People are willing to go to great lengths to get something that no-one has.
We want limited supply products, we want to have customised tailor-made clothes. It is weird to wear something and rock up at a party to find someone wearing the exact same thing you are wearing.
Customers often want customized, exclusive, limited supply and scarce offerings.
How do you create scarcity:
A classic study that demonstrates the psychology of scarcity reveals an interesting observation about human behavior that may hold a clue.
In 1975, researchers Worchel, Lee, and Adewole wanted to know how people would value cookies in two identical glass jars. One jar held ten cookies while the other contained just two cookies.
Which cookies would people value more?
Though the cookies and jars were identical, participants valued the ones in the near-empty jar more highly. Scarcity had somehow affected their perception of value.
There are many theories as to why this was the case. For one, scarcity may signal something about the product.
If there are less of an item, the thinking goes, it might be because other people know something you don’t.
Namely, the cookies in the almost empty jar are the num-numier choice.
The near-empty jar with just two cookies left in it conveys valuable information, even though these cookies are the same with the full-jar.
What is at play is the power of context. An example of this is what happened when the world-class violinist Joshua Bell decided to play a free impromptu concert in the Washington, DC subway. Bell regularly sells-out venues like the Kennedy Center and Carnegie Hall for hundreds of dollars per ticket. But placed in the context of the DC subway, his music fell upon deaf ears. Almost nobody knew they were walking past one of the most talented musicians in the world.
When Bell gave away his concert for free, few stopped to listen. But when he charges beaucoup bucks, his music becomes a rarefied commodity and thousands of people pay-up.
I have personally experienced this, when we started Vuka Advisory Board, we offered the service for free to entrepreneurs, the impact was very minimal and entrepreneurs were not committed to the programme, but we started charging a nominal fee, we had few but committed entrepreneurs.
Can the same principles of scarcity and context make technology products more desirable? I’m sure it does.
In its early days, Facebook was only available to Harvard students. Then, the service rolled-out to the Ivy League. Soon, Facebook was made available to college students nationwide. Then came high school kids and later employees at select companies. Finally, in September of 2006, Facebook was opened to the world.
Today, Facebook is used by over a billion people but its early invitees were among a small exclusive group. As the service grew in popularity, others wanted in too.
Though it ultimately worked to his advantage, it is unclear if Mark knew what he was doing. In a vintage video, the Facebook founder described his intent to keep the service just for college kids. We will never know if Facebook’s scarcity strategy was intentional or not, but the fact remains, it worked. The buzz soon grew about the social network made by, and only available to, Ivy kids.
When scarcity is a feature the service’s limited access increased its appeal.
It is important to note that scarcity should be accompanied by a great deal of value. Don’t make something that is easy to replicate scarce. If your product offering is easy to replicate and scarce to find, you will invite competition and quickly lose out of sales.
Petrol prices are mainly determined by scarcity. When there is enough supply, the prices reduce, when there is shortage of supply, prices increase.
New technology is influenced by scarcity. When technology is new and few products, the prices are always high, but when there is more products in the market, the prices reduce.
Apple has been able to apply the scarcity principle successfully.
Scarcity creates value.