What is scarcity? If you look at the principle of supply and demand, you’ll notice that when supply is limited, demand goes up. Scarcity has a psychological influence on us, making us want something even more if there isn’t enough to go around. Scarcity is great because it creates a fear of shortage, and thus a sense of urgency.
Limited Time Offers
Limited time offers are among the most popular in the scarcity category. Just think about your average car dealership. Practically every commercial is a limited time deal. “Get 0% financing before it’s gone!”
Limited Quantity Offers
When something is of limited quantity, it suddenly becomes more unique or exclusive. In some studies, limited quantity or supply offers have outperformed limited-time offers. Why? Because it’s hard to tell when an offer of limited quantity will suddenly become unavailable, while a time-based offer has a known end time. Limited quantity offers are great for not only getting people to say “yes” to your offer but to avoid procrastination completely.
Limited Time and Limited Quantity
Groupon is the perfect example of using both tactics. All Groupon deals end within a certain time frame, and they limit the number of people who can buy a Groupon. That’s a powerful combination. The site also packages these scarcity tactics with discounting, which is another great value-add, especially for e-commerce businesses.
Scarcity is a tactic marketing and sales teams love–because it works. Take a look at this Safeway ad from 1952:
Notice that the storewide sale isn’t open-ended: It’s seven (sensational) days long.
The ad gives shoppers formal notice that they only have one week to take advantage of the sale.
But scarcity doesn’t just make shoppers feel a sense of urgency to convert and take action–it has a slew of other handy side-effects, too.
One clothing company has this all figured out. This online retailer tested a limited next-day shipping offer against another version in which the limited offer wasn’t shown.
The limited time shipping offer boosted sales by 226%.
All it took was one line of text with a countdown and somewhere around 45 seconds to install it.
HOW TO HARNESS THE REAL POWER OF SCARCITY
The commodity theory proposes that scarcity increases the value (or at least the desirability) of an item or experience that meet three basic criteria:[*]
- It’s useful
- It’s transferable between people
- It has the potential to be possessed
Any marketable good and service fit the bill– even marketing activities fall into this category.
On top of that, Dr. Michael Lynn, a professor at Cornell, compiled a list of explanations psychologists and researchers have found over the years that examine why scarcity increases desirability:[*]
Let’s break down these three main categories:
- Scarce items feel exclusive: Those who have scarce items have exclusive access, which is not openly available to others. This, in itself, makes a scarce item more desirable. This is why clubs have VIP areas, airlines have special membership lounges, etc.
- Scarce items appear more valuable: According to the law of supply and demand, items in low supply often cost more and therefore scare items are expensive items that act as status symbols. Example: To get one of the few Birkin bags produced by luxury brand Hermes, you’ll probably be waitlisted for years…just to pay the $10K+ price tag.
- Scarce items make people feel powerful: Snagging a scarce item means you have access to something other people want but can’t have–which gives the owner power.
At one point, only the royals and leaders had access to clean water, abundant food, and comfortable living quarters. Because of this, these scarce essentials became even more powerful.
But that’s not all. Scarcity, as a driver of desirability, is further proven in research conducted in a virtual context. It’s not an effect that only works in a real-life context.
A study by Wageningen and Tilburg Universities on product scarcity confirmed:[*]
- Limited supply in a virtual shopping environment leads participants to believe scarce items were more popular.
- They believed supply was limited because the demand for these items was higher than other items.
- With this belief in mind, more shoppers chose the scarce item over the non-scarce one when told to select an item of their own.
In this setting, the cause of scarcity didn’t matter, either. Items that were scarce as a result of increased demand or limited supply both had higher consumer preference over non-scarce items.
The bottom line: The more scarce an item, the more people want it.
Just like the cookies.
Let’s look at some specific ways you can start implementing scarcity marketing tactics right away.
USING LIMITED TIME OFFERS TO BOOST A LOW SALES MONTH
One of the best ways to leverage scarcity is through limited time offers.
Just like in the Safeway ad you saw earlier when time is scarce, it makes people act fast. After all…
They have less time to second-guess and the pressure is on which means they will act sooner rather than later.
There’s nothing more anxiety-inducing than seeing the minutes on a clock tick down…
SCARCITY MARKETING TACTIC #1: PURCHASE COUNTDOWNS
Putting a timer or countdown within a sales context means you’re defining the scarcity parameters.
When the customer has a firm grasp on how much time he or she has left to make a decision, it adds urgency.
eBay is known for their purchase countdowns that ignite last-minute bidding wars amongst prospective buyers.
Why is a countdown so effective as a scarcity tactic? Because we hate losing and this next theory explains this further.
Psychologist Daniel Kahneman’s Loss Aversion Theory is based on findings that state the pain of losing is psychologically almost two times as powerful as the pleasure of gaining[* ].
You can see this in the graph below.[*]
You read that right: Losses can be 2x more painful than gains are pleasurable.
Tie this in with Freud’s Pleasure Principle (a human’s innate tendency to seek pleasure and avoid pain), and it’s not hard to see why online shoppers keep on bidding while the countdown draws to a close. Bidders drive up the price tag of a scarce item just to avoid the pain of not winning.
SCARCITY MARKETING TACTIC #2: SALE PRICE COUNTDOWNS
Countdowns can also be used in the context of a limited time sale price.
Using this example from the Social Media Marketing World conference, you can see that adding a countdown shows interested attendees how much time is left before the sale price ends.
The limited time sale on Virtual Tickets not only encourages a “buy now” mindset, but it again taps into the loss aversion tactic that reminds potential attendees why they need to act now rather than later.
They drive this home by not only limiting the time on the offer but by limiting the quantity of the sale price Virtual Tickets, too.
In another example, Huckberry[*] reminds shoppers that limited time sale prices have a hard stop time with an on-site countdown for discounts.
Limited time offers like these put another psychological tactic to work as a powerful motivator: Fear of Missing Out or FOMO.
The FOMO phenomenon was named by Dr. Dan Herman in 1996, and is defined as a “clearly fearful attitude towards the possibility of failing to exhaust available opportunities and missing the expected joy associated with succeeding in doing so.”
Put simply, people hate missing out on a good deal which is why using FOMO can be so effective.
SCARCITY MARKETING TACTIC #3: NEXT-DAY SHIPPING COUNTDOWNS
Another place you can leverage a countdown to take advantage of FOMO is within a next-day shipping context.
By letting shoppers see how much time is left before they’ll miss out on next-day shipping, you can increase the urgency to purchase now.
Amazon uses this exact tactic to let shoppers know how much time is left before they can no longer guarantee next-day shipping.
If you had the opportunity to get next-day shipping, wouldn’t you hurry up and check-out to take advantage of that offer?
I would (and have) and I bet you would too.
SCARCITY MARKETING TACTIC #4: SEASONAL OFFERS
Seasonal offers also help buyers see scarcity and drive sales. After all, the holidays and seasons don’t last forever.
This is one of the reasons stores like Starbucks only sell pumpkin spice flavored drinks in the fall.
Research has proven that seasonal offers pay off. An NPD Group purchase tracking study on seasonal beverages (like pumpkin spice lattes) showed that seasonal offers not only spur purchases, but they also produce higher average order size.[*]
During seasonal offer periods, the average check for pumpkin spice latte buyers was $7.81, compared to only $6.67 for those who bought a non-seasonal drink.
Why did that happen? Because purchase cycle analysis from the same study showed that these seasonal beverages were viewed as indulgent purchases, in which consumers not only bought the seasonal beverage but an additional food item, too.[*]
It’s the “treat yo self” mentality that says, “I’m already buying this special item, why not go all in?”
Limited time offers are powerful for creating a sense of urgency, but scarcity extends far beyond the realm of limited time.
So how can you add seasonal offers to your business?
- If you have a digital product, offer seasonal bonuses.
- If you have an eCommerce store, pull season-appropriate items off of the digital shelf after a period of time (and make sure your customers are aware you’re doing it!)
- If you have a service business, offer a special, discounted rate to your most loyal customers during a specific season (like Christmas.)
USING LIMITED AVAILABILITY TO INCREASE CONVERSIONS
Scarcity already hints at short supply, and sometimes that means the product itself is in limited quantity. Let’s explore how you can use short supply to your advantage.
SCARCITY MARKETING TACTIC #5: LOW STOCK NOTICES
As I mentioned earlier, scarcity makes items seem more popular (especially for online shoppers), which is why it’s not surprising more and more online retailers are leveraging low-stock notices.
Zappos uses a low stock notice to alert shoppers of scarce items, which is important information for anyone looking for a particular size and color.
When a buyer sees that the item he or she wants is near selling out, it’s just one more reason to make a purchase immediately.
SCARCITY MARKETING TACTIC #6: LIMITED PRODUCTION (EXCLUSIVITY)
Other times, limited stock isn’t a product of high-volume demand–it’s a deliberate sales strategy.
Small-batch, limited edition products are just that. Think back to the Adidas release of Kanye West’s Yeezy Boost 350. Within minutes of going for sale online, the sneakers were completely sold out.
Now, not everyone has the celebrity status and reach of Kanye West–but that doesn’t mean limited production loses its effectiveness as a scarcity sales tactic when used in a non-celebrity context.
Brothers Leather Supply lets online shoppers know when their limited edition products are low in stock to drive sales. The red copy notating scarcity stands out from other elements on the page, making it easy for customers to spot.
Limited production products tap into those desirability drivers I talked about earlier. They can be seen as status symbols, have an air of exclusivity, and make owners feel unique and special.
USING DEMAND AND POPULARITY TO JUMPSTART YOUR SALES
Have a product/service in high demand? Showcase it.
Leveraging your demand not only adds ethos to your offering, but it communicates the risk of scarcity as well.
SCARCITY MARKETING TACTIC #7: SPOTLIGHT CUSTOMER BEHAVIOR
Social proof is an indicator of popularity, and often demand.
Popularized by Psychologist Robert Cialdini, social proof theory explains why people look to others when making a decision: They’re looking for guidance from a larger, possibly better informed, consensus.
Sales and marketing teams that leverage social proof are not only showcasing their most popular products and services, but they’re also creating a sense of increased demand at the same time.
Take a look at how Airbnb showcases wish-listed locations as a form of social proof:
When travelers see how popular a particular place is with other users, they’re not only seeing social proof in action, but they’ll also feel greater urgency to book before it’s snatched up by someone else.
SCARCITY MARKETING TACTIC #8: USE NUMBERS TO INDICATE POPULARITY & DEMAND
Sharing hard numbers and statistics about your product or service is another indicator of social proof and popularity that takes advantage of FOMO.
Bonus: It adds transparency as well.
SCARCITY MARKETING TACTIC #9: LEVERAGE REAL-TIME ACTIVITY
You can communicate encroaching scarcity by showing customers what others are doing in real-time.
Again, this helps create a sense of urgency, as buyers are able to see what other people are doing, and gives them an idea of how quickly they need to act if they want to claim the scarce item.
Expedia does this well with hotel bookings–they use yellow pop up notifications that tell browsing visitors how many other shoppers are looking at the same hotel at the moment as well as how many booked this location recently.
THE LIMITS OF SCARCITY MARKETING
Can scarcity tactics boost your marketing and sales? Absolutely.
But only when used in the right ways, at the right times.
Scarcity tactics aren’t a quick fix for lagging sales.
Instead, they increase the intensity of desirability for an item that’s already in demand. Think about it: If people aren’t already lining up to wait for your scarce offering, is slapping a timer on it going to magically increase demand? Probably not. Strive to build a loyal customer base who can’t wait for your new releases before tying in scarcity.
Too much pressure is a bad thing. Many of the scarcity-focused strategies I’ve talked about today create some anxiety-producing urgency–and when you put too much pressure on your customers to act, they may feel like you’re forcing them into action–not letting them make their own decisions. It’s an easy way to break ties with loyal customers.
Everything in moderation. Limited edition items are special because they’re different from all of your other offerings. That means you can’t make every single item limited, seasonal, low in stock, and only available for a short period. If nothing else, customers will get annoyed that you can’t regulate your inventory. Scarcity should be used in moderation…or scarcely if you will.
Test to know what works. I’m a huge fan of testing, so of course, I’m going to urge you to test out different scarcity marketing tactics to find the right ones that drive conversions with your specific audience. An easy way to do that: Monitor and test different strategies using a heat map tool.
BOOST YOUR SALES WITH SCARCITY MARKETING
Ready to start using scarcity to improve your marketing and sales?
Let’s do a quick recap of why it works and how you can use it.
Why it works: Scarce items make people feel unique, powerful, and like they have access to something valuable and exclusive.
How to use it:
- Purchase countdowns
- Sale price countdowns
- Next-day shipping countdowns
- Seasonal offers
- Low stock notices
- Limited edition items
- Spotlighting customer behavior
- Using numbers that indicate popularity/demand
- Showing real-time activity
Scarcity is why people perceive limited quantities as more precious and valuable but it’s not a quick fix for lagging sales.
If you use it too much or pressure your customers excessively, you’ll end up scaring them away instead.