Now or Never: Why Scarcity is Good for Sales

If you have ever stood in line for a Tickle Me Elmo, to get hot concert tickets or to be the first to get a new iPad, you know the sense of anxiety created by pursuing something you may not be able to get. Heart beating fast, palms sweating, wanting to pace and pounce as soon as the target is in sight.

This visceral response to scarcity is part of our human nature. It is imbued in us as a survival skill, driving people to fight for food and other necessities of life. It also causes us to compete with a vengeance for less necessary things, just to feel the joy of being first to the prize. Bragging rights as “one of the few who…” are important in any culture.

Marketers have learned to take advantage of our competitive nature. No one wants to miss out or worse yet, be left out. So we buy in even when the threat of being empty-handed is manufactured, not real.

Take the example of Google+. It was hard to miss all the buzz about Google+ when it first launched as a “limited beta” test on June 30th. It was a major topic of social media mavens and connected people everywhere.

The “In” Crowd

If you didn’t get a coveted Google+ invite right at the start, you may have been one of the thousands begging to be let in to the trial. Only the geekerati who knew someone who knew someone were fortunate enough to be included. Even high profile tech writers were left out.

As proof of the challenge, the web was littered with blog posts about “How to get a Google+ invite.” Those that got one were proud to invite their friends, further proving that “I’m in and you’re not.

With the all the hype about how hard it was to join the Google+ beta, you may have missed the news a few weeks later that the “limited trial” had reached millions of members. PC World reported that Google+ “grew by 350 percent between July 4 and July 10 from 1.7 million users to 7.3 million.” Current reports put Google+ at 25 million users, making it the fastest growing social media launch ever.

The launch of Google+ is a classic case of perceived scarcity creating frenzied demand. If Google had decided to simply launch the service without fanfare, as it does with many of its new offerings, the social media application would not have received a fraction of the press coverage and water cooler buzz it generated.

The artificial scarcity turned the Google+ launch into a race among users to be one of the first to score an invite and try the new platform.

Scarcity Creates Action

Airlines hold seats, releasing a few at a time to keep prices high. Try booking a flight 3 months in advance and checking “available seats.” You might only see a handful, but odds are a month out more seats will mysteriously appear. Many airlines even show “3 left at this price” on some searches to convince users they must buy now.

The same holds true for “limited edition” prints, special flavors of soda, and any other product in limited distribution. The concept of scarcity can be a powerful incentive to buy, but it won’t work for everyone.

To be an effective marketing tactic, scarcity (real or imagined) requires an inherent level of underlying demand created by a desirable brand. If people already like your product and want to buy it, the threat of scarcity will create anxiety and inspire action (which can also elevate prices).

On the flip side, if your product is new and unknown or not especially popular, people will just shrug their shoulders and move on when they hear supplies are running out. Customers need a reason to care, and brand value creates that attachment.

For certain products, scarcity becomes part of the brand image, making the product or service an elite offering. This is why phrases like “highly sought after” and “hard to find” work so well as marketing messages. People tend to want what others can’t or don’t have.

Can Scarcity Work for You?

Enticing buyers with limited releases can be an effective method for maintaining interest and creating buzz prior to launch. This requires a lot of publicity and leg work to generate interest and awareness about upcoming launches, with the payoff in higher prices.

Retiring products can also create demand. If people know they will not be able to make a purchase after a certain date, they may stock up. It’s OK if you later release a similar or upgraded product, as long as you don’t overdo it and leave customers feeling teased or duped.

You can also imply scarcity with the language you use for your marketing messages. Google+ is a great example of using this tactic for a product that would eventually be widely distributed. The concept of a “Limited Field Trial” suggests that not everyone has access, only a select few can get it.

This approach can be applied in a variety of industries with private sales, preferred customer incentives, friends and family offers and other limited-availability deals.

If you’ve tried using scarcity to boost sales, I’d love to hear about your experience. Please share what you learned in the comments below.

Image by Danny Choo.

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