Scarcity-based marketing explained.

Scarcity-based marketing explained.

“May you live in interesting times” is an English expression that is claimed to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is normally used ironically; life is better in “uninteresting times” of peace and tranquillity than in “interesting” ones, which are usually times of trouble. 

Whether you like it or not we certainly live in interesting times, what with the recent pandemic and now the ‘shortages’ of certain staples of modern life such as fuel and certain foods.  The recent fuel crisis in the UK demonstrates one of the fundamental influence triggers that Dr. Robert Cialdini wrote about in his seminal book “Influence, The Psychology of Persuasion”.  Obviously, the one I’m talking about here is ‘Scarcity’. 

There is a tendency to ignore this principle as some people fail to realise just how powerful it can be.  Take the fuel crisis as an example; the very mention that there may be some minor supply problems at a few Petrol / Gas stations led to a wholesale panic by the British public, with scenes of massive queues and even some fighting as people scrambled to fill up. This was despite reassurances from Government sources who stated that there were no shortages and that people should just carry on as normal.

The study of Human behaviour is an essential part of being a business owner/marketeer. Knowing how people will react given certain triggers allows us to predict the results we can expect. So going back to the fuel crisis, it was relatively easy to predict that given the triggers that the public was exposed to would lead to panic buying. In ‘Influence’ Cialdini proposes that there are 6 principles of influence that are hardwired into the Human brain, these are:- 

1. Reciprocity. The principle is that we should try to repay, in kind, what another person has provided us.

2. Commitment and consistency. The principle is that once we have made a choice or taken a stand we will encounter personal and interpersonal pressure to behave consistently with that commitment.

3. Social Proof. The principle is that one of the means we use to determine what is correct is to find out what people think is correct.

4. Liking. The principle is that we prefer to say yes to the requests of someone we know and like.

5. Authority. The principle is that once we realise that obedience to authority is mostly rewarding, it is easy to allow ourselves the convenience of automatic obedience.

6. Scarcity. The principle is that opportunities seem more valuable to us when their availability is limited.

It’s virtually impossible for Human beings not to react to these principles, our decision-making processes are based on them, whether we like it or not.

When observing the current situation in the UK with fuel, three of these principles have come into play. The first principle was that of Authority, A leaked paper from the haulage association to the government was leaked to the press suggesting that the current shortage of HGV tanker drivers could lead to shortages of petrol on the forecourts unless some actions were taken. The fact that a government spokesperson then denied that there were any problems gave the rumours more credence, not less.  

This then triggered some people to ‘fill-up’ perhaps earlier than they would have done, which led to some queues on the forecourts, which were posted on social media and in the press, triggering principle no. 3 Social proof.  People who were not, either aware of the original report nor phased by it were now convinced through social proof and the media that there were shortages, and fuel was scarce (principle no.6 scarcity). Thus the whole thing became a self-fulfilling prophecy. 

Now you might not want to create panic buying of the necessities of modern life but understanding how you can use scarcity in your marketing can massively improve your sales. For example, the use of deadlines in your marketing (implying that time is scarce) almost always increases sales. How many times have you reacted to deadlines, think Black Friday deals, or flash sales?  Amazon uses this principle all the time. Here’s an example:-

Notice that the sale ends in 1 hour and 48 minutes and that 72% of the available product has been claimed. It’s also worth noting that Amazon is using another of our principles, Social proof 106 people have reviewed this product and given it a 4.5 star rating.

Amazon is not the only one to use the principles of scarcity in their marketing, here’s another example from Heinz and the use of a classic limited edition. 

As a thank you to its 45,000 UK Facebook fans for being such passionate advocates of the brand, Heinz made the first 3,000 bottles of the limited edition ketchup with balsamic vinegar available exclusively to them. 

Even fast food giant McDonald’s gets in on the scarcity act with regular limited edition burgers that are available for a few weeks only.  Here’s what McDonald’s promotion said:-

“Customers will be able to indulge in a rich smoky classic for a true taste of the South this summer when they order the McDonald’s limited-edition burger – the BBQ Bacon stack – when it goes on sale in restaurants from Wednesday, 16th June for a limited period of six weeks only.”

Scarcity marketing focuses on consumers’ fear of losing their freedom of choice. Simply put, if a product isn’t available, it suddenly becomes more attractive. In his book, Theory of Psychological Reactance, Jack Brehm recounts researching this phenomenon. First, he placed two identical toddler toys in a room. One had a plexiglass barrier in front of it forcing the toddlers to go around the barrier to get the item. The other toy was accessible in front of them. You might have guessed where I’m going with this…The most attractive toy was the one that had the barrier in front of it.

The same principle works in marketing.

In most cases, scarcity is used in connection with a discount that’s only available for a limited amount of time, and the focus is on the discount and not the urgency of the offer.

The problem, though, is many people think the discount is the trigger. It’s not. It’s the urgency of the discount. Thus, they discount their new products—despite claiming they’re the best on the market.

If your product is that good, then why would you need to discount it?

I’m always arguing not to do what everybody else is doing, and I’m not going to stop now. The truth is, there are other ways to use scarcity without having to lower the price of your product.

For instance, limited product availability works well without discounting (if not better).

We tend to associate limited availability with exclusivity. If things are difficult to get, we know it’s because they’re better than the things we already have. As such, prospects use an item’s availability to decide on the desirability of the product.

People don’t think about the fact that it’s a psychological reaction that’s causing us to want something. We know we want it. And because we need to make sense of this feeling, we assign the item’s positive qualities to justify our desire.

In his book, Influence: The Psychology of Persuasion, Robert Cialdini argues that the idea of potential loss plays a role in how we make decisions. How often have you been more motivated by the prospect of losing something than gaining something of equal value?

Take Black Friday as an example:-

People wake up at silly o’clock. They wait in line for hours in the freezing cold. Why? So they can get their hands on the new LEGO Star Wars set that’s on sale for $49.99 before it’s sold out. (I actually have no idea what Star Wars LEGOs cost so don’t take me up on this). We know this phenomenon as the fear of missing out (FOMO).

• 68% of millennial consumers say they would buy something after experiencing FOMO, most often within 24 hours.

No one wants to feel left out, especially if a good deal is up for grabs. But there’s more to scarcity and FOMO than great deals. Now that you know why you should use scarcity, let’s take a look at some scarcity examples to illustrate how.

• The Few-Items-Left Tactic

Another effective scarcity marketing tactic is the “few items left” tactic.  Building on the previously mentioned research, Jack Brehm developed the psychological reactance theory to explain the human response to diminishing personal control. “The theory holds that a threat to or loss of freedom motivates the individual to restore that freedom.” — Jack Brehm

When opportunities become less available we lose the freedom of choice. And when our choices are limited or threatened, our need to keep that freedom makes us want the item even more than before. What to do?

Email prospects to let them know that some of your most popular items are selling out fast to increase the likelihood of them buying.

• The Limited-Introductory-Price Tactic

When you use discounts to increase sales, you need to find the right balance. You don’t want to offer them too often as they will only decrease the perceived quality of your product. One way of using discounting profitably with scarcity is launching a new product. Whether it’s a beta program you need testers for or a new sweat-repelling invention in sports apparel, you need to give people an incentive to try it out. You don’t have any product reviews or feedback to rely on for proven effectiveness of the product. So, it’s a good idea to offer an early bird discount to get new prospects to try your product.

• The Limited-Bonuses Tactic

In customer service, people always talk about giving your customers “that little extra.” Combining this with scarcity can have a great impact on your sales. Offer your prospects a freebie if they buy more than one item, or if they buy specific products. Offering a free product isn’t always the best tactic if you sell luxury items with a high price range. Then we’re back to the perceived quality of your product diminishing because you’re giving it away for free. Another option is to offer a free resource or service related to your product. If you sell high-end electronics, you could email a promotion for expensive televisions. Then, you can include a bonus such as a free installation, or 3 months free Netflix if they buy now. If you sell expensive sports equipment you could offer a free training guide. The opportunities are endless as long as you remember to include scarcity and a reason to buy now.

• The Order-Before-XX-Today Tactic

Consumers today aren’t only demanding—they’re also becoming more impatient. According to one recent study, 38 per cent of people said technology had made them less patient than they were five years ago. This puts more pressure on businesses to keep up with deliveries and shipping time. Thus, things such as “next-day delivery” are in high demand among consumers. So, if you have the possibility of offering “next-day delivery” you already have an advantage over the competition. And by including scarcity, you’ll be able to sell even faster.

• The Limited-Products Tactic

Crystal Pepsi.

Heinz purple-colored ketchup.

Cinn*A*Burst Gum.

These are all items that, in hindsight, weren’t noteworthy. But now? They are highly sought after because they’re no longer available. Once again, when we’re presented with the prospect of losing our freedom of choice, we do what we can to avoid that loss. In other words, if you have a product that you only produce in limited quantities, use that scarcity to sell more. It’s not that people are afraid they won’t get the product. They’re also afraid they won’t have the choice to buy the product.

There are two ways to use the “limited products” tactic.

The first is notifying prospects that a popular item is back in stock, but will be sell-out soon. The other option is to promote your products in advance and encourage potential customers to pre-order if they want one. It’s important that you include the number of products you’re producing to emphasize the limited availability.

• The Device-Limited-Sale Tactic

With 37% of shoppers (age 18-24) doing most of their shopping on mobile devices, a device-specific sale can give your sales a bump in the right direction. Send out an email to your list and tell them that you have a limited offer for them if they buy on mobile or through your app. Because the discount is only available via mobile, it feels more exclusive than a regular one. If you include a time limitation to your offer or another incentive to get people to buy now it can drive even more sales and engagement.

Go Beyond The Discount

Everyone’s doing time-limited sales nowadays. So, if you want to stand out from the competition, you need to take your scarcity marketing to a new level. If you believe in your product there’s no reason to host time-limited sales every other week to get people to buy. Instead, use some of the above strategies and focus on the exclusivity of your product. Get people to buy now instead of later (read: never) and watch your sales soar.

Scarcity doesn’t need to be a reality. People simply need to think that something is scarce in order to be compelled to act. The recent fuel crisis proves this beyond doubt. Using scarcity-based marketing is a must for the switched-on small business owner.

Why not check out our course on the principles of influence (Including scarcity). Click the button to find out more.