Situation

Any company that sells similar products at a range of prices fears cannibalization. Take the case of a subscription media company that expanded from one product line to a mix of offers that included several similar but lower-priced products sold through a number of channels. Executives felt that the new offers were necessary because the original product, while quite profitable, was losing market share and might never penetrate certain customer segments. The new products did indeed attract these elusive customers, but the lower prices also lured some established customers away from the mature product.

Complication

Deciding how aggressively to push the new offers proved difficult. The company's customer-relationship-management system allowed marketers to pinpoint the extent of the cannibalization. Yet the data implied simplistic recommendations—for instance, abandoning the new products without regard for their strategic importance. Unless the implications were clarified, product managers balked at exploring the trade-offs between market share and profitability. Indeed, they had an incentive not to do so, for each product was organized as a separate, competing business with its own sales targets.

Resolution

To break the stalemate, senior executives looked beyond traditional marketing approaches to data optimization techniques long used in operations research for planning...