Customer rights

Planned obsolescence

Planned obsolescence (also built-in obsolescence in the United Kingdom) is the process of a product becoming obsolete and/or non-functional after a certain period or amount of use in a way that is planned or designed by the manufacturer. Planned obsolescence has potential benefits for a producer because the product fails and the consumer is under pressure to purchase again, whether from the same manufacturer (a replacement part or a newer model), or from a competitor which might also rely on planned obsolescence. The purpose of planned obsolescence is to hide the real cost per use from the consumer, and charge a higher price than they would otherwise be willing to pay.

For an industry, planned obsolescence stimulates demand by encouraging purchasers to buy again sooner if they still want a functioning product. Built-in obsolescence is in many different products, from vehicles to light bulbs, from buildings to software. There is, however, the potential backlash of consumers who learn that the manufacturer invested money to make the product obsolete faster; such consumers might turn to a producer, if any, which offers a more durable alternative.

Planned obsolescence was first developed in the 1920s and 1930s when mass production had opened every minute aspect of the production process to exacting analysis.

Estimates of planned obsolescence can influence a company's decisions about product engineering. Therefore the company can use the least expensive components that satisfy product lifetime projections. Such decisions are part of a broader discipline known as value engineering.

The use of planned obsolescence is not always easy to pinpoint, and it is complicated by related problems, such as competing technologies or creeping featurism which expands functionality in newer product versions.

Rationale behind the strategy

A new product development strategy that seeks to make existing products obsolete may appear counter intuitive, particularly if coming from a leading marketer of the existing products. Why would a firm deliberately endeavour to reduce the value of its existing product portfolio?

The rationale behind the strategy is to generate long-term sales volume by reducing the time between repeat purchases, (referred to as shortening the replacement cycle). Firms that pursue this strategy believe that the additional sales revenue it creates more than offsets the additional costs of research and development and opportunity costs of existing product line cannibalization. However, the rewards are by no means certain: In a competitive industry, this can be a risky strategy because consumers may decide to buy from competitors. Because of this, gaining by this strategy requires fooling the consumers on the actual cost per use of the item in comparison to the competition.

Shortening the replacement cycle has many critics as well as supporters. Critics such as Vance Packard claim the process wastes resources and exploits customers. Resources are used up making changes, often cosmetic changes, that are not of great value to the customer. Supporters claim it drives technological advances and contributes to material well-being. They claim that a market structure of planned obsolescence and rapid innovation may be preferred to long-lasting products and slow innovation. In a fast paced competitive industry market success requires that products are made obsolete by actively developing replacements. Waiting for a competitor to make products obsolete is a sure guarantee of future demise.

The main concern of the opponents of planned obsolescence is not the existence of the process, but its possible postponement. They are concerned that technological improvements are not introduced even though they could be. They are worried that marketers will refrain from developing new products, or postpone their introduction because of product cannibalization issues. For example, if the payback period for a product is five years, a firm might refrain from introducing a new product for at least five years even though it may be possible for them to launch in three years. This postponement is only feasible in monopolistic or oligopolistic markets. In more competitive markets rival firms will take advantage of the postponement and launch their own products.

Types of obsolescence

Technical or functional obsolescence

The design of most consumer products includes an expected average lifetime permeating all stages of development. For instance, no auto-parts maker would run the extra cost of ensuring a part lasts for forty years if few cars spend more than five years on the road. Thus, it must be decided early in the design of a complex product how long it is designed to last so that each component can be made to those specifications.

Planned obsolescence is made more likely by making the cost of repairs comparable to the replacement cost, or by refusing to provide service or parts any longer. A product might even never have been serviceable. Creating new lines of products that do not interoperate with older products can also make an older model quickly obsolete, forcing replacement.

Planned functional obsolescence is a type of technical obsolescence in which companies introduce new technology which replaces the old. The old products do not have the same capabilities or functionality as the new ones. For example a company that sold video tape decks while they were developing DVDs was engaging in planned obsolescence. That is, they were actively planning to make their existing product (video tape) obsolete by developing a substitute product (DVDs) with greater functionality (better quality). Associated products that are complements to the old products will also become obsolete with the introduction of new products. For example video tape holders saw the same fate as video tapes and video tape decks. Likewise, buggy whips became obsolete when people started traveling in cars instead of buggies.

Proprietary batteries

Many recent portable consumer electronics contain proprietary, often Lithium-based batteries. These batteries will only last around 500 cycles before losing large amounts of their capacity. Production of these batteries is usually stopped at around the same time the product is discontinued and therefore rendering the product worthless once the batteries start to wear out. While battery packs can be rebuilt and fitted with new cells this is either too costly or too time consuming for most people to bother with.

Systemic obsolescence

Planned systemic obsolescence is the deliberate attempt to make a product obsolete by altering the system in which it is used in such a way as to make its continued use difficult. For example, new software is frequently introduced that is not compatible with older software. This makes the older software largely obsolete. For example, even though an older version of a word processing program is operating correctly, it might not be able to read data saved by newer versions. The lack of interoperability forces many users to purchase new programs prematurely. The greater the network externalities in the market, the more effective this strategy is.

Another way of introducing systemic obsolescence is to eliminate service and maintenance for a product. If a product fails, the user is forced to purchase a new one. This strategy seldom works because there are typically third parties that are prepared to perform the service if parts are still available. One place it does work is in proprietary software, where copyright forbids third parties from performing some kinds of service. One example of this type of obsolescence is Microsoft's termination of support for Windows 98 and earlier versions of Windows. Similarly, Apple Inc.'s introduction of Mac OS X (post-purchase of NeXT in 1997), which is Unix-based and incompatible with previous versions of the company's operating systems (although a compatibility layer was provided for several years).

Style obsolescence

Marketing may be driven primarily by aesthetic design. Product categories in which this is the case display a fashion cycle. By continually introducing new designs and retargeting or discontinuing others, a manufacturer can "ride the fashion cycle". Examples of such product categories include automobiles (style obsolescence), with a strict yearly schedule of new models, and the almost entirely style-driven clothing industry (riding the fashion cycle) and the mobile phone industries with constant minor feature 'enhancements' and restyling.

Planned style obsolescence occurs when marketers change the styling of products so customers will purchase products more frequently. The style changes are designed to make owners of the old model feel "out of date". It is also designed to differentiate the product from the competition, thereby reducing price competition. One example of style obsolescence is the automobile industry, in which manufacturers typically make style changes every year or two. As the former CEO of General Motors Alfred P. Sloan stated in 1941, "Today the appearance of a motorcar is a most important factor in the selling end of the business—perhaps the most important factor— because everyone knows the car will run.

Some marketers go one step further: they attempt to initiate fashions or fads. A fashion is any style that is popularly accepted by groups of people over a period of time. A fad is a short term fashion. Examples of successfully created fashions or fads include Beanie Babies, Ninja Turtles, Cabbage Patch Kids, Boy Bands, Rubik's Cubes, pet rocks, acid wash jeans, and tank tops. Obsolescence is built into these products in the sense that marketers are aware of the shortness of their product life cycles so they work within that constraint. For example, when Beanie Babies sales revenue started to decline, company president Ty Warner astutely decided to go for one last Christmas marketing push and then drop the product.

Another strategy is to take advantage of fashion changes, often called the fashion cycle. The fashion cycle is the repeated introduction, rise, popular culmination, and decline of a style as it progresses through various social strata. Marketers can "ride the fashion cycle" by changing the mix of products that they direct at various market segments. This is very common in the clothing industry. A certain style of dress, for example, will initially be aimed at a very high income segment, then gradually be re-targeted to lower income segments. The fashion cycle can repeat itself, in which case a stylistically obsolete product may regain popularity and cease to be obsolete.

Notification obsolescence

Some companies have developed a very sophisticated version of obsolescence in which the product informs the user when it is time to buy a replacement. Examples of this include water filters that display a replacement notice after a predefined time and disposable razors that have a strip that changes colour. If the user is notified before the product has actually deteriorated, planned obsolescence is the result. In this way obsolescence can be introduced without going to the expense of developing a new replacement product.

Economics of planned obsolescence

Planned obsolescence tends to work best when a producer has at least an oligopoly. Before introducing a planned obsolescence the producer has to know that the consumer is at least somewhat likely to buy a replacement from them. In these cases of planned obsolescence, there is an information asymmetry between the producer, who knows how long the product was designed to last, and the consumer, who does not. When a market becomes more competitive, product lifespans tend to increase. When Japanese and European vehicles with longer lifespans entered the American market in the 1960s and 1970s, the American carmakers were forced to respond by building more durable products.

However, there are some industries where there is significant competition and consumers have chosen to go for products that will fail more quickly anyway.

Even in a situation where planned obsolescence is appealing to both producer and consumer there can also be significant harm to society in the form of negative externalities. Continuously replacing, rather than repairing products, creates more waste, pollution, and uses more natural resources.

Others have defended planned obsolescence as a necessary driving force behind innovation and economic growth. Many products, such as DVDs, become both cheaper and more useful the more people have them. Planned obsolescence will also tend to benefit those companies with the most modern and up-to-date products, thus encouraging extra investment in research and development that often has large positive externalities.

Obsolescence and durability

If marketers expect a product to become obsolete they can design it to last for a specific lifetime. For example, if a product will be technically or stylistically obsolete in five years, many marketers will design the product so it will only last for that time. This is done through a technical process called value engineering. An example is home entertainment electronics which tend to be designed and built with moving components like motors and gears that last until technical or stylistic innovations make them obsolete.

These products could be built with higher-grade components, but they are not because it is felt that this imposes an unnecessary cost on the purchaser. Value engineering will reduce the cost of making the product and lower the price to consumers. A company will typically use the least expensive components that satisfy product’s lifetime projections.

The use of value engineering techniques have led to planned obsolescence being associated with product deterioration and inferior quality. Vance Packard claimed that this could give engineering a bad name, because it directed creative engineering energies toward short-term market ends rather than more lofty and ambitious engineering goals.

Fair trade

In the United Kingdom, planned obsolescence engineered into products is considered a breach of customer rights. The Office of Fair Trading and Trading Standards Institute investigate claims of products constantly failing just outside the warranty period. A famous case of this was the 'Click Wheel' Apple iPod, which many consumers found to fail within 18 months of purchase.

Origins of the term

Origins of planned obsolescence go back at least as far as 1932 with Bernard London's Ending the Depression Through Planned Obsolescence. However, the phrase was first popularized in 1954 by Brooks Stevens, an American industrial designer. Stevens was due to give a talk at an advertising conference in Minneapolis in 1954. Without giving it much thought he used the term as the title of his talk.

From that point on, "planned obsolescence" became Stevens' catchphrase. By his definition, planned obsolescence was "Instilling in the buyer the desire to own something a little newer, a little better, a little sooner than is necessary."

Stevens' term was taken up by others, and his own definition was challenged. By the late 1950s, planned obsolescence had become a commonly used term for products designed to break easily or to quickly go out of style. In fact, the concept was so widely recognized that, in 1959, Volkswagen mocked it in a now-legendary advertising campaign. While acknowledging the widespread use of planned obsolescence among automobile manufacturers, Volkswagen pitched itself as an alternative. "We do not believe in planned obsolescence," the ads suggested. "We don't change a car for the sake of change.

In 1960, cultural critic Vance Packard published The Waste Makers, promoted as an exposé of "the systematic attempt of business to make us wasteful, debt-ridden, permanently discontented individuals."

Packard divided Planned Obsolescence into two sub categories: obsolescence of desirability and obsolescence of function. "Obsolescence of desirability", also called "psychological obsolescence", referred to marketers' attempts to wear a product out in the owner's mind. Packard quoted industrial designer George Nelson, who wrote: "Design... is an attempt to make a contribution through change. When no contribution is made or can be made, the only process available for giving the illusion of change is 'styling.'"

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