Revenue lost from existing products due to the treatment.

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Why It Matters

• Overestimation Risk: If cannibalization is ignored, campaigns may seem more successful than they are.
• Strategic Planning: Helps decide whether to launch new products or promos, considering total portfolio impact, not just single-product metrics.
• Profitability Focus: True business impact = incremental gain – treatment costs – cannibalization.

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Key takeaway:
Cannibalization means stealing from yourself. It’s the hidden downside of promotions or product launches, and must be subtracted from uplift to measure the real net benefit.