Planned Obsolescence

[dimpy.handa]

For any unfamiliar with the term, planned obsolescence is when a company creates a product that will cease to be useful in time for the purpose of making the customer purchase the product from you again. If that's too confusing, think of the well known Red Ring Of Death that has plagued the Xbox 360. If Microsoft had known about this occurring (or planned it even) and sold the units without fixing it because those not covered by warranty would be forced to purchase a new unit when it stopped working, then that is planned obsolescence.

Now... on the subject of whether it's right or wrong, it seems clear cut at first. Obviously, it seems greedy and wrong to sell customers something that you know has a high chance of breaking in time and making them pay to get a new one when it does.

On deeper analysis though, perhaps this plays a key role in economics. By utilizing it, consumers spend more money and the producer has to create more of the product, which in turn allows them to find ways to make it cheaper as well as reduce the cost by producing en mass, allowing them to lower the cost to the consumer. And if items like cars didn't break down, transmissions go out, parts break, etc, the automobile industry would go belly up as soon as everyone owned a car. There'd be no real purpose behind ever buying another car unless you were essentially upgrading to a newer model.

Any thoughts or comments on the matter?

 

[swatiraohnlu]

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. 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.

 

[dimpy.handa]

A strategy of planned obsolescence can backfire. If a manufacturer produces new products to replace old ones too often, consumer resistance may set in. This has occurred at times in the computer industry when consumers have been unconvinced that a new wave of replacement products is giving sufficient extra value for switching to be worth their while.

 

[dimpy.handa]

I ran across this example recently. I had a 20 year old vacuum which died. Went to the store for a new one since there were no parts available to fix the old one. Asked how long I could expect the new one to last and was told "about 3-5 years". When I asked how this could be because I just had one from the same manufacturer that lasted for 20 years, the gentleman said "planned obsolescence" which means that the manufacturer planned on the vacuum to die after a few years so that I would have to buy another. Good for their checkbook, bad for mine.
Placing sweeping tail fins on an automobile was an example of planned obsolescence.