The document discusses planned obsolescence, which is designing a product to become obsolete or unfashionable after a certain period of time in order to generate long-term sales. It notes that General Motors popularized planned obsolescence in cars in the 1920s by introducing annual styling changes. While planned obsolescence can increase sales, it is risky if consumers catch on, and tends to work best in oligopolistic rather than competitive markets. The strategy also has critics who argue it wastes resources and exploits customers.
2. Prepared By
Manu Melwin Joy
Assistant Professor
SCMS School of Technology and Management
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Planned obsolescence
• Planned obsolescence is a
policy of planning or
designing a product with
an artificially limited useful
life, so it will become
obsolete (that is,
unfashionable or no longer
functional) after a certain
period of time.
4. Planned obsolescence
• 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")
5. Planned obsolescence
• In the United States, automotive
design reached a turning point
in 1924 when the American
national automobile market
began reaching saturation.
• To maintain unit sales, General
Motors head Alfred P. Sloan Jr.
suggested annual model-year
design changes to convince car
owners that they needed to buy
a new replacement each year, an
idea borrowed from the bicycle
industry.
6. Planned obsolescence
• The origins of phrase, planned
obsolescence, go back at least as
far as 1932 with Bernard
London's pamphlet Ending the
Depression Through Planned
Obsolescence.
• The essence of London's plan
would have the government
impose a legal obsolescence on
consumer articles, to stimulate
and perpetuate consumption.
7. Planned obsolescence
• Producers 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.
8. Planned obsolescence
• In a competitive industry,
this is a risky strategy
because when consumers
catch on to this, they may
decide to buy from
competitors instead.
9. Planned obsolescence
• 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.
10. Planned obsolescence
• Planned obsolescence
tends to work best when a
producer has at least an
oligopoly. When a market
becomes more competitive,
product lifespans tend to
increase.
11. Planned obsolescence
• For example, when
Japanese vehicles with
longer lifespans entered the
American market in the
1960s and 1970s, American
carmakers were forced to
respond by building more
durable products.
12. Planned obsolescence
• A counterexample is
Moore's law, stating that
the rather competitive
electronic industry plans for
double computer capacity
every 18 months, and the
software industry plan for
new program versions that
require double computer
capacity every 18 months.
13. Planned obsolescence
• A counterexample is
Moore's law, stating that
the rather competitive
electronic industry plans for
double computer capacity
every 18 months, and the
software industry plan for
new program versions that
require double computer
capacity every 18 months.
14. Planned obsolescence
• Shortening the replacement
cycle has critics and
supporters.
– Philip Kotler argues that:
"Much so-called planned
obsolescence is the working
of the competitive and
technological forces in a free
society—forces that lead to
ever-improving goods and
services."
15. Planned obsolescence
• Shortening the replacement
cycle has critics and
supporters.
– Critics such as Vance Packard
claim the process wastes and
exploits customers. With
psychological obsolescence,
resources are used up making
changes, often cosmetic
changes, that are not of great
value to the customer.
