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.
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.
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.
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).
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.
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.
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.
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.'"