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Increasing Sales Through Scarcity – Is It a Scam?
This is the third post in a series on sales and marketing tactics. Read our first post, Afraid of Marketing or Just Turned Off, and then our second, How Urgency Gets You To Buy. And now for today’s post…
The law of supply and demand says that when something is hard to get, it’s worth more. That’s great if you have a small stash of Canadian diamonds tucked in your pocket. But how does it all work? What makes us want those Canadian diamonds so badly? They’re just hunks of compressed coal, after all.
What creates desire and demand in the first place?
Scarcity. We want what we can’t have. We desire what is difficult to possess. The more out of our financial reach or our ability to seize, and boy, do we ever want that one thing.
Limited Numbers Create Desire
Take Mario Kart, for example. It’s just a Wii game, right? Well, when Christmas 2008 rolled around and I couldn’t find Mario Kart in the stores anywhere, that game took on more importance. I wanted it, dammit, and I couldn’t have it.
So I wanted it more.
I began to ask for the game at other stores. “Sold out,” I was told, and I suppressed a sigh and a pang of envy for those lucky gamers whizzing around in their carts. I started to travel to stores I don’t usually shop at in hopes of finding wee Mario and his vehicles.
No luck.
I perused the leaflets that came with my newspapers. I was getting desperate. I would ask clerks when they expected to have copies of the game. “Oh, we only get a few in at a time, and they sell out fast.” Well. I’d just have to watch more closely and be faster, wouldn’t I?
And then one day…
The local Wal-Mart proclaimed they had Mario Kart, and even better, it was on sale! Without even thinking, I dropped everything and hopped in my car. There it was – four months after Christmas, and mine, all mine!
Price be damned, I was going to have that Wii game in my hot little hands. And when I’d finally paid and brought the game home, I felt victorious. I, too, was now one of the cool kids – nay, the elite!
Truth be told, I’ve played the game exactly twice since I’ve bought it.
We Want What We Can’t Have
Scarcity and social demand got me wanting that Wii game badly. It wasn’t just a game anymore – it was a coveted object in my possession, one that would make non-owners envious. Once I owned it… Meh.
You’re not above this psychological consumerist quirk, either. We all make decisions on what to buy and what’s valuable based on scarcity and social demand. These two elements help us determine what’s good to have and what keeps us in favorable position with other human beings.
That’s important. If you’re out of favor, you’re an outcast. And caveman logic (it’s hardwired in your brain) says that outcasts, loners, weirdos and whatnot just don’t survive. Being an accepted member of society is crucial to safety and our well-being.
Back to scarcity, shall we? The scarcity principle claims that opportunities are more valuable to us when availability is limited.
Take wedding bands and diamond rings, for example. They’re just metal and stones, but boy, they carry a nifty price tag, and they’re always in demand. Silver and aquamarines are just as pretty, though, but neither metal nor stone are as scarce as gold and diamonds. Thus, we perceive them as of lower value.
Are they? Not really. A stone is a stone is a stone. Our perception of value, therefore, comes from the difficulty in possessing that particular stone. Diamonds are hard to find, they’re expensive to extract and cut, and there’s a limited supply available.
Out Of Your League and Into Your Emotions
Here’s another great example: Let’s use Frank Kern’s Mass Control. (Love him or hate him, the guy offers the best example going for the purposes of this post.)
- Frank’s course is hard to find – you can’t easily obtain it and those who do own it aren’t sharing what they’ve learned very much. The information isn’t common and it’s difficultly obtained.
- Frank’s course is expensive – at about $2,000, it’s out of financial reach for many people.
- Frank’s course has limited availability – it goes on sale for a short time and then it’s gone for a long time. We could lose an opportunity.
That’s the perfect recipe for success. Frank’s made sure to apply scarcity principles to create desire. He tosses in some urgency tactics, and his courses are real hot sellers.
Desire is a huge key in marketing and sales strategies. If what you sell is easy to obtain, then no one really cares. Potential customers take for granted that they could buy from you any time they wanted. Limit that option, and you’ll sell more.
Not only that, but desire and scarcity tap right into our fear of loss. We’re hugely motivated to protect what we have, and we’re terrified to lose anything. Since we can have or lose an opportunity… Yeah. Loss is powerful stuff, especially when it comes to our rights and freedoms. It’s cause for revolution, they say.
Blockbuster Lineups – Ka-Ching!
Then there’s social demand, another psychological hot-button. Social demand influences you in that when many people want something, you start to want it too.
If a friend likes a certain shampoo, you might try it out. But if the bottles are selling like hotcakes, there are lineups on the street and everyone’s clamoring for theirs, then you can bet you’ll be lining up for yours too.
Social demand often regulates the decisions we take when it comes to buying. Scarcity can create desire, and urgency can help you buy, but add in that everyone wants one, and you suddenly place far more value on that object than before – and you may do anything to get it.
I’m not kidding. Riots have been started over many an Elmo doll.
Social demand is important, though. It assists our ability to determine quality quickly and thus influences our decisions when to buy and when to pass. We think, “Well, if everyone else wants it, then it must be good.”
Usually, that’s quite true. After all, if the object or service was crap, no one would want it, and the strategies to get us to part with our dollars wouldn’t work very well. It’s fair to say that if it’s both in demand and scarce, it’s probably a good buy.
We Have a Winner!
Need one last example? (Hey, why not?)
Imagine you were eyeing a shirt in the store. It’s nice, you like it, and there’s only one size medium left – just the right size for you.
But you don’t really need a new shirt. Besides, it’s not an emergency. It’s just a nice shirt you might like to own. Hmm… Well, maybe not. So you set the shirt back on the rack and turn to walk away.
Then another shopper approaches excitedly, dragging a friend. “Oh, I saw a shirt I love. I’ll show it to you, right here.” The girl grabs the exact same shirt you were looking at – size medium. “Isn’t it gorgeous?”
You probably don’t walk away. In fact, you’re probably listening to the conversation very closely. And if by some chance the girl sets the shirt down on the rack for just a second, you might even snatch it and throw it in your cart before she can pick it up again.
Scarcity. Social demand. Urgency. Sales.
How to Use Scarcity for the Power of Good
Now you know more about creating sales using scarcity and social demand. (You also now know why Frank Kern isn’t going out of business anytime soon). And you know you can use scarcity for your own business as well – without being sleazy or false.
You can limit your consultations. You can restrict your downloads. You can cap your forum membership. You can extend your waiting list. You can raise your rates.
There is nothing wrong doing any of that.
In fact, using the scarcity principle in your business can actually help you live a better life, one that’s more balanced and one that gives you more free time with less work on your plate. The scarcity principle can help you provide better products and services to your customers, and it can help you offer better support to your clients.
And what if you want to fight back against scarcity? You can. There are times when buying isn’t a good idea and you need to keep your hands off your wallet. There are times when something else would serve you just as well, or when you know you’re buying just because everyone else is.
There are times when you start to think you might miss your chance, not get your copy or never be able to get in – and for those times, do this:
Ask yourself whether you want to buy because this product or service is going to give you something more. Do you want it just to own it, or get yours because everyone else is getting one? Are you going to put it to good use? Do you just want to be cool?
Do you really need this item? Or is it just the latest, hottest seller?
Another way to fight the scarcity principle is to remember that while it’s true that what we buy based on scarcity and social demand is usually of good quality, it’s also usually no better quality than what we would buy otherwise.
Keep that in mind. What is scarce or hard to get does not necessarily perform better, look better, or taste better – we just think it does.
See you next Friday, when we discuss how scarcity can backfire on you. (I promise it won’t be as long as this post.) In the meantime, remember, young Sales Skywalker. Shun the Dark side and wield your saber for the Power of Good, not Evil.
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“Ask yourself whether you want to buy because this product or service is going to give you something more. Do you want it just to own it, or get yours because everyone else is getting one? Are you going to put it to good use? Do you just want to be cool?”
Do you think asking yourself this would have stopped you buying the wii game?
If you had known that the scarcity was a deliberate sales tactic, would you have felt differently about buying it?
Melinda´s last blog post…Do You Have Permission to Market?
@ Melinda – Oddly, no. I knew there was a scarcity tactic going on, as it’s been prevalent with popular Wii games and the system itself at peak seller times.
Why didn’t I fight it? Because I didn’t want to. I wanted the game more than I wanted to fight the tactic.
James,
Mm.
I agree with scarcity as a useful tool if you are selling a limited resource such as your time or a nice byproduct of high demand with a manufactured resource like a shirt or a wii game.
I like your ideas about fighting the urge as a consumer, even though it never works if I’ve just “got” to have the (last in my size) knee-high-boots with the four-inch heel *now.*
But…
Back to the title–is it a scam? I know I may get flogged for saying it, but often, yes.
If you’re selling an electronic “product” with no production issues, no time-sensitive material, and essentially no use of your time, yet you claim you can only sell it for a limited time, it’s a scam designed to make me drool on your cue.
My back is up instantly, and I’m nearly guaranteed not to buy it.
Hope I’m not giving away thoughts you had for next week, but the feeling of being scammed (and other folks being scammed) over scarce products that aren’t scarce at all really does get me all in an uproar.
Regards,
Kelly
Kelly´s last blog post…The Hidden Truth About Your Customer Experience—Can You Handle It?
I was the same exact way, not about Mario Kart, but rather the Wii itself. I wanted one so bad, couldn’t get it, was willing to pay in excess. When I finally got it, I played for a bit and it has sat there. It’s been two years and I haven’t bought another game. Granted, life is hectic and I don’t have the endless hours for video games I once used to, but it was definitely the scarcity of it that fired my noggin to send me all about in search of a unit.
I agree with Kelly, when it’s a digital product that someone is attaching scarcity t, it makes me want to run in the other direction. These days in general I do a great job of fighting that urge, but I fully recognize the value as a sales tactic.
Writer Dad´s last blog post…Serial and Milk: Available Darkness – Chapter 1
@Kelly I know there are a lot of scam e-books out there that put up that ridiculous timer that resets every time the page is refreshed. But there are perfectly legitimate ways of adding scarcity to e-products.
For example, for a new e-book you could offer the first 100 copies at a steep 60% discount because you need to prove your promise and gather testimonials. That is a legitimate way to include scarcity.
Here’s another way. You could be perfectly honest and say, “I’m getting married in 3 days and need some cash for my wedding. So I’m offering a 3 day 50% off sale on The Unlimited Freelancer.” 3 days of scarcity, plus a quality product, plus an honest reason. Got me to buy.
Scarcity is powerful, but the most important tactic any salesman can use in any market is to really believe in his product and be completely honest. If you’re not being honest about the scarcity it’s going to be obvious and you may chase off some people who were almost ready to buy otherwise.
Henry Bingaman´s last blog post…The Friday Retweet 4-24-09
Henry,
If I’m reading you right: Discounting for a limited time is not the same as taking an item down after a limited time (scarcity). Early adopters/ purchasers often get a discount for having blind faith, and that, to me, is a good thing.
Jamie,
If you’re getting married in 3 days you know I’m gonna cry, right?
But I already bought TUF, so I’m not getting a discount. Darn.
Later,
Kelly
Kelly´s last blog post…The Hidden Truth About Your Customer Experience—Can You Handle It?
@ Kelly – Incorrect. Discounting for a limited time does use scarcity. “This offer will end.” Plus, there’s urgency. “This offer will end SOON.” Double-whammy. (which is why I wrote on urgency before scarcity – they tend to go hand in hand.)
There are so many variations on scarcity tactics that it isn’t funny.
As for marriage, that’s Mason, not me.
Scarcity is always a great tool for marketers….the challenge I have was applying it to my digital products. However, selling the first 100 copies at a steep discount to gather testimonials…I think I’m going to use that when I’m finally finished with my ebook Income Fitness.
Thanks for the idea!
Barbara
Barbara Ling, Virtual Coach´s last blog post…Agonizingly CRUCIAL – When Your Blog Suddenly IMPLODES, Banish Panic (troubleshoot and deactivate plugins instead to find the hang)
James,
Let’s call that a discussion of semantics then. A scarce discount. Okay.
Mason: Hooray.
James: Hooray.
I like you just the way you are, hehe.
Later,
Kelly
Kelly´s last blog post…The Hidden Truth About Your Customer Experience—Can You Handle It?
I’m with Kelly. Any artificially-imposed scarcity for an electronic “product” just smells like SNAKE OIL to me.
On a related note:
My Dad grew up in Europe during WWII. He used to tell me stories about waiting lin line for three hours, just for a loaf of bread.
Fast forward 60 years later. I watched a bunch of idiots lining up outside Futureshop in frigid temperatures, with the intent of spending the night. Some even had tents.
Not for food. But so that they could get the first crack at the latest Nintendo-Widget when it came out in the morning.
I dunno..that just speaks VOLUMES about today’s screwed-up sense of priorities.
Scarcity definitely works. People want what they are told they can’t have. It’s like Eve and the apple. I run a writing agency and hardly have the time to write myself. I let buyers know this and they request ME, even when I have better writers than me working for me. Supply and demand, baby. Like a dog begging you to throw the stick.
Huh. Son and I have a Wii and Mario Kart as well, and we had no problem getting either (we have connections/we got lucky). What I find interesting is that both of you (James and Sean) who had trouble getting them barely use them, while Son and I still play with the Wii quite often and played Mario Kart a TON in the months after we got it. I know I’m probably inventing correlation where it doesn’t exist, but still… interesting.
I wonder if this urgency also makes things look a heck of a lot better than they actually are, so you’re disappointed when you get them and find they’re not extraordinary? Vs. if there were no urgency, perhaps you would be perfectly pleased with the product as it is? I know little about marketing tactics beyond what you’ve written here, so it’s entirely possible (and probable even) that I’m wrong, but it’s something I thought worth thinking on.
Also, yay that you got the site working again! *hugs for all* Do you know what the problem was?
Allison Day´s last blog post…Lemon Drop Roll
Another spin on scarcity… Dungeons & Dragons Miniatures used to come in 100% random packages. You got 8 minis and you didn’t know which ones until you opened the box. There are common, uncommon, and rare minis. Getting the rares makes you the super coolest geek on the block and I know of people who will buy FOURTEEN BOXES of the same run of minis in the hopes of getting ONE rare. It’s crazy.
Geek’s Dream Girl´s last blog post…Arcane Power: E’s Top Five Fun Ways To Roleplay a Wizard
I was one of those people who bought Mario Kart Wii when it first came out. I played it A LOT. Since I have internet connection for the Wii, I also play on-line, and that made me play it even more!
But you’re right, scarcity makes good marketing. I can’t say it’s good marketing, but seems to work very well. Japanese companies do this a lot. I know because I work for one.
Rudy´s last blog post…Please Comment (But How?)
Some of the previous comment posters have had very good ideas for creating scarcity without coming off looking like a weasel. Now I would like to add my own idea.
Post a WSO over at the Warrior Forum. You will be able to offer your product at a discount, for a limited time, while you also build your credibility. These WSOs, many times, create a feeding frenzy as these Warriors all feel the need to avoid being left out of the loop.
Heather´s last blog post…Who Says That the Library Is No Place For POD People?
Scarcity has to truly mean scarcity. Otherwise, it’s kind of like crying wolf isn’t it? Like those endless going out of business sale signs you see in bricks and mortars that really aren’t going out of business.
I love short window discounts that offer a really good deal on something that I both want and can buy at the time, but I abhor, the endless parade of offers I am getting at the moment… after a while seen again and again it begins to be a dull drone of not so special, not so scarce…and makes me tilt my head a bit to the side…like …hm…why does this trick bother me so much? Is it because I know it is a trick?
Janice Cartier´s last blog post…Welcome to Private Studio
@ Janice – Ahh, and you bring up an excellent question… which I’ll address next week
@ Heather – Good tip. There are plenty of ways to use scarcity without being a jerk about it at all, and the more we know about how and why, then the better we can serve clients properly to engage them and make them happy, right?
@ Rudy – There are tons of companies that use scarcity without us even knowing it. McDonalds is one – they tend to create new meals that are only around for a few months. Get ‘em while they’re hot! Or rotating the type of pies they offer… what, I can’t get blueberry? Or one toy per week only… you want the whole collection, right?
@ Geek’s Girl – Pokemon cards. I have a box full collecting dust for that specific reason. Worked like a charm when my kiddo was younger!
@ Allison – I do know that things I buy of my free will when I choose and after I’ve had time to think over the purchase tend to be objects or items that I do use. The items I buy on a whim, quickly, under urgency or because of scarcity are rarely ones that have the same lasting power. So… you’d be correct
@ Friar – I hear you on those crazy line-ups to get tickets or a glimpse of a star. But no odder than the Beatles frenzy years back, don’t you think? So maybe history just repeats itself… hm!
@ Barbara and Henry – Limited downloads to gather testimonials, to test a product out (betas), to get some feedback or to fill up a forum before a full launch are all great reasons for scarcity. The feeling people have is of being the first to know – woot! And then others want in too, so there you go – they get a better product because of the strategy.
@ Kelly – I like me the way I am too
@James- Hmph.. if you’re going to make me wait I’ll take a nice Shiraz please….
Janice Cartier´s last blog post…Welcome to Private Studio
@James – Your mentioning McDonald’s creating scarcity with their menu brings up an interesting point about limited edition flavors. This kind off scarcity just really seems like a good way to annoy the consumer. I know that it ticks me off. I don’t know how many types of potato chips or ice cream varieties that I have enjoyed only to have them discontinued because they were limited edition. Why give us these tasty treats only to take them away? It really just isn’t cool and proves that sometimes the scarcity method of marketing can backfire.
Heather´s last blog post…Who Says That the Library Is No Place For POD People?
James – That’s a very good point, but I think you kind of missed my point. I wasn’t referring to whether you thought out the decision to buy or not. Rather, if we were to assume you thought out the decision to buy Mario Kart (or whatever) and would have bought it even without the urgency, but then the urgency created a certain hype around the product, would you feel the same way about it if that hype had not been created? Would that urgency make you feel that a product which you would have been perfectly happy with on it’s own is actually going to be extraordinary, but then cause you to feel let down when it’s just a normal product?
Did that make any sense? Or did I just muddle my point more?
Also… pokemon cards? My siblings went crazy for them. I think my brother probably had all the cards and then some, not to mention figurines, Game Boy games, and so on and so forth.
Heather – I think the problem with that sort of limited time product is that they don’t tell you, “buy before such and such date when it will be gone!” They just slap a “limited edition” label on the product, which doesn’t really mean anything to most customers (or to me, at least) and then suddenly and without warning, it’s gone. It would create much more of a sense of urgency if they actually told you when it will be discontinued, so you felt more of a need to buy or stock up before that date if you enjoyed the product.
Allison Day´s last blog post…Lemon Drop Roll
@ Allison – Nope, I got your point, but I may not have conveyed my thoughts in response properly.
No, I would not have. Consumers don’t feel the same way about the products they buy through scarcity versus non-scarcity.
Not at all. The product, essentially, remains the same quality and I wouldn’t have felt let down at all if I was satisfied with my purchase.
What’s important is that a product touted as extraordinary better be extraordinary to maintain consistency.
But, regardless, my perception of the product would need to be changed and altered for me to think less of it. Finding a better product. A poor-quality product. Frustration through usage. If nothing affects my perception, then my brain is going to continue to perceive it as higher value – and also, my brain will work hard to justify my decision, so two-fold pressure to like the damned thing
I’ll say this: I still think Mario Kart is the cat’s meow, even if I don’t play it. My interest lagged, but my perception of value didn’t.
Ah, you guys are giving me a headache and it’s too early…
Pokemon cards – my 11yo is ALWAYS after me to buy them, just so she can try and get the rare one’s. She has so many it’s not funny. I can’t wait until she grows out of this!
Another thing that had the scarcity factor – figurines from Twilight. They were on sale for only a few weeks before Christmas. Overpriced in my opionion – and yet I bought one. I was suckered in by scarcity, urgency and the child begging.
This might be a good time to go and look at Compacting again, leaving the tv off permanently and not going into any shops whatsoever…..
Melinda´s last blog post…Do You Have Permission to Market?
I have felt at times when I want something I must have it. When I do get it I wanted even more and will not stop until I get it. To think that have not thought of this when I try to sell something on my blog. Great post, thanks for refreshing my mind and inspiring me to use this technique.
The Word Seeker´s last blog post…How to Become a Better Husband
I think De Beers was the diamond company that really hit the jackpot with their marketing of diamonds. Before them diamonds were really not a very big seller especially for the average person. The company then used purchase of scarce diamonds as a show of good faith in marriage. “An indestructible item to prove my ever lasting love for you,” or something like that. Then they had another marketing aha moment. DeBeers started a marketing campaign based on the idea that a wedding ring’s cost should equal two month’s wages of the groom. When a guy wants to get married he sure isn’t going to tell his bride that she is only worth one month’s wages. Debeers instantly increases their margins because they are selling rings of twice the price. Sure diamonds are scarce but they really aren’t worth much except as industrial cutters.
I’m not a romantic at heart as you can tell.
Andy with network marketing´s last blog post…Network Marketing Leads To Build Your Business
James, great post. It’s amazing to me, how Cialdini’s (psychological consumerist quirk) social research into these very points (to name just a few) has been unknown to a vast majority of professional ‘persuaders’ out there. Anyone wanting an insiders edge to understanding the unconscious social factors that drive our behavior really must read this book. For all you that already Cialdini fans, check out his latest co-authored book. Yes!: 50 Scientifically Proven Ways to Be Persuasive The book is layed out chapter by chapter as an easy to read summarization of a research into how people act on unconscious triggers in their decision making process… not the least of which is, you guessed it: scarcity!
Hey Lucia – thanks for that. I’ll check it out for sure.
you know, I don’t really worry about it when buying offline. I got a WII, even though I was angry about the “production issues,” and I’ve purchased a lot of other things that were in limited supply.
The only issue I take is on the internet when people use fake numbers or signals (when the red light goes on, we’re all sold out) to induce scarcity. Hell, its an ebook for crying out loud.
I understand the whole “first 50-100 at a discount” but I don’t like it much. The problem is that it works.
In this golden age of technology, scarcity is a rarity nowadays as only bandwidth matters for some intellectual products. We need to rework our conception of supply and demand. I predict a resurgence and throwback to live musical performances and acoustic music as a rebellion against the electronic age of music.
I don’t fall for those things. If I want to buy something that is very hard to find and that means that stores will sell it at a bigger price when they have it I prefer to go and buy something else although it will not perform the same.
@James: You waited so long to buy Mario Kart and after that you played it just 2 times. I wonder what would have happened if you would have bought another game. I guess you would have played it more than twice, why, because wanting something very badly and not to be able to have it makes us loose our appetite about that thing. When I bought my first car I was very anxious to be able to go everywhere I want in a short time, and a short time after I bought it I realized I don’t need it that much and thought about selling it. The fact is that the things we desire so much are not necessary the things we really need.
@ John – Unfortunately, we *all* fall for these things. The psychology is so very basic that if it’s not one particular item that gets us, another will. The pull is irresistible, with the right recipe.
As for your question, yes, I do think I would’ve played another game more and longer had it been a thought-out informed choice based on my desire and not pressure tactics.
However, I still gloat when someone mentions they don’t have Mario Kart – and I do
(We’ll not mention the fact that Mario Kart also makes me incredibly carsick – I can do exactly 6.5 minutes before I have to stop from queasiness.)
Y’know, you could always sell it on Ebay and get most of your money back to put towards another game….
Melinda | WAHM Biz Builder´s last blog ..Imagine Slowing Down and Getting More Done