NationMaster - Encyclopedia: Planned obsolescence

Planned obsolescence (also built-in obsolescence^[1] 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.^[1] 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.^[1] Image File history File links Question_book-3. ... A good in economics is any physical object (natural or man-made) or service that, upon consumption, increases utility, and therefore can be sold at a price in a market. ... Obsolescence is when a person or object is no longer wanted even though it is still in good working order. ... Manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. ... In microeconomics, production is the act of making things, in particular the act of making products that will be traded or sold commercially. ... Consumers refers to individuals or households that use goods and services generated within the economy. ... Competition is the act of striving against another force for the purpose of achieving dominance or attaining a reward or goal, or out of a biological imperative such as survival. ...

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. Mass production is the production of large amounts of standardised products on production lines. ...

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 term company may refer to a separate legal entity, as in English law, or may simply refer to a business, as is the common use in the United States. ... Engineering is the discipline and profession of applying scientific knowledge and utilizing natural laws and physical resources in order to design and implement materials, structures, machines, devices, systems, and processes that realize a desired objective and meet specified criteria. ... A products service life is its expected lifetime, or the acceptable period of use in service. ... For other uses, see Discipline (disambiguation). ... Value Engineering is a systematic method to improve the Value of goods and services by using an examination of function. ...

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. Microsoft Word with all features activated Creeping featurism, or creeping featuritis, is a phrase used to describe software which over-emphasizes new features to the detriment of other design goals, such as simplicity, compactness, stability, or bug reduction. ...

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? In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product or service to market. ...

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. Sales are the activities involved in providing products or services in return for money or other compensation. ... Purchasing refers to a function in business whereby the enterprise obtains the inputs for what it produces, as well as other goods and services it requires. ... The phrase research and development (also R and D or, more often, R&D), according to the Organization of Economic Cooperation and Development, refers to creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use... Opportunity cost is a central concept of microeconomics. ... In marketing In marketing, cannibalization refers to a reduction in the sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer. ...

Shortening the replacement cycle has many critics as well as supporters. Critics such as Vance Packard claim the process wastes resources and exploits customers.^[2] 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. Vance Packard (May 22, 1914 - December 12, 1996) was an American journalist, social critic, and author. ... Classical economics distinguishes between three factors of production which are used in the production of goods: Land or natural resources - naturally-occurring goods such as soil and minerals. ... Technology (Gr. ...

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. This article is about the economic term. ... This article does not cite any references or sources. ...

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. Maintenance, Repair and Operations or Maintenance, Repair and Overhaul (MRO), is fixing any sort of mechanical or electrical device should it get out of order or broken (repair) as well as performing the routine actions which keep the device in working order (maintenance) or prevent trouble from arising (preventive maintenance). ...

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). Another example is the replacement of telegraphs with telephones. In economics, one kind of good (or service) is said to be a substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of one another in at least some of their possible uses. ...

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. A complement or complementary good is defined in economics as a good that should be consumed with another good; its cross elasticity of demand is negative. ...

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. Interoperability is a property referring to the ability of diverse systems and organizations to work together (inter-operate). ... The network effect causes a good or service to have a value to a potential customer dependent on the number of customers already owning that good or using that service. ...

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. Proprietary software is software with restrictions on copying and modifying as enforced by the proprietor. ... Not to be confused with copywriting. ... Microsoft Corporation, (NASDAQ: MSFT, HKSE: 4338) is a multinational computer technology corporation with global annual revenue of US$44. ... Windows 98 (codenamed Memphis) is a graphical operating system released on June 25, 1998 by Microsoft and the successor to Windows 95. ...

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. Next big thing redirects here. ... Aesthetics is commonly perceived as the study of sensory or sensori-emotional values, sometimes called judgments of sentiment and taste. ... All Saints Chapel in the Cathedral Basilica of St. ... Such styles may change quickly, and fashion in the more colloquial sense refers to the latest version of these styles. ... Car redirects here. ... A baby wearing many items of winter clothing: headband, cap, fur-lined coat, shawl and sweater. ...

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. Marketers also claim that style changes relieve peoples' boredom and allows for both self-expression and conformity at the same time.^{[citation needed]} 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, "Today the appearance of a motor-car is a most important factor in the selling end of the business—perhaps the most important factor— because everyone knows the car will run."^{[citation needed]} Look up keep up with the Joneses in Wiktionary, the free dictionary. ... In marketing, product differentiation is the modification of a product to make it more attractive to the target market. ...

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, 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. For other uses, see FAD (disambiguation). ... This article is about managing the life of a product in the market. ...

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. A Market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. ...

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.^[3] This article does not cite any references or sources. ... In economics and contract theory, an information asymmetry is present when one party to a transaction has more or better information than the other party. ...

However, there are some industries where there is significant competition and consumers have chosen to go for products that will fail more quickly anyway. Some consumers are also perfectly content with planned obsolescence.

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. An externality occurs in economics when a decision (for example, to pollute the atmosphere) causes costs or benefits to individuals or groups other than the person making the decision. ... For other uses, see Waste (disambiguation). ... Air pollution Pollution is the introduction of pollutants (whether chemical substances, or energy such as noise, heat, or light) into the environment to such a point that its effects become harmful to human health, other living organisms, or the environment. ...

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. World GDP/capita changed very little for most of human history before the industrial revolution. ... DVD (also known as Digital Versatile Disc or Digital Video Disc - see Etymology) is a popular optical disc storage media format. ... The phrase research and development (also R and D or, more often, R&D), according to the Organization of Economic Cooperation and Development, refers to creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use...

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. Value Engineering is a systematic method to improve the Value of goods and services by using an examination of function. ...

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. As with all these planned obsolescence issues, the marketer and product engineer must determine for themselves if any of these criticisms are warranted. Engineering is the discipline and profession of applying scientific knowledge and utilizing natural laws and physical resources in order to design and implement materials, structures, machines, devices, systems, and processes that realize a desired objective and meet specified criteria. ...

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.^[4] Consumer protection is a form of government regulation which protects the interests of consumers. ... The Office of Fair Trading or OFT is a UK statutory body established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UKs economic regulator. ... The Trading Standards Institute is the professional association which represents trading standards professionals in the UK and overseas. ... Apple Inc. ... iPod is a brand of portable media players designed and marketed by Apple Inc. ...

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.^[5] Year 1954 (MCMLIV) was a common year starting on Friday (link will display full 1954 Gregorian calendar). ... Brooks Stevens (1911-1995) was an industrial designer, as well as automotive designer, graphic designer, and stylist. ... This article is about the city in Minnesota. ...

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."^[5]

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."^[6] The 1950s decade refers to the years 1950 to 1959 inclusive. ... VW redirects here. ...

In 1960, cultural critic Vance Packard had a book published called The Waste Makers, promoted as an exposé of "the systematic attempt of business to make us wasteful, debt-ridden, permanently discontented individuals."^[2] Vance Packard (May 22, 1914 - December 12, 1996) was an American journalist, social critic, and author. ... For other uses, see Debt (disambiguation). ...

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.'"^[2]

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