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Scarcity in Marketing: Increasing Sales by Influencing Demand

Updated: May 30, 2023

Scarcity, an often overlooked yet immensely powerful principle, has the potential to revolutionize your business. When harnessed effectively, scarcity can supercharge sales, win negotiations, inspire action, foster a sense of community, cultivate customer loyalty, and inject fun and excitement into your offerings. Recognized as one of the key principles of influence, scarcity taps into our primal instincts for survival, making it one of the most potent tools at your disposal. In this article, we will explore the definition of scarcity, discuss its effectiveness, and reveal tactics that can ignite unprecedented customer demand for your products.


What is Scarcity in Marketing?

Scarcity is a fundamental concept characterized by a limited availability of resources or goods, exerting a profound influence on human judgment and preference. At its core, scarcity evokes a sense of constrained freedom in possessing something, intensifying our longing for that particular item. As humans, we value our ability to choose, and the notion of scarcity challenges this inherent desire for freedom of choice. If we can’t have something because it’s scarce or difficult to obtain, we become all the more anxious to get our hands on it.


The Evolution of Scarcity

Throughout human history, the struggle for survival has compelled us to compete for vital resources essential to our well-being. Our ancestors grappled with cycles of scarcity and abundance, navigating the challenges imposed by limited resources. Scarcity, deeply rooted in evolutionary biology, has shaped our instincts and influenced our behavior.

Scarcity has played a prominent role in human existence, as our ancestors faced the constant threat of resource shortages. From prehistoric times to the rise of civilizations, periods of famine and scarcity shaped the course of history. Ancient empires like Rome, the Ottoman Empire, and Qing China recognized that control over scarce resources, such as food and water, translated into authority and dominion over others. Securing access to these essential commodities ensured the survival and power of these civilizations, highlighting the intrinsic link between scarcity and control throughout the ages.


The Science Behind Scarcity

Two studies shed light on the impact of scarcity in marketing, exploring its effects on both brain activity and decision-making processes. In a 2019 study using fMRI scans, participants engaged in an auction simulation where products were presented as scarce. The results revealed that when scarcity was emphasized, the participants’ orbitofrontal cortex, the area associated with valuation processes, exhibited increased activity. Consequently, participants were willing to bid higher on scarce products compared to nonscarce ones. This study demonstrates that scarcity triggers a rapid evaluation of a product’s value, leading to swift decision-making.


Another study conducted in 2017 focused on the neurological aspects of scarcity. Participants were shown promotional messages offering a percentage discount on a product, with variations indicating limited-time availability. Using fMRI scanning, researchers observed participants' brain activity while they made purchase decisions. The findings indicated that when participants chose to buy a product with a limited-time offer, their amygdala, the region linked to emotion, showed increased activity. Conversely, when the product was not presented as scarce, the same level of neural activation did not occur. Additionally, the study revealed that individuals tended to ignore information that contradicted their decision to purchase the scarce product.


These studies highlight the neurological and decision-making effects of scarcity in marketing. Scarcity not only influences the brain's valuation processes but also taps into emotional responses, creating a sense of urgency and heightened desire for limited-time offers.


Different Types of Scarcity

Understanding the four types of scarcity—supply-related, limited-edition, time-related, and demand-related—empowers businesses to harness the psychological impact scarcity has on consumers. By strategically incorporating these scarcity elements into their marketing and product strategies, businesses can drive demand, create excitement, and ultimately enhance customer experiences.


Supply-Related Scarcity

Supply-related scarcity arises when products become scarce due to a shortage in the available quantity. Phrases like "supplies are limited" and "while supplies last" are often used to indicate this type of scarcity. When a product's supply is restricted, consumers perceive it as valuable and exclusive, driving a sense of urgency to make a purchase. We've all experienced the thrill of acquiring a limited quantity item before it's gone. Understanding the psychological impact of supply-related scarcity can help businesses effectively manage their inventory and create buzz around their products.


Limited-edition Scarcity

Limited-edition scarcity is closely related to supply-related scarcity, but with a unique twist. It occurs when a product is released in a limited number of units, often as a slightly modified version of the original. These limited editions tap into consumers' desire for exclusivity and the opportunity to own something unique. Whether it's a special edition collectible, a limited-run fashion item, or a rare variant of a popular gadget, limited-edition scarcity triggers the fear of missing out (FOMO) and drives increased demand.


Time-related scarcity

Time-related scarcity revolves around the concept of scarcity within a specific time frame. It can manifest through product promotions, limited availability, or a fixed window of supply. By imposing time restrictions, businesses create a sense of urgency and scarcity. Time-limited offers, flash sales, and exclusive discounts for a limited time are all effective strategies that leverage time-related scarcity. Consumers are driven to take immediate action, fearing they may miss out on a beneficial opportunity if they don't act swiftly.


Demand-related scarcity

Demand-related scarcity emerges when a product experiences high demand that surpasses its available supply. This scarcity is a direct result of a product's popularity, where the desire for the item exceeds its availability in the market. Phrases like "[#] units sold" or "only [#] left" are common indicators of demand-related scarcity. This type of scarcity creates a sense of urgency and competition among consumers, fueling their desire to obtain the product before it's gone. Businesses can leverage this scarcity by employing effective marketing strategies to increase demand and maintain a delicate balance between supply and consumer interest.


Scarcity Tactics: Creating Limited Availability in the Mind of Consumers

Creating a sense of limited availability in the mind of a consumer can be the ultimate selling point. By emphasizing scarcity, businesses tap into the innate desire for what is perceived as exclusive or rare. This psychological tactic drives urgency, triggers heightened demand, and compels consumers to act swiftly, ultimately boosting sales and fostering a sense of value and desirability.


Kevin Harrington, creator of the infomercial and a shark on “Shark Tank,” talks about how crucial it is to send a message of scarcity. To learn how he spent his career creating urgency in the minds of consumers and driving his sales up, read his interview in my book The Power of Scarcity.


Or take McDonalds, and the McRib farewell tour. By making this item a limited-time product, demand for the sandwich skyrocketed. The launch of the tour created a huge buzz, and the limited availability of the product created an urgency to purchase it when it was available.


Using scarcity tactics to create limited availability in the mind of the consumer is key. Your business can do this by:


  • Creating a limited time sale

  • Displaying an item is nearly sold out, or continues to sell out

  • Offering exclusive memberships

  • Branding your product as exclusive

  • Scarcity is fragile, so avoid common pitfalls companies make when trying to send a message of scarcity by clicking here.


Conclusion


By creating limited availability in the minds of consumers, businesses can harness the power of scarcity to increase sales, create buzz, and enhance customer experiences. However, it is important to use scarcity ethically and avoid common pitfalls to maintain trust and credibility with consumers. Embracing scarcity as a marketing tool can revolutionize your business and unlock new opportunities for success in a competitive marketplace.


To read more about how you can use scarcity to drive up sales in your business, click here to get your copy of The Power of Scarcity.

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