Planned Obsolescence

What is planned obsolescence?

Obsolescence is whereby goods or services no longer meet the needs of the consumer and planned obsolescence is the deliberate introduction of obsolescence into the marketing strategy of an organisation to reduce the period between sales.

If planned obsolescence is introduced over a long period then it is usually done by organisations where the sale revenue is offset by the additional costs of research, development and production to produce the goods or services that are being sold. If it is over a short period then the reverse logic applies to the sales cycle and production costs.

Planned obsolescence is a useful tool for organisations to stimulate consumer demand at a time that benefits the organisation and can be viewed as a necessary enabler of innovation and economic growth. It can however also be viewed as incompatible with good corporate social responsibility.

What are the types of obsolescence?

Five main types of obsolescence can be planned:

  • Economic obsolescence: Managing assets to achieve financial results
  • Technical obsolescence: Components of technology are no longer available or require upgrading
  • Style obsolescence: Furnishings or decorations no longer match the aesthetics
  • Functional obsolescence: A physical asset is no longer available
  • Legal obsolescence: Legislative or director orders to prohibit assets or activities

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What is an example of planned obsolescence?

Examples of planned obsolescence can be drawn from the automotive and clothing industries, with styling on motor vehicles being implemented annually, and clothing fashions changing seasonally.

Why would you instigate planned obsolescence?

An organisation may decide to make a product range obsolete for several reasons:

  • The product has reached the end of its life cycle
  • The introduction of an upgraded model
  • Changes in the market which are impacting on demand and possibly supply
  • The effect of market competition
  • Inaccurate forecasting that has led to surplus stock and slow moving levels of inventory
  • Changes to production methods, leading to new product capabilities or an inability to continue producing the product

To find out more about this subject read the full knowledge paper: Planned Obsolescence

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