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Making Scarcity Work for You

Scarcity can be a major driver of product sales. However, different types of scarcities push different types of products. Demand-based scarcity is most effective for utilitarian products. Supply-based scarcity helps experiences and hedonic products. And time-based scarcity is most beneficial to push sales of high-involvement products. Using appropriate scarcity tactics and cues based on these relationships will help marketers maximise the impact of their efforts.

The toilet paper stock runs at the onset of COVID-19 were unprecedented and are hard to forget. They are also a brilliant example of the effectiveness of scarcity as a driver for sales. The perception of scarcity increases the value and desirability of a product for buyers,

encouraging them to purchase it. Hence, marketers have used scarcity cues and tactics of various kinds in both online and offline shopping for years. However, there is no clear understanding of whether all types of tactics have the same impact on buyers. Therefore, a study including the meta-analysis of 131 studies on scarcity tactics tries to answer the question: Which tactics work best to drive sales of a product?

The study found that different tactics work best for different types of products. For utilitarian products (products that meet basic needs, e.g., groceries, office supplies, or regular

clothing), demand-based scarcity is most effective. Demand-based scarcity refers to scarcity driven by high consumer demand. This rise in demand can be explained through the Conformity theory (desire to conform to group norms). People want to buy what others are buying. For example, if a particular brand of shampoo is scarce, it signals the product’s popularity. Buyers’ desire to conform makes them want to buy the same shampoo, increasing demand and sales.

Supply-based scarcity works best for experiences (intangible products with utility, e.g., movie tickets, flight seats, or theme park passes) and hedonic products (products for fun

excitement, or pleasure, like flowers, games, or music). Supply-based scarcity refers to when a limited number of items are available due to limited production or distribution restrictions. In such cases, limited supply indicates the product’s quality and status, making it more desirable (as explained through Uniqueness theory or “snob effect”). For example, tickets to a cricket match have a limited supply, so having the tickets makes a person stand out, which will push sales of the tickets.

Hedonic and utilitarian products also differ in many other ways that impact marketers and retailers. Here’s how they respond to in-store displays.

Finally, time-based scarcity is the most suited to high-involvement products (products with greater personal significance that typically satisfy hedonic and conspicuous consumption

goals, e.g., cars, jewellery, or fine dining). Time-based scarcity refers to situations where a product is available for a limited time. Regret theory, or the desire to avoid making the wrong choice, drives demand in case of time-based scarcity. For example, a Christmas-special cake might be available only in December. The limited availability creates a sense of urgency and achievement among buyers, who don’t want to miss out on a good purchase, which would drive the sales of the cake.

The study has significant implications for marketers who want to use scarcity cues and tactics

to drive sales. For marketers of experiential products and experiences, supply-based scarcity tactics are the best option. They can communicate supply-based scarcity through advertisements and physical demonstrations of restricted availability. Signs indicating limited availability will also help to boost buyers’ desire to purchase.

Marketers of utilitarian products would benefit most from demand-based scarcity cues.

Some of the most prominent of these cues are empty shelves or shelves containing only a few products. These are evidence of previous purchases by other buyers and can prompt new buyers to opt for the same high-demand products. Marketers can also use in-store signs that highlight the high demand for products, like “Only 5 pieces left”.

“Sold out” signs can be a double-edged sword. Read on to find out how to get the most out of them.

Finally, marketers of hedonic and high-involvement products can use time-based scarcity to

increase urgency and drive sales. They can communicate the scarcity using prominent signs that highlight the limited period of availability. For example, signs like “Happy Hours from 3 PM to 4 PM” or “Available today only!” can push up purchasing intentions for such products. Using appropriate scarcity tactics and cues combined with appropriate marketing communication tools can lead to a significant increase in demand and sales of products.

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