A long time ago, when swing sets seemed to tower over you and he who had the fruit rollup ruled the cafeteria, psychology and scarcity were already at work in influencing your wants and needs.
When it came to playtime, no toy or station was more enticing than the one that another child was already using, or that only a few lucky kids could use-if they got to it in time.
You only realized how badly you wanted to play with the green robot when your friend already had it in hand. You had to run to the swings first because there were only three of them and recess was short.
Picture a party in which there is one box of pepperoni pizza and two boxes of the presumably popular cheese. Even if you liked both, your hands (and likely, many others) went flying toward the former, assuming it was more likely to be gone first.
While we are somewhat more sophisticated in our assessment of what we need and want as adults, in a way- we are still children on the playground. There’s something about the last “slice of pizza” that is especially mouthwatering.
In fact, in the right conditions, it’s downright irresistible. The prospect of losing the opportunity to have one of the few slices of pepperoni is more likely to win you over than getting any one piece in general. This is a concept known as “loss aversion”.
Studies show that in various situations, losses have double the power of gains; Humans would much rather avoid a loss than acquire a gain. We also have serious FOMO-the slang acronym for “fear of missing out”.
Thus, scarcity elicits emotional and psychological responses. This hard-wired tendency is the main reason why scarcity rules. When experiencing a loss in a betting game, Jefrey Berejikian, a professor of Decision Making at the University of Georgia says, “You can do nothing and walk away…absorb that certain loss, or you can gamble-and you know that the gamble is biased in the favor of the house-but there’s some chance that you might win and get back to where you were before. When you frame choices in that way, human beings exhibit real consistent risk acceptance.”
Loss aversion is adopted by more industries than you may realize. Even TV, which relies on viewership to translate into ad sales, capitalizes on this psychological button. For instance, a program you watch might show a preview for what is coming up after the break. Are we that distracted that we can’t stick to the show for a few commercials without seeing the coming attractions?
The answer is: Yes, we are. We are inundated with too many other options for there not to be a risk of losing our interest. Knowing exactly what we will miss out on after the commercial break is more motivating in preventing us from changing the channel than an abstract prospect of entertainment. Their ratings depend on showing us what we may miss out on. Anticipating loss aversion and implementing tools that maximize urgency are a powerful, sales-boosting combination.
In general, behavioral analysis yields two important truths about how we are as buyers:
- We want something more when we see that it’s wanted by others.
- We are quicker to make a decision when we know that the window of opportunity is soon to close.
Tools like evergreen deadlines allow us to ethically capitalize on both of these-and have the power to do so consistently. Scarcity mechanisms like time and product limitations generate situations in which people are forced to act-or ultimately lose out. They facilitate the idea that what you are selling is not only desirable, but that it won’t always be available-giving buyers a sense of urgency.
Think back on your own online shopping habits. Whether you love Amazon books, clothing, jewelry, or new software, chances are, you’ve saved, “hearted”, “liked”, and even shared items that you could or would buy at some unspecified “later date”.
Years go by…and while organizing your bookmarks, you realize you “got over” the hump in which these things mattered most. Other things won your attention or warranted faster purchase. Remember, there are a thousand reasons-both imagined and reasonable-why a prospective buyer won’t budge.
Had those items been on sale, of very limited quantity, or a hot-ticket trend that all of your friends seemed to be grabbing NOW, would you have made a different decision? Perhaps the item would be in your closet or going for a night out on the town instead of sitting in your bookmarks.
Online auctions, for instance, exemplify scarcity at work. Ebay expertly utilizes scarcity in the form of both item and time limits. Multiple people will bid on a single item, knowing that without getting the highest bid in a timely manner, they could miss out on the item of choice-forever.
Closer to home, media masters with smaller-scale, yet successful online businesses make the most of scarcity. Here are just a few examples:
1. Marie Forleo B-School
Marie Forleo hosts an annual, 8-week online training program focusing on small business branding and female entrepreneurs. Thanks in part to the brevity of her program’s availability, Marie has built a multi-million dollar business herself. In the interim, she offers free advice via her web show, MarieTV just to keep everyone on their toes-while building her email list with her closed registration page.
2. Digital Marketer’s Follow Up Machine
Digital Marketer takes a page out of the same book with their baby, “The Machine“. When you can’t enroll in their top-notch email marketing training, DigitalMarketer offers coveted spots on its waiting list-begging those who want the best email campaign tactics under their belt to secure an exclusive and fleeting workshop. This has lead to the immense success of its founders and a team that boasts ample research, prestigious speaking engagements, and consulting for businesses all over the world.
3. VideoFruit’s Get 10,000 Subscribers
Get 10,000 Subscribers is a course that helps people-well, get 10,000 subscribers. As great as the course is, the only thing that might one-up it is the launch strategy. Creator Bryan Harris outlines three key points of scarcity embedded into his launch process. He offers a discount, bonus, and purchase window that all do one, special thing-end. Bryan personally attributes $85,000 in sales from a recent launch to the temporary bonus element alone.
The highest revenue-generating courses that these startups offer have one thing in common: Closing. Their value is increases by their scarcity, filling spots and building their email list for the next round long before launch time.
Scarcity operates on the premise that while wants are unlimited, resources are limited. How this applies to resources like food or a set number of manufactured products is obvious, but when applying scarcity to less tangible things for sale, or things that aren’t necessary to survival, its significance and authenticity become less apparent-but it’s still there and as important as ever.
As with B-School, The Follow Up Machine, and Get 10,000 Subscribers, one of the most popular ways to sell online is through information products. How scarcity comes into play here may be difficult to wrap one’s head around. Isn’t purveying information online sort of…limitless? With one URL, you can extend ebooks, blogs, webinars, etc that were made once to anyone online. In theory, this may seem like the altruistic thing to do. After all, if you truly believe the information is helpful and important, wouldn’t it be a happier, better world if everyone knew about it?
Maybe not. If everyone knew the same information, it would no longer hold the same value-placing a disadvantage upon those who are most wanted it and are most likely to utilize it. In the case of information that experts could acquire from other experts to impart to their clients, the more people that have the information at hand, the less credible they all are.
It also hurts the seller, because the value decreases monetarily and subjectively. This can lead to creative fatigue, poor quality products, and even a neglect to contribute at all.
If enough customers are procrastinating – and research shows that they will – it is difficult to keep prices low. In order to sustain the business on less sales and ensure some kind of livelihood from the work being done, prices on individual units have to go up.
You want a lot of people to get their hands on your product, but not to make it so easy that is becomes obsolete. Luckily, scarcity can help you get to the sweet spot of optimizing revenue.
As you can see, even online information has implicit, genuine scarcity. Without it, the information market would cease to exist, and there would be less motivation to do anything about it.
-inspires prompt purchase of a helpful product or service
-keeps the product, service, or information valuable
-ensures that the seller’s investment gets a worthwhile return, keeping them working to help others and striving for quality
-keeps prices affordable
If you want to really sell your product, have it retain its value, maintain affordable price points, and re-enforce credibility, scarcity doesn’t only work-it is essential to the success of your online business. Have scarcity tactics worked for you? Have you encouraged urgency in a creative way? If so, let us know in the comments below, and don’t forget to share…don’t worry-the concept of scarcity is too inherent in economics to lose its value.