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Planned Obsolescence

Updated on March 21, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Planned Obsolescence Definition

Planned obsolescence (or built-in obsolescence) is a negative business strategy of intentionally creating inferior products that become obsolete after a certain time. Manufacturers use this strategy to push customers to upgrade in order to drive their sales. As a result, businesses thrive, but it induces wasteful spending and increases environmental waste.

Planned Obsolescence

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Planned obsolescence is used to retain the customer base by offering new features to the old product. It is more suited to an oligopoly market. Built-in obsolescence is based on asymmetric informationAsymmetric InformationAsymmetric information is the knowledge mismatch that happens when one party secures more information about a product or service than the other party to the transaction. The information failure is often seen when the seller is more informed about a product's condition than the buyer.read more about a product’s lifespan between the customer and the manufacturer. The manufacturer does it by tweaking existing models, stopping upgrades, or embedding rare machine parts in the existing product.

Key Takeaways

  • Planned (or built-in) obsolescence is a business technique of developing a product with reduced life to force customers to replace them often.
  • The strategy boosts sales and, thereby, profits of companies.
  • Every industry, including electronics, fashion, automobiles, and technology, uses planned obsolescence to its advantage.
  • Apple has been at the forefront in employing the built-in obsolescence strategy to stimulate interest in its new models of iPhone through the concept of a vintage list.
  • Barring a few nations of Europe, built-in obsolescence is not illegal anywhere, including in the US.

Planned Obsolescence Explained

Planned obsolescence refers to deliberately designing a product with a limited life span so that it becomes unfashionable or useless after a definite period. It is a tactic that manufacturers employ to force their customers to buy the new models of their products.

The origin of the strategy dates back to 1954 when industrial designer Brooks Stevens popularized it. According to him, it is a way to instill the burning desire in customers to buy a newer and better version of a product before the completion of its useful lifeUseful LifeUseful life is the estimated time period for which the asset is expected to be functional and can be put to use for the company’s core operations. It serves as an important input for calculating depreciation for assets which affects the profitability and carrying value of the assets.read more.

The most common instance of planned obsolescence is visible in the fashion industry. The fashion industry periodically comes up with new designs and garments to outdate the old designs. As a result, it pushes the customers to replace their wardrobes every few months.

In the electronics industry, too, built-in obsolescence is widely prevalent. Under this phenomenon, manufacturers build electronic products with limited software and hardware functionality. As a result, customers soon start facing issues. This restricts the utility and durability of these products.

Manufacturers know their products’ lifespan as part of their business strategy of planned obsolescence. Thus, they started promoting the new model of their product that bested all the previous shortcomings. So, the customers replace their existing products with the more recent version to use the better features and capability of the product.

Hence, the customers of the company are forced to buy the latest version of the product. This puts a strain on their pocket as well as increases environmental waste in the form of discarded goods.

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Examples 

Many giant corporations like Apple Inc., car manufacturers like Tesla, lightbulb makers, and others practice the planned obsolescence strategy to boost their sales. Here are a few planned obsolescence examples.

Example #1 – Apple

The tech giant Apple Inc. is the master of this strategy. It employs built-in obsolescence to compel consumers to buy iPhones every couple of years. As part of its strategy, iPhones use batteries with 2-3 years of lifespan. After that, the battery needs replacement which requires a substantial amount. Mobile users prefer replacing their existing iPhone with a new model than coughing up a large sum for just a battery.

As per an NYP news report, Apple plans to update its vintage list with models like iPhone 6 and iPhone 6 Plus. Apple places the old models in its vintage list first before making them obsolete. As soon a product enters the vintage list, customers find it difficult to get its spare parts, repairs, or software updates. Furthermore, after the products enter the obsolescence phase, Apple removes all types of support for the products.

This act of planned obsolescence by Apple aims to entice and force the users to buy its newer models of iPhone. Apple’s built-in obsolescence made headlines in 2017 when a French company filed a criminal case against it. The lawsuit claimed that Apple had deliberately slowed down old iPhones through software updates to force the users to buy the newer version of the iPhone.

After the investigations started against Apple in France, Apple apologized. It clarified that it slowed down the iPhone to save battery. Later on, apple reduced the price of the new lithium-ion battery to one-third to help the iPhone gain its previous speed and performance.

Example #2 – Cars

The planned obsolescence of cars dates back to 1924. This was when General Motors announced the launch of cars with new design changes to motivate the consumers to either replace their old car with a new model or buy a new car entirely.

As a result, it led to astronomical sales of their cars and made GM the dominant player in the auto sector in the US. As a result, more and more car manufacturers followed suit and used the built-in obsolescence strategy in manufacturing their vehicles.

The car manufacturers used two categories of built-in obsolescence – continuous redesigning and restricting the availability of spare parts. Manufacturers first lure consumers into buying their latest model based on their great looks and features. After that, in a few months or so, they redesigned the same car model to look more stylish, with more features, upgraded interiors, and improved engine performance.

Thus, it gives an impression to the consumers’ minds that their recently bought car is old, old-fashioned, and less fuel-efficient. And hence, they replace it with a newer car with all the best features. Thus, consumers get into the trap of built-in obsolescence by the manufacturers.

Example #3 – Lightbulb

Lightbulb manufacturers undertook the planned obsolescence of the light bulb in 1924. They joined together in Geneva to create the world’s first cartelCartelA cartel is a group of producers of goods or suppliers of services formed through an agreement amongst themselves to regulate the supply of goods or services with the basic intent to illegally regulate the prices or restrict competition regarding the said goods or services.read more called the Phoebus cartel. Their main aim was to divide the territories of business amongst themselves and lower the shelf life of the incandescent bulb.

The cartel decided to reduce the life of a bulb to 1000 hours from the existing 2500 hours, along with the increase in lightbulb prices. Thus, manufacturers forced the people to buy new bulbs at higher rates and consequently reaped substantial profitsProfitsProfit refers to the earnings that an individual or business takes home after all the costs are paid. In economics, the term is associated with monetary gains. read more.

Frequently Asked Questions (FAQs)

Is planned obsolescence legal?

No, there is no such law in the USA making planned obsolescence illegal for the manufacturers. However, the consumers are empowered through Consumer Product Safety Commission to seek the redressal of planned obsolescence if the products are not durable, as was done in the case of the death of babies caused by low-quality cribs in 2012.

What does planned obsolescence mean?

Planned obsolescence means enticing the existing users of any product by its manufacturer through design upgrades or features elimination to make them buy the newer version of the current product. Often, the device is set to cover only a year under warranty of service so that manufacturers can push the new model with an extended warranty for consumers to buy.

Is planned obsolescence real?

Yes, planned obsolescence is absolutely real and affects every aspect of our life. Companies have made planned obsolescence very much a reality in everyone’s life. Clothes have little shelf life in terms of design. Newer, better, faster, and fuel-efficient automobiles are launched frequently to replace older models. Mobile phone models with enhanced features are often released. Computer software come with a timed upgrade notice. Electronic products have a shorter useful life.

This has been a guide to Planned Obsolescence & its definition. Here we explain examples of planned obsolescence by Apple, & other car & light bulb firms. You can learn more from the following articles – 

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