Imagine arriving at a store only to find that they’re down to the last three rolls of paper towels. Would fear of a shortage tempt you to buy them all, even if you don’t really need them? Does knowing that there are only two discounted seats available on a flight make you more likely to book passage? Are you even willing to pay more because you’re afraid of missing an opportunity?
This is the scarcity element at work, and marketers use it very effectively to motivate consumers.
What is Scarcity?
Scarcity, as it relates to economics, is a principle that hinges on the idea that a finite amount of human, financial, and natural resources inevitably leads to limited commodities. In fact, most modern economic theories depend upon the fact that human needs can never be totally fulfilled due to limits on the resources needed to meet the demand for useful goods.
These limits can be created intentionally on the manufacturing side of the equation or due to things like supply chain disruptions and an inability to obtain raw materials needed to produce goods.
This leads to a condition known as relative scarcity. Relative scarcity can be applied to supply and demand in consumer markets. It can also be applied to the lack of ability in a production environment to meet demand because of a limited availability of resources.
Such conditions can also be artificially created through actions like:
This is a manufacturing strategy to produce consumer goods with an artificially short useful life. A good example of this is the lightbulb, which could theoretically burn for an unlimited amount of time but result in little to no profit for light bulb manufacturers. One of oldest working bulbs in existence, Adolphe Chailet’s 110-year old Centennial Light, still burns in a fire station in Livermore, California. Once they figured out how everlasting lightbulbs will affect their bottom line, a world-wide consortium of manufacturers created an agreement for industry-wide planned obsolescence.
This tactic is used by everyone from governments to corporations and marketers to create artificial scarcity of certain commodities for the purposes of price stabilization and conservation. When used in advertising, it manipulates human cognition, memory, and social biases in order to sell products.
Fear of missing out (FOMO):
These are feelings of anxiety created when a person perceives that others are enjoying something unattainable to them. On a smaller scale, marketers manufacture this feeling in order to spur sales or trigger other forms of customer activity. Online tactics like clickbait produce the same feelings of FOMO by leading people to believe that clicking a link will reveal hidden or unknown information.
In short, feelings of deprivation or fear of missing an opportunity adversely affect the brain’s decision-making capabilities by commandeering mental bandwidth and creating a state of anxiety. When you’re anxious, fearful, or uncertain, you make snap decisions in an effort to relieve those feelings.
This could be seen in action during the recent pandemic panic-buying sprees, but it happens to some extent each time we are made to feel a sense of urgency through advertising.
The Psychology of Scarcity in Marketing
Though some of the above descriptions could be perceived as manipulative and/or dishonest, using the scarcity element to super-charge marketing needn’t be negative.
Done right, it is one of the most effective marketing tactics around.
As it applies to marketing, scarcity flourishes in a field known as neuromarketing. This could be described as marketing by observing and measuring consumer habits and behavior, and then using this information to devise marketing strategies that play to cognitive biases. These subconscious biases are something that all people share, at least to some degree.
Effectively leveraging basic human biases related to principles of reciprocity, loss aversion, and FOMO makes it difficult for even the most savvy consumer to resist when they’re subtle and well-executed. The power of scarcity triggers action regardless of cost and many other factors that usually influence buying decisions.
Fomenting FOMO: The Scarcity Element in Action
Like many marketing techniques, the scarcity principle only works when applied strategically and under the right circumstances. Used too often, and it can come off as spammy, inauthentic, or manipulative.
The less often leads are exposed to the principles of scarcity, the more effective the technique. This principle also works well when used in conjunction with other principles of persuasion like:
- Social Proof
If you want to apply the scarcity element in a way that produces consistent, positive results, there are several methods that are very effective.
Highlight Diminishing Inventory
This is a method that’s used very well by booking websites. Many people will jump on a booking when they see there are only a few rooms or seats left at that price. Another version of this is to have a live counter that reduces in number each time someone purchase that product. There are few things that can motivate as well as seeing inventory on hand drop right before your eyes.
Make Your Offer Time-Sensitive
Let’s face it. Indecision has been the source of a lot of regrets in the average life. When you place a time limit on a sale or other opportunity, you can often convert an “I’m not sure” into a “yes”. ‘
Leverage a Looming Deadline
This is a great tactic to use for seasonal sales and events. It can take the form of an ad that asks the customer if they’ve finished their back-to-school or holiday shopping, and by counting down the days to a holiday, such as Mother’s Day.
It’s been proven by anecdotal evidence and through reams of valid research that hacking the human brain influences people to take specific actions. When you create a sense of urgency, customers are more likely to heed your call to action.
However, using the scarcity element takes finesse if you want to do it effectively and ethically. When you’re not sure how to begin, a marketing consultant from Level 343 will walk you through the process. Get in touch with us to arrange a consultation today.