Editor’s note: Phillip Adcock is the founder and managing director of the shopper research agency Shopping Behaviour Xplained, U.K.
Scarcity marketing uses our innate fear of shortage to boost sales. This is especially evident in-store near Christmas – think of the rush of parents desperate for the latest toy craze for their kids. But what are the reasons behind it?
We are evolutionary tuned to fear shortages. As hunter-gatherers, food was often scarce so we would feast when it was available, followed by long periods of famine. Those same impulses are triggered when we see that a product we are considering is scarce, even if the product has no nutritional value. Our needs as 21st-century consumers have changed and we are now tuned to need consumer goods just as we need nutrition.
As we are afraid of losing out, we will be instinctively drawn to a sales display if it is half-empty, as it presents the potential to miss out. Under the influence of scarcity, we make purchasing decisions more quickly and with less forethought.
Who commonly uses scarcity techniques?
Many different brick-and-mortar stores use scarcity techniques to increase their sales.
Starbucks uses seasonal drinks as a scarcity product. If it was possible to buy a pumpkin spice latte year round, it is likely that sales of the product would go down. As it is only in-store at certain times of the year, fans of the flavor are more likely to purchase when it’s available due to the seasonal scarcity.
Amazon uses scarcity techniques online to increase sales and increase impulse buying. The “x amount left” counter on the product page can drive buyers to make a purchase they were considering in case they miss out. eBay uses the same technique with buy-it-now sellers, as well as pitting buyers up against one another in auctions.
Types and effect of scarcity techniques
There are two different scarcity techniques and they can be used in a variety of ways, depending on the product that is on offer.
First, there is the limited day offer, where a sale price or product is available for a set number of days. This may also be tied in with other offers or promotional accompanying gifts. Similar to this is the holiday special (e.g. Christmas, Valentines or Black Friday) or the seasonal sale (which may last for a few days or several months). Many brands have seasonal products that are discontinued after the seasonal period.
Then there is the limited quantity sale. This can range from a one-off (a piece of art) to a limited run (depending on audience size this could be anywhere from 10 to several thousand items). This is even more effective if there are emotional sales techniques at play, such as the need to buy an in-demand Christmas present for a child.
There is also the tactic of adding an “inform me when it’s back in stock” function. This is a good way to gauge how big the potential re-release market is, as well as combating the frustration of shoppers who missed out. This is the chance to give them the chance to order the new product before it is re-released, motivating them to purchase immediately.
What benefits can scarcity techniques have in online stores?
Even though shoppers spend less when shopping online than they do in-store, scarcity techniques have the potential to increase purchases. Whether it’s a limited-time offer or a limited-edition offer, it can persuade shoppers who are unsure to make the purchase.
Even on products that cannot physically run out, such as e-books, a time limit on their availability at a certain price increases sales. Many shoppers will also wait until it is almost the end of a sale period to purchase. The number of purchases tends to be highest on the final day of the sale.
Limited time offers can also be a boost during quiet periods. If January has historically been a month of low sales, a limited-time offer in January is likely to boost sales.
More value is attached to scarce products such as art prints. Numbered prints are more expensive than regular prints because there is a limited number. Signed numbered prints are even more limited. Signed numbered prints by an artist who has died will be the rarest and most sought after because there is a final, finite quantity.
We value products that are scarce
The recent limited-edition Father’s Day record pressings in the U.K. are a good example of unintentional scarcity. Pink vinyl pressings of The Jam’s Sound Affects LP were created as a limited-edition father’s day gift promotion. Rather than being a father’s day gift, these were quickly bought out by The Jam fans, who often drove to several Tesco outlets trying to find them.
In a recent experiment, it was proved that we value products more highly if we perceive them to be scarce. This is most evident if the scarcity is due to high demand by other consumers. This social proof gives an impression of added quality to products.
Scarcity technique case study: Kickstarter campaigns
Kickstarter is one of the most efficient users of scarcity techniques. There are several in play with each campaign.
The first way in which Kickstarter uses scarcity technique is by putting a time limit on each project. This has a dual function. It encourages the poster to promote the project as much as possible to receive funding in time. It also provides a time limit for project contributors.
The second way is through scarcity. Each project comes with different rewards of limited quantities, depending on the amount donated. While some projects may have slightly pointless rewards for small sums (such as a thank you e-mail) this is often the chance to buy the product at a cheaper price.
The risks of improperly applied scarcity techniques
It might be tempting to add “three left” to your product sales pages but your scarcity marketing needs to line up with your product quantity. Shoppers may return to a page, only to see the same stock number again – in some cases after buying the product. This will lead to customer distrust and dissatisfaction.
If you want to make scarcity techniques part of your ongoing strategy, make sure the strategy matches your products. The strategy works if you produce a limited run of t-shirts every month, or if a different product is at a sale price for a month.
A prime example of this not working can be seen in many soft furnishing companies where sofas are constantly on sale. Customers are aware that the before prices are often false or only applied for a short period in an obscure location.
If you are selling limited runs online, make sure that your sales system is up to scratch. Shoppers shouldn’t be able to add products to their basket if they have already sold out. There is nothing more frustrating than to have appeared to acquire a rare, limited-run item only to be told that it isn’t available on checkout. This will cause the customer to stop trusting you and make complaints – and online customers aren’t shy about sharing their frustrations with others via Twitter and Facebook.
Scarcity techniques can be a great way to increase sales but should be handled with caution.