What's Scarcity's Hidden Power?
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Recommended Reading: The
Power of Scarcity by MINDY WEINSTEIN, PHD
Dear Readers, Thank you for taking the time to read today’s
business moment. I just want to emphasize that this writing is not a substitute
for reading the book. The book is comprehensive, and our weekly Business
Development Moment is merely a guide in which I emphasize specific
questions and themes in light of the book.
How should you read this book?
The book includes two parts "Understanding
Scarcity" explains why and how scarcity works, while "Using
Scarcity" explains how it is applied and what makes it effective. It also
includes a list of Key Selling Points about scarcity that can be applied to a
variety of situations.
Why MINDY's book is crucial and a must read?
Scarcity is a powerful principle that can be
used to boost sales, win negotiations, ignite action, develop community, build
customer loyalty, and create fun and excitement. It invokes primal instincts
that are key to survival, and it is a reason behind many of the purchases we
make. If used correctly, scarcity can influence the people who use your
products or services, and it has been identified as one of several principles
of influence. The focus of this book is the psychology behind scarcity and why
it has such a powerful impact. It is important to understand why the perception
of scarcity leads to purchases and increased sales, as it is driving our
decisions and those of our customers.
Why should we educate ourselves about Scarcity?
Scarcity is a powerful force, but it needs to
be used correctly to be effective. This book provides a deeper understanding of
its effects and techniques to apply it to business and personal life. Scarcity is a fundamental aspect of
daily life that affects individuals, communities, and the environment. By
understanding the causes and effects of scarcity, we can take steps to address
this issue through education, awareness, and action. Through collaboration and
innovation, we can create a more sustainable future for ourselves and future
generations. Educating ourselves about scarcity allows us to make more
informed decisions, make better use of resources, and avoid being misled or
manipulated by others. Let’s start our journey and ask some questions in light of
the book
Let’s start our journey and ask some questions in
light of the book
What is scarcity? What are scarcity categories?
Scarcity is a powerful principle that can boost sales, win negotiations, ignite action, develop community, build customer loyalty, and create fun and excitement. It invokes primal instincts that are key to survival, and our ancestors had to survive when it was prevalent. We still experience the feeling of loss and regret if we don't get our hands on a scarce product or service. According to Mindy ‘Scarcity has been identified as one of several principles of influence. And out of all the influence principles, scarcity is one of the most powerful because it invokes primal instincts that are key to survival”. Scarcity can have a powerful impact on our mental health, leading to FOMO (Fear of missing out’’)
As Mindy describes it, Supply-related scarcity is caused by a shortage, limited-edition scarcity, time-related scarcity, and demand-related scarcity. Supply-related scarcity is reflected in phrases such as "supplies are limited" and "while supplies last". Limited-edition scarcity is based on the limited number of units produced.
What’s the artificial Scarcity? What’s the risk of creating false Scarcity?
1- Artificial scarcity arises when the quantity of an item is purposely limited, despite the fact that there may be enough of that item to meet demand. It could also imply that an assumed limitation exists.
2- Scarcity can backfire when used as a sales tool. Customers want to feel confident in the salesperson, brand, and so on.
3- Scarcity disconfirmation occurs when the information presented to us contradicts the scarcity claim made by a business—and it may be tremendously damaging to a business.
4-It is OK to emphasize the scarcity of a product, service, or other resource as long as it is honest and beneficial.
5- Because age influences how consumers react to a signal that a product or service is in short supply,
What’s time related Scarcity? Why is it important?
It’s time is running out and you need to take a decision. ‘’Studies have shown that when we feel pressure to make a decision, the amount of information we are able to process diminishes and we focus on features that can be quickly and easily evaluated. When we perceive a lack of time, the related stress influences our decisions. This is especially true when we anticipate the price of the item is going up’’.
Time-related scarcity is best used for no conspicuous goods that provide utility or benefit and are not used to show status and wealth.
Social cues are not effective, so customers need to purchase the item before the sale deadline to "win". Promotional messages should be kept simple and clear, including the sale end date and future price after the sale. Scarcity caused by a time restriction can come in many forms, such as limited time offers, flash sales, countdown timers, or coupons.
As Mindy stated, Time-related scarcity is best used for no conspicuous goods, such as aluminum foil, microwaves, and toothpaste, as our brains are still activated if there is a presence of it.
What’s Limited Scarcity? Do you want to feel unique?
Limited-edition products are attractive to people who seek uniqueness and self-expression, and are often drawn to them from an emotional appeal. Companies can use limited-edition strategies such as events, service bundles, twists, packaging, and collaborations to boost their perceived value.
What’s demand Scarcity?
Scarcity due to high demand creates a feeling of urgency, entices people to do something immediately, and encourages businesses to promote sales restrictions, bestsellers, back-in-stock products, current items left, or the need to sign up on a wait list. This creates a sense of belonging and identification with a certain group.
What are examples of scarcity in business?
Harry Oppenheimer, the son of the chairman of De Beers, embarked on a journey to keep his family’s company profitable in 1938. This journey would forever change the way we view diamonds and would solidify De Beers’ position as the leader in a multibillion-dollar industry. De Beers was the world’s largest producer and distributor of diamonds, but market conditions were threatening the company’s existence. Oppenheimer’s journey would change the way we view diamonds and would solidify De Beers’s position as the leader in a multibillion-dollar industry. De Beers could not change the economy, but it could take steps to change perceptions. De Beers needed to change the perception of diamonds in order to control demand and prices. To do this, Oppenheimer contacted N. W. Ayer, one of the largest US advertising agencies, to develop a plan to improve the image of diamonds among consumers. After extensive research, N. W. Ayer concluded that the association between diamonds and romance needed to be strengthened and solidified. Nine years later, the ad agency hatched a new plan that relied heavily on psychology to enforce the tradition of the diamond engagement ring and position it as a psychological necessity. The lecture program reached thousands of high school girls and instilled in them that diamonds were a symbol of lasting love and commitment. De Beers used both limited supply and popular demand to create demand for diamonds. In 1948, a copywriter at N.W. Ayer came up with the motto "A diamond is forever" to encourage consumers to keep the diamonds they received and never resell them.When Marilyn Monroe and Jane Russell sang "Diamonds Are a Girl's Best Friend," the demand for diamonds grew. Scarcity is not limited to diamonds, as it reaches across many product lines and industries. ''Mindy mentioned more examples in the book''
What’s the hidden Power of Scarcity?
1-Scarcity
is a major influencing factor that influences judgment and preference for a
thing. It evokes a sense of threatened freedom to acquire something, which
increases our desire for that item.
2- It can
be useful in a variety of circumstances, including business negotiations,
social engagements, and personal interactions.
3- It has
been linked to power because ancient empires and governments were able to
guarantee access to food and water, giving them immense power over others.
4- Scarcity preference can be a valued feature of the good itself, generate a hyper focus on what we can't or don't have, simplify decision-making, and originate from a fear of losing out.
Should businesses create scarcity? Why is scarcity important?
1-Yes!
Businesses can intentionally create a sense of scarcity by keeping supplies
artificially low or projecting the perception of scarcity through promotions or
sales. We react to these cues when making purchase decisions.
2-Scarcity is a key selling point in psychology,marketing and
sales, as it encourages us to act and changes behaviors and attitudes. It
can increase our sense of urgency to make decisions, leading to a mentality of
"buy it now". Once we are aware of the role scarcity plays in our
lives, we can make better informed decisions.
3-As Mindy
describes it, Scarcity is an
influence tactic that can change beliefs, attitudes, or behaviors due to actual
or perceived pressure.
4-Social psychologists have been particularly interested in scarcity and influence because it can cause significant behavior changes and result in people making decisions they otherwise would not have made.
5- Scarcity appeals highlight features associated with the uniqueness, rarity, or unavailability of a product or opportunity, and has become a mainstay approach in marketing and psychology.
What are risks associated with applying scarcity in marketing?
Scarcity is a powerful force, but it must be validated by the person on the receiving end through signals that prove limited availability. This can lead to trust being shattered and the product's value plummeting. When a scarcity claim is made to only improve sales, it can irreparably harm a business's reputation.
How do customers perceive Scarcity?
1-The scarcity-equals-value mentality is a common
decision-making technique used by people to reach conclusions and opinions
about something or someone.
2-This is illustrated by the example of Tesla, where people
camped outside of Tesla locations just for the chance to be put at the top of
the wait list for the Tesla Model
3. This mental shortcut is used to value something to the
degree that it is unavailable to us, which can lead to increased desirability
and value.
4-Arousal induced by scarcity influences the choices we make when selecting among multiple items in a product class. This concept is evident not just with "things" (e.g., diamonds, Nintendo Switch consoles, and toilet paper), but also when choosing courses to take. When a particular professor has zero seats left, it makes them want to enroll more, leading to a mental shortcut in determining the professor's value.
What’s source Credibility and why is it important for scarcity?
Credibility is critical in making scarcity work in a marketing or sales message. Credibility fosters buyer or target audience trustworthiness in your product.
According to Mindy,
1- Source credibility
is the extent to which a source is perceived as possessing expertise relevant
to the communication topic and can be trusted to give an objective opinion on
the subject. Expertise refers to the source’s knowledge of the subject and
trustworthiness refers to the believability of the source, as well as perceived
honesty.
2- A source is considered attractive to the extent that the source is familiar, likable, or similar to us. When an expert communicates a message, we offload the burden of the decision process to the expert. Businesses need to consider the source when using scarcity as a way to influence others.
3- The most important details in this text are that perceived expertise can cause sales to go up when sources are viewed as having a high level of expertise that is relevant. This is demonstrated by the example of Nordstrom selling Suit supply, which is connected to what others are buying and has a positive impact on memory.
4- Additionally, online companies can use scarcity messages to show their expertise, such as Net-a-Porter's "people like me mentality" and Net-a-Porter's "buy one get one free" offer. Social media marketing is a powerful tool for brands to gain customers' attention.
Therefore,
Scarcity can be used to increase desirability and perceived value, drive
premium prices, and create strong overall messages if it employed in
appropriate way.
How can fear perception contribute to scarcity's success?
1-We are more afraid
of what we might lose than what we might gain.
2-Temporary discounts outperform everyday discounts.
3-There is a larger regret for inaction than for impulse buying.
4- The likelihood of us quickly regretting not making the
purchase is high.
5-Businesses who understand how to capitalize on fear of loss
recognize that it all boils down to effectively structuring the purchasing
scenario.
6- Seeing products run out in real time is another trigger that can lead to feelings of loss and regret
To sum up, acknowledging that creating scarcity is not a one-size-fits-all solution, but can be a powerful tool when used strategically. Reminding businesses that ultimately, the key to success is providing value to customers and building strong relationships with them. By leveraging scarcity, businesses can create a buzz around their offerings, drive demand, and increase profitability. Whether it's through limited edition products, exclusive access, or unique features, scarcity can be a powerful tool for any business looking to stand out in a crowded market. By focusing on what makes their product or service truly unique and finding creative ways to communicate that value to customers, businesses can create a sense of urgency and exclusivity that drives sales and builds brand loyalty. In today's competitive market, it's crucial for businesses to stand out from the crowd. By highlighting their unique selling points and communicating them effectively to customers, companies can create a sense of exclusivity that drives sales and builds brand loyalty. However, it's important to ensure that these marketing practices are ethical and don't mislead or deceive consumers.
P.S, Some of the writers' text has been used, paraphrased and summarized where needed. There are also some personal reflections.
References
1-https://www.drip.com/blog/scarcity-marketing
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