Which concept describes a drop in sales of an existing product caused by launching a new product from the same company?

• A. Substitution effect
• B. Market cannibalism
• C. Cannibalization
• D. Product line extension

Answer: (C)

Cannibalization describes the situation where a company’s new product steals demand from one of its existing products, causing that older product’s sales to fall. The new offering competes for the same customers and purchase occasions, so some of the demand that would have gone to the old product shifts to the new one. This internal transfer is what defines cannibalization, and it’s a common risk when expanding a product lineup.

The other terms don’t fit as precisely: the substitution effect is a broader idea about how consumers switch between products in the market, not necessarily caused by a new product from the same company. A product line extension adds variations to attract more customers, but doesn’t inherently imply a drop in an existing product’s sales due to internal competition. Market cannibalism is often used interchangeably with cannibalization, but cannibalization is the standard term for this internal sales shift.