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Why break a bulb in production?

19/05/2015 18:33, author Mateusz Chołaściński

The potential environmental implications of shortening the lifetime of a product are extremely dangerous. Even if obsolescence is unintentional but rather the result of pressure on costs (generated by aggressive competition and a price war) forcing the use of lower-quality components and materials it is still dangerous and, in the long term, destructive. One method would be to control manufacturers, to spy on them, to punish them, to impose increasing environmental taxes. The other option would be to simply change the pricing model.

Planned obsolescence[1] is a very touchy subject for all consumer and environmental organizations and it's also a pain in the neck for the goods manufacturing industry, esp. electronics and household. PR experts work hard to disclaim this view, declaring it to be a classic conspiracy theory, yet it persists in the collective consumer imagination as the industry has numerous motives to incorporate illegal practices. There are far too many for consumers to have faith in the manufacturers' honesty and that their products are designed to last us a lifetime. Direct evidence is hard to find, but the documentary “The light bulb conspiracy” by Cosima Dannoritzer is actually rather convincing.

Motive 1: Sustainable income

Every business needs to secure a sustainable income to survive. If imperishable goods were released onto the market, demand would go down and saturate near zero level. For the industry this is the worst thing that could possibly happen. Even heavy competition is easier to deal with. Faced with the threat of an everlasting product the temptation for manufacturers and the trade to agree to prevent it from coming onto the market may be quite strong. This is why light bulb manufacturers are believed to have agreed on a maximum lifetime for their product nearly a century ago.

Motive 2: Shoppers’ limited disposable income

Actually, it is not entirely true that goods which last forever are possible. Every material wears out over time and eventually needs replacing. So it’s rather price scalability that might be the issue. If a manufacturer invented a technology to extend the lifetime of a device by ten, income might be secured by setting the price 10 times higher (or actually well below[2]). But it's not really that easy. Most shoppers allocate their disposable income quite carefully. Imagine you are arranging your house, spending over 1000 EUR on bulbs alone is not an option, even if they were to last a lifetime. This is why price per item is often a critical criterion, not the overall spend over a 50 year period.

If we express annual sales of products as:

Sales = Number of shoppers x Buying frequency x Item price

We clearly see, that since (a) the item price has its limitations (and no functional benefits justify going beyond a certain level), and (b) the number of shoppers in a category is pretty much constant, the only way of protecting sales is to maintain frequency. Moreover, almost no business today is satisfied with stable sales, but each seeks growth, hence the need to drive frequency even further. Product lifetime should therefore become shorter.

There are many ways in which this can be influenced. Fashion is one of the drivers convincing shoppers to buy a new outfit every year (x 4 seasons), or change their mobile phone to keep up with current trends. And quite a large group of fashion and gadget freaks will often buy simply to possess, despite having a rack of unworn clothes in their wardrobes or similar, still-functioning, devices. In industries where development is rapid, the exchange of goods is forced by the incompatibility of the “old” generation with the new. However, there are categories where none of these apply, like the household. Fridges, washing machines, bulbs – they could be operative for 30-40 years and nobody would mind. In reality they function for a period of 12-14 years. And the only promise made by the manufacturer is the warranty, i.e. 2-3 years.

The sole motive of producers to keep the lifetime short, but not too short, is the need to associate the brand with quality. Others strongly justify (not from an ethical, but from a purely business POV) building in obsolescence. Is there enough evidence that is the case? Not at all. But the current motivation is for producers to implement a form of sabotage, and for consumers to suspect this is happening.

Maintaining the status quo is not particularly healthy for either side. Both the industry and consumers are frustrated. The potential environmental implications of shortening the lifetime of a product are extremely dangerous. Even if obsolescence is unintentional but rather the result of pressure on costs (generated by aggressive competition and a price war) forcing the use of lower-quality components and materials it is still dangerous and, in the long term, destructive. One method would be to control manufacturers, to spy on them, to punish them, to impose increasing environmental taxes.

The other option would be to simply change the pricing model.

An issue of ownership

The current traditional pricing and sales model assumes that a manufacturer sells customers goods which serve a purpose. Manufacturers and traders receive the cash for the goods instantly and promise that the devices will work for the duration of the warranty period. Once that expires, they shrug their shoulders and - tough luck - it becomes the consumer's problem. The consumer continues to exploit the products after the warranty period ends hoping they will continue to function well for as long as possible, the manufacturer on the other hand, anticipates their (hopefully) imminent break down. The manufacturer has one advantage over the consumer here: not all of the product properties are visible to the consumer and as they are subject only to the manufacturer's input they have greater influence on the product lifetime. All the manufacturers need to do is use some low-quality materials or components (or install a micro bomb which explodes after a couple of years). Such in-built features do not have to be too big, it's enough they simply isolate or hold some critical elements together, they could be an integral part of a computer chip. Job done. Very tempting, isn’t it?

The point is that with the current model the products become the property of the consumer, and so any damage then becomes the worry of the consumer. The solution would be to give the manufacturer incentives to design products that last a lifetime.

Manufacturer’s property, manufacturer’s worry

Imagine now the opposite scenario. The manufacturer remains the owner of a device and simply leases the goods to the consumer for an indefinite period, so the consumer is able to return the device and switch to a different provider at any time. The manufacturer would have to repair the product if it broke down, and replace it with a new one if it proved impossible to fix. The trade would be responsible for arranging the transfer of the goods and service, and for selling them too. Well, perhaps not so much for selling the goods per se, but rather the accompanying overall service. As the price would be paid in the form of a leasing rate, all the motives and barriers to build in obsolescence disappear: (a) the manufacturers and the trade have a secured income irrespective of the product lifetime, (b) consumers can easily bear the monthly leasing rate within the home budget. In addition, manufacturers would be free of any suspicion, since a long device lifetime now becomes their internal business goal. It would simply reduce costs, without making an impact on sales.

In this approach however, extending the durability of a device is of greater interest to the manufacturers than the consumers. Some consumers might be incentivized to leave the manufacturer with a used device after a short while and switch to another supplier in order to get a new one. This could indeed cause some trouble.

The balanced model: shared responsibility

Let’s take a look at the intermediate scenario. The shopper pays a percentage of the product price followed by monthly leasing rates. As before, returning the device and switching to a different provider is possible at anytime, but the initial payment is non-refundable. Any breakdown would be repaired by the manufacturer. If it can't be fixed the manufacturer provides a replacement. Is there then any incentive for the shopper to switch to different supplier? Not right at the beginning. But when the time eventually comes for a replacement, well – yes, to a certain extent. It then becomes the manufacturer's task to keep the goods in top working order as long as possible. The cost of delivering a new device might be covered well before it really happens.

Let us summarize the motives of both parties:

  • By choosing this service the consumer pays an affordable price at the beginning, followed by the set monthly rates and has a lifetime warranty with the freedom to terminate the agreement and switch to a different supplier. Unless, of course they are satisfied with the current one.
  • By offering this service, the manufacturer cannot be suspected of having introduced any form of built-in obsolescence. However, high quality needs to be delivered from the very start to avoid costly servicing and throughout the lease time to earn consumer loyalty. This high quality ensures a stable, sustainable income, and cost reduction.

There are certainly some issues to be resolved, such as the precise responsibilities of the manufacturer. Is mechanical damage as a result of consumer negligence also to be repaired at the expense of the manufacturer? These are nuances, and it is possible to settle everything by agreement. Both the initial price and the leasing rates would include an insurance component anyway. The wider the scope of cost-free repairs for the consumers, the higher the price. There are multiple options in which this can be addressed whilst still giving clear benefits to all parties.

The cost of change, change management

The challenge for manufacturers here is evident and the changes necessary to switch to such a model costly. Internally, marketing and sales employees need to learn the new approach and change their mind-set. They’d stop selling products and start selling solutions. They’d have to communicate the solution to convince consumers it’s the right choice. It would be lots of work for the Pricing, Finance, and Legal departments to re-design their organization and prepare for the new battle. It would take a huge amount of effort to convince the trade to undergo similar changes. So, why do it? Because it would be a way for manufacturers to differentiate themselves from the competition, prove their environmentally- and consumer-friendly attitudes, and in the longer term, to win the market over.

Image source: Crowbar light bulbs by Bernt Rostad


[1] Wikipedia: Planned obsolescence or built-in obsolescence in industrial design 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. 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").

[2] Minus a “volume” discount for a high one time spend. This could also be quite significant from the cost perspective – the manufacturer needs to produce one bulb instead of 10. Unless the manufacturing cost is 10 times higher, the saving can be easily given away to the shopper as a price discount.