Planned Obsolescence


DEFINITION of 'Planned Obsolescence'

A manufacturing decision by a company to make consumer products in such a way that they become out-of-date or useless within a known time period. The main goal of this type of production is to ensure that consumers will have to buy the product multiple times, rather than only once. This naturally stimulates demand for an industry's products because consumers have to keep coming back again and again.

Products ranging from inexpensive light bulbs to high-priced goods such as cars and buildings are subject to planned obsolescence by manufacturers and producers.

Also known as "built-in obsolescence".

BREAKING DOWN 'Planned Obsolescence'

Planned obsolescence does not always sit well with consumers, especially if competing companies offer similar products but with much more durability. Pushing this production too far can result in customer backlash, or a bad reputation for a brand.

However, planned obsolescence doesn't always have such a negative connotation. Companies can engage in this activity solely as a means of controlling costs. For example, a cell phone manufacturer may decide to use parts in its phones that have a maximum lifespan of five years, instead of parts that could last 20 years. It's unlikely most consumers will use the same cell phone five years after purchase, and so the company can lower input costs by using cheaper parts without fearing a customers backlash.

  1. Obsolescence Risk

    The risk that a process, product or technology used or produced ...
  2. Functional Obsolescence

    A reduction in the usefulness or desirability of an object because ...
  3. Succession

    The action of one party, person or product being replaced by ...
  4. Disposable Income

    The amount of money that households have available for spending ...
  5. Obsolete Inventory

    Term that refers to inventory that is at the end of its product ...
  6. Property, Plant And Equipment - ...

    A company asset that is vital to business operations but cannot ...
Related Articles
  1. Active Trading

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  2. Investing Basics

    Industry Handbook

    In this feature, we take an in-depth look at the various techniques that determine the value and investment quality of companies from an industry perspective.
  3. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  4. Budgeting

    A Day Without Spending, A Lifetime's Worth Of Lessons

    Financial guru Suze Orman once challenged her fans to go a day without spending any money. Here are the lessons learned from this exercise.
  5. Credit & Loans

    The Disposable Society: An Expensive Place To Live

    Resisting the trend toward consumption will boost your bottom line and bolster the environment.
  6. Home & Auto

    Wheels Of A Future Fortune

    Buy a quality car without driving your expenses through the roof.
  7. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  8. Investing

    Where the Price is Right for Dividends

    There are two broad schools of thought for equity income investing: The first pays the highest dividend yields and the second focuses on healthy yields.
  9. Stock Analysis

    Under Armour's Plan to Double Revenue

    Learn how Under Armour plans on doubling its revenue by 2018. Find out what areas the company plans to count on for this growth and its record streak.
  10. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  1. Does QVC accept debit cards?

    QVC accepts debit card payments as one of its many payment options. The company, which is the world’s leading video and e-commerce ... Read Full Answer >>
  2. Does QVC charge sales tax?

    QVC, an American TV network, is registered with states to collect sales or use tax on taxable items. QVC is also required ... Read Full Answer >>
  3. Can you pay off a Walmart credit card in store?

    Wal-Mart Stores, Inc. (NYSE: WMT) allows multiple payment options for its credit cards, including in-store payments. The ... Read Full Answer >>
  4. Does Walmart take international credit cards?

    Foreign visitors to Walmart locations in the United States can use their credit cards issued by banks outside of the U.S. ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center