What is Scarcity?
In one sentence, scarcity is the unavailability of material when supplies are relatively lower than the demand. The scarcity plays a pivotal role in our buying process sometimes as our brains are wired to get affected by that. Marketers have been playing with psychological elements like scarcity over the centuries. They have been used both in an ethical or unethical way.
Naturally, the harder something is to get, the more we crave it. People often relate availability or exclusivity – equivalent to quality. You will often find limited edition cars, gadget selling at a higher price with not much significant performance difference, but mostly with a modified design.
How does scarcity works?
We are more motivated by the fear of losing than by the wish of gaining. In 2009, Parker & Burkley explained,
“Women are more attracted to men who are in a relationship than to single guys”
It means when something is limited, it becomes more attractive.
A Cookie Test:
Through a focus group experiment by Worchel, Lee and Adewole in 1975, it came out that people give a better rating to the cookies if they are limited in number. A group of participants were given a glass jar with ten cookies, while others only get two. In another test, the number of cookies was reduced to two from ten in quantity. The participants rated the limited number of cookies the highest. Though they were the same cookies that other groups had.
Another study by Lynn at 1991 explained that Scarcity works well when it’s targeted at customers who have a greater than average need for uniqueness. Now you know, why PS4 limited editions are bought by people who already have one or two PS4 at their disposals. Because their average need is already met, they just need to be more unique than the others.
How can you apply scarcity to your business?
Now, I am going to show you some of the examples of how you can implement scarcity to your business and get more revenue from your new/ existing product lineup. I am pretty sure, you have experienced most of them as a consumer or marketer. But, a fresh perspective may help you to implement them in a better way.
1. Limited Stock
You will find it very common by the eCommerce companies. We tend to value those things more that have recently become less available to us.
2. Limited stock for a specific size or model
Take the limited stock technique to a new level and show them which sizes are available at which quantity. Here 7 size is not available. But, 8 is available for only 3 quantity.
3. Showing the interest of another customer
When you are just evaluating whether to book a particular hotel room or not, travel sites like booking.com can show you that other people are also visiting the same room in the last 10 minutes, implying that they may book it any time and you can lose the opportunity to get it for yourself. Showing, how many people are currently viewing the same time can play a very powerful role in the scarcity field.
4. Setting Deadlines
By setting a deadline in a clever way, you can give your potential customer to buy now. However, some businesses may use it unethically. But, you need to make sure that you keep your promises intact to your customer. Most likely they will be observing your intent.
Something like: Apply by the 25th of August or The deadline for joining is 29th September or the early bird offer ends tonight.5. Using Count Down Timers
This count down timer technique is often used for a perceived benefit for buying fast for a discounted price or reward items. They can be placed strategically to draw even more attention to feed the customer’s fear of missing out.
6. Fast Shipping system with a time-bound approach
Amazon shows the fast shipping option if you choose to buy it earlier within a time-limit. Shoppers who need a product immediately will go for impulse shopping to get it on the next day.
7. Shortening the free trial time
If you are planning to get more people to use your service in a shorter time-frame. You can reduce the length of your free trial service from the regular one. People will think, they have less time to use it and their conversion possibility will be faster.
From Start your 30-day trial to Start your 15-day trial = More usage.
8. Auction & Bidding
eBay became successful by using this auction system. A single unit product which is available for a limited time applies scarcity in multiple ways. At the same time, you will have to compete with the other bidder to get the deal and there can be only one winner. That makes the scarcity game multi-dimensional.
9. Content availability with limited features
The online world is a big repository of information and every knowledge seems to be available here for the lifetime now. But, here’s a catch. if you knew some stuff is not going to be permanent here, wouldn’t your curious mind like to see that at first?
Snapchat introduced this scarcity model in the social media sector. If you miss a story on Snapchat, which is only available for 24 hours, you will never see it again. This feature helped the users to come back to the platform, again and again, that made it the most engaging app. Facebook is following the footsteps and now we can see our Stories get more views than a post in our profile or business page.
Ask yourself, is there any feature of your product that can be made artificially scarce?
The psychological parameters are not new. If you learn them well enough, it can help you to come up with a groundbreaking product idea that can actually earn you millions someday. Nokia had flash messages in the early 2000s. It’s the Snapchat, who took the same model and applied it to a target market (teenagers) at the right time (internet boom).
Are you interested to know more about how you can use Psychological techniques to get new product ideas and increase your existing business revenue? Take a look into the Anchoring Effect and it’s the application to the business world.