Question #9: How can I best account for cannibalization and the halo effect when demand forecasting?
Get used to slicing your data in a number of different ways. Don’t just segment by customer or product line — do both. Scrutinize your customers’ buying habits. While consumer behavior can change over time, we are generally creatures of habit.
Do customers in a certain geographic region tend to buy two specific products at the same time? Identifying these habits yield valuable insight into who is buying your products, how they buy them, and the ancillary decisions they make when they do so. You may be surprised at some of the behaviors you uncover.
Additionally, the same strategies you use when forecasting demand for new products can also be applied here. Look at like products — whether yours or your competitors’ — to identify patterns. What products were cannibalized or what products experienced the halo effect as a result of a new launch? Use those examples to anticipate a similar outcome.
Once identified, target the products you anticipate being impacted by brand cannibalization or a halo effect for additional attention. Communicate with key stakeholders along the supply chain to adjust the manufacture and supply of these products accordingly. And continue monitoring demand levels of those products vis-à-vis your other products to ensure your conclusions were correct.
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