Note: This is the third in a series of six blog posts being featured in the coming weeks and months based on principles found in Dr. Robert Cialdini’s seminal psychology book entitled Influence: The Psychology of Persuasion. It is essential reading for any marketer.

The scarcity principle recognizes two powerful impulses that drive the human condition: 1) that people want what they can’t have; and 2) that as soon as someone is told something is unavailable, they tend to want it even more. It’s the urge that drives people to erect tents to be first in line outside of Best Buy days before Black Friday, the desire that explains the rise of eBay and the Beanie Baby collecting frenzy, and a core reason why live home shopping is so successful. As a weapon of influence, it can be a powerful motivator, though if not handled carefully, can work against a marketer by engendering cynicism amongst a public worn out by gimmicks that ring hollow because they are bereft of truth.

Perhaps the easiest way to explain scarcity mentality in action is to observe what happens every holiday season. News and entertainment programs will review the year’s “hot” toys; that is, those in highest demand. In the process, they ignite a mania for the featured items. From Cabbage Patch Dolls to Tickle Me Elmo Dolls to Fingerlings (a series of robotic monkeys, no less), the pattern is the same: inventories are limited and quickly sell out, creating a secondary market on the likes of Craigslist and eBay, a phenomenon that in and of itself becomes newsworthy. The land grab typically lasts until Hanukkah and Christmas have come and gone.  What parent, after all, wants to have to explain why Santa let their ‘nice’ children down on Christmas morning?

Sound irrational? It is. But as humans, we loath the idea of “missing out.” We want to be among the chosen few who have their desires and wishes fulfilled. Scarcity exploits the notion that the world is like a pie, with only so much to go around, and that if someone else gets a piece – well, that means there is less for you and me. It is an especially powerful tool for marketers in a world where instant gratification is the norm because consumers have become so habituated to getting what they want. It works effectively when it either is or is perceived to be rooted in truth. So, for example, when a home shopping hostess warns the viewer they should call or go online to order because supplies are running out, it appears to be real, because the number of items sold is ticking up live in front of the viewer’s eyes (in this case, sales volume also acts as a form of affirming social proof).

On the other hand, when an infomercial tries to use a similar ploy it comes across as phony because the content is not live.  If the paid program is successful, then it has likely peppered the airwaves, and the chances that a viewer has run across it before are reasonably good. Such frequency exemplifies the idea that “familiarity breeds contempt” and it works against the advertiser’s scarcity claims. On the other hand, the use of a tactic such as “…be among the first 500 to order…” in order to get a bonus, could work in this environment, because the viewer assumes that the premium offer is (as it should be) associated with each individual airing.

Here are some other examples of the effective use of scarcity contrasted with examples that fall flat:

• Nordstrom’s Annual Pre-Season Sale, where current fashions are discounted prior to the start of the season, versus a Times Square retailer with ‘Going Out of Business’ signs that are a fixture as constant as the sullen shop owner behind the counter.
• Tesla’s pre-ordering process for new model releases versus a car dealer who tries to convince you that the car you want is rare and in demand – even though you can clearly see that there are loads of inventory parked on their back lot.
• eBay’s live auction model – which creates a sense of urgency and piques excitement in real time – versus the ‘Buy It Now’ option which reduces the site to just another discount retailer; a kind of online flea market where the seller and their goods may or may not be trustworthy.

The difference in these examples is the difference between a proposition that creates a sense of plausible scarcity versus one that either comes across as phony or ho-hum. Given the amount of product research information available to the consumer on their smartphone, they can find out very quickly, anywhere, in real time, whether or not such offers are genuine or merely trickery on the part of the marketer. Any advertiser perceived to be in the latter camp risks eroding the trust that is so vital to establishing a long-term relationship with the consumer, as opposed to just executing a transaction at any cost. Want proof of the power of scarcity? The owner of the parent corporation of the aforementioned Beanie Babies – Ty Warner – is worth a reputed $2.4 billion. Leveraging scarcity requires a fine balance to be sure, but one that, if achieved, can create the kind of scarcity marketer’s value most: lasting brand affinity and lifetime value that is the hallmark of every enduring brand.

Rick Petry

Author: Rick Petry is the CMO/EVP Client Services of DirectAvenue and a seasoned direct marketing professional and thought leader with experience spanning three decades. He has had a hand in campaigns generating over $1 billion in sales and is conversant in all facets of performance-based marketing including off-line and on-line media planning and buying, research, analytics, creative, production, and back-end management, Rick is the author of over 200 articles on direct marketing best practices, and is a past Chairman of the Board of the Electronic Retailing Association (ERA) and a recipient of ERA’s Volunteer of the Year award, as well as the Direct Response Marketing Alliance’ Member of the Year award as voted by his peers.