What Marketers Need to Know About Artificial Scarcity

November 16, 2018Alicia Terry

Blog

Sometimes an offer really is for a “limited time only,” and sometimes there are “only 2 left in stock”. But most of the time, these phrases are tools used to push consumers to make a purchase they’d otherwise put off.

In an age of mass production and widespread availability of almost everything, how are we constantly on the brink of running out of products? Enter artificial scarcity.

 

What is it?

In technical terms, artificial scarcity is the scarcity of items even though either the technology and production, or sharing capacity exists to create a theoretically limitless abundance.

The fact is, we’re intrigued when we think can’t have something. Artificial scarcity shifts our attention from the loss of money we’d be trading for a product (“I’m not sure I want to spend $75 right now…”) to the potential loss of that item (“I don’t want to miss out on those boots if there are only 200 pairs being made in that color”).

We’ve all experienced these tactics as consumers. It still sort of works even when you know it’s happening! So as marketers, we have to ask: How can denying your customers something actually benefit you? Is this a strategy you should consider, or will it backfire and create upset customers? In many situations, it’s a misstep—but that doesn’t mean there isn’t something to be learned from intelligent use of scarcity tactics (and urgency, which is closely linked).

 

Where do we see it?

What brands do to maintain the artificial scarcity of their products can be pretty heinous—like when Burberry burned $38 million worth of unsold inventory so as not to dilute their brand’s exclusivity—or relatively mild, like “limited edition” patterns of S’well water bottles or a Nike sneaker.

Let’s consider some examples of artificial scarcity done well, and done not so well:

 

1. Chick-Fil-A, closed on Sunday.

This is a practice that aligns with Chick-Fil-A’s core values, and in that sense, it’s not “artificial”, but the restaurant chain has the resources to be open 7 days a week like many competing fast food chains, and isn’t. Somehow, this manages not to hurt their sales per restaurant, which are nearly $2 million more than McDonald’s.

If you’re someone who loves that “chikin”, you’ve probably noticed that you crave Chick-Fil-A, then realize it’s closed, and vow to go the next day. Or, you preemptively fuel up the day before, knowing it will be unavailable come Sunday

 

2. The diamond industry, controlling supply to manipulate prices.

On top of extreme ethical violations, leaders in the diamond industry are extremely shrewd in limiting the supply of those nice clear rocks. Despite diamonds being numerous, artificial scarcity keeps prices extremely high. Today’s consumers aren’t so keen to ignore ethical issues and overpaying—adults under 30 are increasingly leaning towards other types of stones. Diamonds probably aren’t going anywhere, but we wouldn’t recommend mimicking this business model.

 

3. eCommerce, always urgent.

To observe the carefully calculated forces of scarcity and urgency in their natural habitat, look no further than the robot overlords tech innovators at Amazon. Here, they employ a live countdown clock for the availability of this practical headwear item. (Even for someone who’d never wear this monstrosity… it’s admittedly a bit more alluring that the opportunity will be disappearing soon.)

Elsewhere on the site, the low number of items remaining in stock is prominently displayed:

And lest you think it’s just value-driven retailers using this strategy, here’s J. Crew, sharing that there are only a few super cute tops left.

 

The site manages to tell the consumer this not once, but twice, within an inch. (Whether or not I added one of the “few” to my bag is between me and my overflowing package locker, thank you very much.)

 

What do marketers need to know?

To make a long and complicated story on artificial scarcity short:

  • If what you’re selling is actually scarce… it’s not artificial scarcity. You’re in the clear.
  • If it’s easy to find alternatives to your product, scarcity is not doing much for you. Your customers will simply purchase an equivalent product.
  • If you overuse scarcity as a gimmick, you’ll lose trust with your customers over time.

Still wondering if artificial scarcity can or should play a role in your marketing? Reach out to our strategy and performance experts for a conversation around your specific needs.