Using incentives to address cannibalization

In a decentralized multi-product firm, different products within the firm sometimes compete with one another for the same customers. This paper proposes managing such cannibalistic behavior with incentives. Designing the appropriate incentives requires detailed information on how the sales of one product impact the profitability of other products. As this paper shows, the only additional information required is the second choice preferences of buyers. Drawing on successful development by General Motors, this paper shows how this information can be collected and used to develop cannibalization incentives. While developed for the automotive industry, this approach is applicable across industries.