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The scarcity effect is a cognitive bias that causes people to value something more when it is less available. People can see this phenomenon in a variety of contexts, from pricing to product distribution. Interestingly, the scarcity effect can also have an impact on buyers’ behavior that makes people perceive objects as being more valuable, even if they are not actually in short supply. In this article, we’ll explore the psychological underpinnings of the scarcity effect and look at some ways you can use it to your advantage.
What Is the Scarcity Effect Principle?
At its core, the scarcity principle is a theory that states that people place a higher value on something that is in short supply. The idea behind it is that when something is scarce, people are more likely to want it because they know it will not be around forever. Marketers have used this theory for years to convince people to buy products and services even if they are not an immediate necessity.
4 Types of Scarcity Marketing
Scarcity marketing is one of the most widely used marketing tools. There are four types of scarcity marketing strategies.
This type of scarcity marketing revolves around the idea that if something is exclusive, then it must be valuable. You can see this in retailers such as Tiffany & Co., Cartier, and Apple. When designing their products, these companies always build a brand identity that sets them as exclusive, so they can become more desirable. The desire to own an exclusive product drives a buyer’s behavior.
Rarity scarcity revolves around the idea that if something is rare, then it must be valuable. To increase the rarity of a product, marketers will often use shorter production runs and launch products in limited markets first. This is the strategy behind limited edition products. The items are so rare, that it generates the concept of value for it. The desire to own a rare item impacts the buyer’s behavior.
Urgency scarcity revolves around the idea that there is a limited amount of time to take action or your opportunity will disappear forever. Urgency marketing is very popular with marketers because it works effectively and quickly when used correctly in advertisements and promotional material. It targets people’s emotions and tells them they need to buy now or they will miss out on an opportunity that they will never get again. Black Friday sales are a good example of this strategy at work.
Excess Demand Scarcity
Excess demand, also known as limited quantity, is the type of scarcity marketing that refers to a product being in high demand. Excess demand makes people think it is scarce because there are so many more people who want it than businesses have available for purchase.
You can see this type of scarcity in toy stores when they tell you “only 10 items left at this price!” This toy store company wants you to believe their toys are very popular and wanted by all children, which is why they only have a limited amount on hand. Thus creating an urge to buy quickly before they’re gone forever. You never know when the next shipment will arrive (which brings us back to urgency)!
How Can Scarcity Influence Buying Behavior?
The reason why scarcity works is that people don’t enjoy losing out on things. We would all prefer to say ‘yes’ to something rather than ‘no’, especially if our feelings of regret get reduced because we had no warning of what was going to happen. Another reason why scarcity works is that it creates a false sense of urgency, which encourages people to buy more quickly than they normally would have. The sense of urgency that scarcity creates makes the buyers act impulsively.
Finally, scarcity can often make people feel like they are getting a great deal on something – ‘You wouldn’t normally pay this much for X, but you’ll take it now while there’s only one left in stock!’ Scarcity influences buying decisions because of FOMO (fear of missing out). Because a product is rare the buyer would want to own it. They fear that if they don’t own it, they are missing out on an opportunity.
Why Scarcity Works?
Scarcity gets buyers’ attention and causes them to act. People want what they can’t have and don’t realize how much they need and want things until those things are no more. For example, when people get a choice of several versions of a product (e.g., two flavors of jam) they rarely want either very much. When given no choice at all (e.g., “take this jam or leave it”) they usually choose the item because it is the only one available. This illustrates the core principle of scarcity; options narrow a person’s behavior and decisions.
When Does Scarcity Work (And When It Doesn’t)?
In the world of marketing, scarcity is a powerful tool. People have proven repeatedly it to work by leveraging people’s fear of loss. In the most common forms of it, marketers let their audience know that a special deal or offer will end soon. Therefore, they give the sense that any delay in buying/acting will make it impossible to get the deal.
Scarcity fails when marketers overplay their hands. Showing how limited and offer is without justifying why your target audience should care will make the strategy fail. Scarcity can also backfire when brands are too restrictive with to whom they offer the advantage of a sale or campaign. Sometimes that’s because of legal reasons, sometimes it’s simply that marketers didn’t think about the way their messaging could get misinterpreted.
The scarcity effect is a powerful psychological phenomenon that can affect how buyers behave. This article has covered the scarcity effect in-depth, including giving you some examples of what it might look like when applied to your marketing strategy.
If you’re looking for more information on this subject or want help implementing these principles into your own business practices, contact our team today!