Have You Heard of Scarcity Marketing?
Scarcity marketing plays on the cultural trope that most people want what they can’t have. It’s not a new phenomenon—it is based on decades of psychological research and not to mention a basic economic principle.
In economics, the law of supply and demand dictates that a low supply makes something more valuable in terms of price, all things equal. It’s one of the reasons why anything that’s limited edition will be pricey.
But what makes a limited edition so attractive and in-demand?
There are many other psychological principles in play here. Some people are collectors and are motivated to purchase anything that’s limited edition. There’s also the need to be distinct from others—getting your hands on a limited edition somehow grants you bragging rights. Then there’s herd behavior—when you see other people want something, you’ll start liking it, too.
Cue #FOMO or the fear of missing out. Millennial consumers were asked if they would buy something after experiencing FOMO, and 68% of them said yes – they’d even make the purchase within a day or two.
The bottom line is that scarcity creates demand. Scarcity also creates urgency. Demand and urgency lead people to buy NOW.
The pull toward things we can’t have develops at an extremely young age.
Jack Brehm shared his findings in his book, Theory of Psychological Reactance. For his experiment, he placed two of the same toddler toys in a room. He put plexiglass around one of the toys and let the other sit out in the open. By this point, you shouldn’t be surprised that toddlers were more interested in the one with the barrier.
What are popular and compelling examples of the use of scarcity by companies?
Amazon makes it known if a product is running low in stock. Some e-commerce sites will even send you notifications if a product is selling out quickly. Whether you were almost convinced to buy the product or not, it’s suddenly a lot more desirable. When you’re taking your time to decide on a purchase, you’re passively picturing your life with the product. As soon as you know that it’s almost gone, you’re forced to quickly and intensely imagine what your life would be like if you missed out on this product. The thought of losing this chance is likely enough to make you commit.
Booking.com and Agoda.com will alert you if someone has booked the room you’ve been eyeing. They’ll also let you know how many other people are currently looking at the room you’re considering, putting the pressure on you to book it before they do.
Door Dash and other food delivery companies will send members a coupon for a specific dollar amount off an order and only make it usable for the next week. If you were on the fence about getting food delivered in the next week, chances are you’re at least going to look at the options now. But who are you kidding – you’re definitely going to order dinner from that new Thai restaurant everyone’s been talking about.
Seasonal products or limited-time items are also compelling examples of the use of scarcity in marketing. Those Starbucks fall and holiday drinks? Those are made with the scarcity principle in mind. It must work because nearly every industry has adopted a seasonal offering of some sort. Pumpkin spice deodorant, anyone?
Studies also show that the average ticket price when buying a seasonal drink is higher than buying a regular drink. Seasonal beverages are seen as special and indulgent, so people are more likely to treat themselves to another menu item while they’re at it. Holiday self-care at its finest!
Some brands use limited-time freebies to encourage purchases. Lego will release limited edition polybags and other collectibles to entice collectors to purchase on particular dates, like May the 4th for Star Wars builds. Starbucks created a limited-edition holiday travel mug that shoppers got for free when they ordered a holiday beverage, increasing their seasonal sales by even more than usual.
An e-commerce clothing company tested two versions of a product page to see which one would prompt more purchases. They’re each selling the same jacket – the only difference is that one page has an “Order within 3 hours (counting down clock), get next day delivery” message just under the “Add to Cart” button. That offer increased their sales by 226%.
Airbnb lets viewers know when they come across a “Rare Find” – that is, a space that’s so spectacular it’s usually fully booked. Mix in some social proof with that urgency, and you’ve got yourself a sale!
Let’s go over some ways for you to use scarcity marketing in your own business.
Limiting your products’ availability triggers customers to assume that these products must be far better than other ones that are readily available. In our eyes, exclusive means superior. This assumption is so strong that we can assign a quality level to a product simply by noticing its availability. This works for limited bonus products, limited sale items, limited introductory price offers, limited time for free shipping or next-day delivery offers, limited offers through a specific channel (“Order through our app in the next 24 hours for 50% off), etc.
If you consistently run sales and each one is accompanied by a “Final Hours” or “Ends Soon” message, your customers will start to catch on. They’ll notice that your warnings aren’t compelling, and their sense of urgency will disappear.
Strategy and authenticity are the keys to making scarcity marketing work for you.
How about you? How do you leverage scarcity for your business? Got a question? Don’t forget to COMMENT below and SHARE your thoughts.
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