Answer by Shuba Swaminathan, The accidental Product Manager, on Quora

Step 1

It is important (for many reasons besides this!) to clearly know the profile of your ideal customers for existing products. The more specific and detailed your description, the better. Something as specific as: "Female, 25 to 35, city dweller, college educated, commutes by public transport, drinks more than 2 cups of coffee per day, uses a smartphone"etc. If you have already identified your target customer, skip this step.

Step 2
When considering launching a new product, you will have to go through a similar exercise, except this time it is theoretical--you are guessing who your best customers will be. Come up with detailed profiles/personas of your prospective customers.

Step 3
Now lay out the different characteristics in the form of a Venn diagram. Each characteristic should be a circle of its own. So "female", "city dweller", "public transport user", "coffee drinker", "smartphone owner" each gets its own circle in my example.

Do this for the existing product first, and then the new product. If many of the circles overlap, your new product will cannibalize sales of an existing product. If the circles are mutually exclusive, then it's a non-cannibalizing product. Note that I did not say complementary, only that it is non-cannibalizing.

For instance, if you are launching version 2.0 of an existing product, you can expect all circles to overlap fully, since current customers will be your customers for the 2.0 version as well. Whereas if version 2.0 is a paid offering with premium features while version 1.0 was a free offering, there will be overlaps but the people who will pay for your premium features will very likely have a different attribute or two from your existing free users.

I bet both free and paid users of Dropbox are people who value cloud storage and want easy syncing across devices. But the paid users are likely customers who want to store large quantities of data or are businesses that want to deploy Dropbox inside their organization behind a firewall. In this case, the offerings are complementary.

The real trick is to identify complementary products that overlap with your existing products enough to branch into new markets while taking advantage of your marketing expertise gained from acquiring present customers and existing customer goodwill. Non-cannibalzation is a necessary but not sufficient condition, when you are thinking of launching a new product.

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Published on: Apr 9, 2015