The Scarcity Principle: How 7 Brands Created High Demand
Scarcity Principle: If you took the same introduction to economics You’ll remember this key lesson from a class I struggled with in college:
The law of supply and demand states that low supply and high demand of a product will generally increase its price.
Why am I telling you about basic economic rules? Because the scarcity principle may apply as a result of changes in the supply and demand of products. In this post, we will learn what the scarcity principle is and how you can use it to create higher demand.
What is the principle of scarcity?
Lack of persuasion theory coined by Dr. Robert Cialdini means that the rarer or more difficult it is to obtain a product, offer or piece of content, the more valuable it becomes. Because we think the product will soon be unavailable to us, we are more likely to buy it if there is no perception of shortage.
Perceived scarcity can induce a sense of urgency within consumers, and they typically make purchasing decisions more quickly. People are also more willing to pay more money because a cost-benefit analysis might say that losing a product or service is worse than the money spent to get it.
How does shortage affect demand?
When a product or service is in short supply, consumer demand increases as people want to purchase it before it becomes available. In this scenario, some businesses choose to raise prices due to increased demand, allowing the scarcity principle to increase profits.
scarcity principle in marketing
Marketers take advantage of the psychological response to scarcity, meaning consumers don’t want to give up what others have.
A customer may think that a product, offer or piece of content is hard to get because it is so valuable that people keep buying it. This may give them a chance to act quickly and purchase before time runs out as they want to experience the same value as their peers.
Marketers can activate the scarcity response in consumers by doing the following:
- Flash sale offering where consumers have a limited time to take advantage of a deal before it expires.
- Listing the remaining stock amount on a product so that consumers can decide to make a purchase before it is too late.
- Notifying customers when products are back in stock so that they rush to purchase so as not to miss the price this time.
Brands can use the scarcity principle to motivate people to fill out a lead form, purchase a product, or take any other desired action. Here’s an example: On many air travel booking sites, such as Kayak, flight listings are displayed with a note that there are only a few seats left at a certain price. Check it out below:
We know that airfare pricing is incredibly volatile – that’s why some of us wait until certain times or days of the week to make a purchase – so the knowledge that there’s only one seat available at that price Well, I think I should buy it now rather than wait and risk paying more later.
Now that we’re buzzing with scarcity, we wanted to highlight brands that have successfully used the scarcity principle to market and sell a variety of products. Let’s look at some real-life examples of scarcity theory.
7 Brands That Used the Scarcity Principle to Promote and Sell Products
1. Nike
Nike releases limited-stock and limited-edition shoes within its SNKR app.
The limited stock prompts customers to be ready in the app a few minutes ahead of time to ensure they join the queue exactly when the app opens to maximize their chances of getting a shoe. Nike has stated that entries are selected randomly based on shoe size availability, hinting that it may be more of a random lottery than who is first in line.
Despite this, the principle of scarcity is in play here, so much so that people have created special bots to monitor the website and enter buyer information immediately when the timer goes off.
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2. Snap Inc.
Snapchat’s parent company, Snap Inc., unveiled the Snapchat Spectacles in September 2016: sunglasses that can record 10-second videos from the wearer’s perspective. The glasses were initially sold only through Snapbots – smiling, Snapchat-themed vending machines dropped randomly in cities around the United States.
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Blog posts and social media comments about the unique sales approach helped drive even more interest in the products. Announcements were never made before the arrival of Snapbots – most awareness was generated on social media channel, and large queues of people stood in queues in hopes of purchasing spectrum before Snapbot ran out of stock for the day.
The glasses are now sold online or at a few more permanent pop-up locations, but in the beginning, the glasses were only available for a limited time – exactly on the day the Snapbot was in your city, and you had to kill everyone who tried to buy the glasses. Had to beat the machine before it was sold.
3. Nintendo
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When Nintendo released the Wii gaming console in 2006, it was one of the most popular items on the market. People were lining up to get their hands on the Wii as soon as possible, but the frenzy didn’t end there. For nearly three years, the Wii was disappearing from shelves, and gaming stores could not keep the shelves stocked – despite Nintendo increasing its supply to 1.8 million and then 2.4 million units of production per month.
By starting with low monthly production numbers, Nintendo ensured that customers would be eager to buy more right away. The shortage situation here left people desperate to buy a Wii whenever possible – especially when a Nintendo executive advised buyers to “chase down the UPS driver” and find out where. When is the Wii going to be distributed to stores so they can purchase it.
4. Starbucks
Starbucks gets a lot of orders and social media engagement during another of its infamous limited-time offers – the Starbucks Red Cup. During the December holiday season, Starbucks begins serving coffee in red cups for a limited time to bring people into the café and get them to share #RedCups photos on social media. In this case, scarcity + food and drink is the magic equation.
5. Girlfriend Collective
Girlfriend Collective’s offer was simple: For a limited time, the brand will send you a free pair of $100 leggings if you pay the cost of shipping. All you had to do was share a link to its website on Facebook.
Girlfriend Collective had recently launched its website, and was asking its consumers to spread the word about the leggings so it could dedicate 100% of its advertising budget to leggings production. And if you think about it, it was a smart approach. After all, what are you more willing to believe: a Facebook ad offering free leggings or half of your friends in your news feed touting this offer?
Using this model, Girlfriend Collective “sold” 10,000 pairs of leggings on the first day of the campaign – in addition to the myriad of fans and buzz it scored as a by-product. The one-two punch of “limited supply” and “free” made this offer irresistible – even to me.
6. Groupon
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Groupon partners with various businesses to provide discounted services and a split of the revenue in exchange for new customers. The site often uses limited time remaining warnings (pictured above) to encourage visitors to make a purchase quickly at the risk of missing out on a good deal.
For some deals, Groupon uses some marketing psychology persuasion tactics to encourage you to make a purchase. Check out the deal below:
This deal uses scarcity theory and social proof to encourage you to buy it – it’s only available for a limited time, And Nearly 600 other people have already bought it and given it a high rating. These strategies work well – Groupon made more than $3 billion last year.
7. Toms
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Beloved TOMS shoes offer a great value proposition beyond comfort and style: For every pair of shoes purchased, TOMS donates a pair to a child in need. TOMS takes it a step further by partnering with other advocacy organizations to share sales revenues to benefit other worthy causes.
Because the brand knows its customers are already charitable, it’s a safe bet that they’ll want to buy shoes that benefit other causes (like Panda in the example above), but they may still need an incentive. . So TOMS created a mini-site about why TOMS and WildAid are partnering, along with some fun facts about pandas and unique panda-themed shoe designs.
Then, once the visitor reads the entire compelling site and begins browsing vegan, panda-friendly shoe options, TOMS subtly tells them that the shoes are only available for a short time. In other words, helping the cute panda is also an option for a limited time only.
TOMS’s approach of using scarcity premises to encourage purchasing and philanthropy works here.
sometimes less is more
Applying the scarcity principle to promote and sell a product can be an effective persuasion strategy, but you have to do it correctly. If you phrase product shortages as if there used to be a large supply, but there are only a few products left due to increased demand, consumers will be more receptive. But if you express product scarcity as if only a few units of the product were available, the scarcity principle will not be as effective in generating sales.
