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Planned obsolescence (also '''built-in obsolescence''' (UK)) is the decision on the part of a manufacturer to produce a consumer product that will become Obsolete and/or non-functional in a defined time frame. Planned obsolescence has potential benefits for a producer in that it means a consumer cannot just buy a product once and never have to buy again - the life of the product's usefulness or functionality is fixed, so that at some point the consumer must purchase again, whether returning to the original manufacturer for a newer model, or buying from the competition. For an industry, it stimulates demand in the marketplace by ensuring a customer must come back into a buying mode sooner than had the product been built to last longer or indefinitely. It exists in many different products from vehicles to lightbulbs, from buildings to software. There is, however, the potential backlash of consumers that become aware of such obsolescence; such consumers can shed their loyalty and buy from a company that caters to their desire for a more durable product. 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 . RATIONALE BEHIND THE STRATEGY A New Product Development strategy that seeks to make existing products obsolete may appear counter intuitive, particularly if you are 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 s may decide to buy from your competitors. Because of this gaining by this stragegy 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 you make your products obsolete by actively developing replacements. Waiting for your competitor to make your products obsolete is a sure guarantee of your future demise. The main concern of the proponents 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. The recent US legal proceedings that concluded that Microsoft was acting as a monopolist made reference to this postponement strategy. 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). Another example is the replacement of telegraphs with telephones. 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. 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 is this strategy. 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. One example of this type of obsolescence is the Microsoft's termination of support for Windows 98 and earlier versions of Windows. This strategy seldom works because there are typically third parties that are prepared to perform the service if parts are still available. Style obsolescence Marketing may be driven primarily by Aesthetic Design . Product categories where 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 Automobile s (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. Marketers also claim that style changes relieve peoples' boredom and allows for both self-expression and conformity at the same time. 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." 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. 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 Segment s. 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 gap 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. Some consumers are also perfectly content with planned obsolescence. The buildings housing suburban Big-box Store s such as Wal-Mart and Home Depot are not built to last any longer than twenty-five years . In this instance the retailers want the cheapest buildings possible. Stores are relocated or redesigned often enough that a longer lifespan would be useless to the storeowner. 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 Resource s. Others have defended planned obsolescence as a necessary driving force behind innovation and economic growth. Many products, such as DVD s, 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 military spec 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 (unless there is a lack of competition in the industry). 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. 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. FAIR TRADE |
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