What it is
Cannibalization rate measures the impact of new products on sales revenue for existing products.
Cannibalization rate is calculated as ratio between sales lost from existing products and sales of new product.
How to use
Given total business assessment of new product launches. It accounts for sourcing and cannibalization of new product launches.
What to consider
Define period of analysis (e.g. year, quarter). Define metrics of analysis (volume, revenue).
Determining the sales loss is not always straight forward. Therefore, it is important to define ahead the approach how to calculate the sales loss of existing products.