How To Use Scarcity To Increase Sales
You have probably noticed that some retail stores and restaurants limit the number of items they have in stock, the number of tables they can serve or even their opening hours. Such creates “scarcity”, and signals to the market what they are offering is desirable. Let’s explore this powerful concept.
Scarcity Marketing Explained
Scarcity marketing focuses on consumers’ fear of losing their freedom of choice. If a product or service isn’t readily available, it then becomes more attractive. In his book, Theory of Psychological Reactance, Jack Brehm tested this assumption. He first placed two identical toddler toys in a room. One had a plexiglass barrier in front of it forcing the toddlers to go around the barrier to reach the item. The second toy was accessible in front of them. The most desirable toy was… you guessed it… the one that had the barrier in front of it. The same principle works in the retail sector in which many brands have employed a number of tactics in order to boost demand.
American streetwear brand Supreme is often cited as a retailer using scarcity marketing tactics. It is known for its box logo design and low supply of clothing.
Anton Mikhaylov, a Toronto-based consulting analyst at Accenture wrote in a Medium blog post: “I can’t seem to get any Supreme is because their online store is always sold out”. He also mentioned that Supreme only has about 10 stores worldwide (with only three in the United States at the time of writing), making it difficult to acquire goods visiting points of sale.
Basically, everything that Supreme releases is rare, instead of having a constant supply of a popular designs, the retailer instead makes “drops” on Thursdays where they release new designs. Mikhaylov adds “In these drops they release a very limited amount of any design, and after that drop they don’t sell that same design again. Supreme has so far released two types of black box logo shirts, and while they look the same from the front, they differ in design on the back. By altering the box logo shirts, Supreme is able to release something they know has high demand but at the same time not over-saturate their supply”.
The sensation of rarity ups shoppers’ demand for the goods, and the fact that the company releases so little at a time decreases the supply. James Jebbia, the founder of Supreme, is known for saying: “…if we can sell 600, I make 400.”
Paris-based marketing analyst Valentin Decker took an interest in upscale Italian restaurant chain Big Mamma which currently has seven locations in France and utilizes long lines as a scarcity tactic.
He notes that “people do not just go to Big Mamma to eat a good meal. They come to be part of a club, which instills a certain status and standard”.
He adds this is also valid for any consumer good: “We do not make our buying decisions based on the utilitarian value of the product, but rather based on what it says about us, about the kind of person you want to be”. Furthermore, consuming is a way of “belonging to a tribe” in which people share the same values, ambitions and desires.
Interestingly, Decker thinks such tactic has polarized (in a good way) Big Mamma’s audience, producing fanatics who post countless of their meals on Instagram as well as “haters” who complain about not receiving service: “people who complain about queuing reinforce those who go there in their status and their conviction to go”.
We’ve already seen that limited stock can be effective for upping demand after you’ve started selling a product, then such could have an impact before the product even comes into stock. That’s what pre-orders are all about. Not only do they drive consumer interest in one’s offering, they also encourage increased sales from dedicated consumers.
This tactic either incorporates a pre-order list or a countdown to a release date, generating more noise and making your product launch more memorable. Nike is known for utilizing pre-orders, creating limited supplies of select shoe models, the company engenders a cult following and aims to secure a sell-out.
A crucial thing to remember is that scarcity marketing shouldn’t appear more prominent than your offering, you should always ensure customers get quality products and services. It is obviously not a strategy for all retailers yet scarcity marketing can be quite effective depending on one’s market and brand positioning.
By Phil Siarri