Do you use scarcity to market? Careful, it could backfire

If you don’t read this post within the next five minutes it will self-destruct. Limited time offer to read this post by midnight tonight before I hit delete. If you haven’t already guessed this post is all about scarcity selling, otherwise known as limited time offers . Scarcity selling is a marketing strategy taking the online business world by storm. It’s not new.  It’s not reinventing the wheel but for many consumers it’s irresistible to pass up on.  In this post I am going to discuss why this marketing  technique can sometimes backfire and loose potential sales not only in the moment but for any future reoccurring sales.

why your scarcity selling could backfire

A few months ago I received a sales email  informing me of a new subscription membership site.  The product was  from a company that had a long-standing solid reputation in the online business world. I had previously subscribed to their list as I was, and continue to be, generally interested about what new innovative products they launch and how they can help my business grow.

The sales page was for an online software  that would enhance my business.  The demo looked great and I was keen, but there was one problem. Despite the product being something that I would benefit from, I wouldn’t be ready to actually use the product for at least another 6 months and I wasn’t prepared to pay for something that I couldn’t use immediately.

The sales page was advertising a special scarcity promotion. If I signed up before the  deadline my subscription cost would be permanently 50% less than it would be from the day after the deadline.  It was essentially introductory pricing.  After that first initial email  I received several follow-up emails letting me know that If I didn’t sign up quickly I would forever be paying at least 50% more than their special introductory pricing.

The flaws of introductory pricing and grandfathered pricing

So you might be wondering what’s wrong with  this sales technique?  Surely applying a little time-sensitive pressure on a campaign will help to provide a quick turn around on sales won’t it?   I can’t argue that point. Scarcity sales techniques have a proven track record of delivering burst of sales. However, does scarcity cause a barrier to future sales after that initial influx of membership sign-has died down?

 They way I interpreted their marketing communication was:

Buy this product before the deadline and you will always pay 50% less every month

Buy this product after this deadline and you will always pay at least 50% more every month

The main flaw of grandfathered  pricing is that it frames future customers in a position of consistent disadvantage. Potential customers like myself, who were very heavily marketed to during the launch phase were basically sent the message that if we were to sign up after deadline we would be paying a 50% penalty for doing so.  Any future marketing attempt towards email list subscribers would not be as effective – it would be a hard sell as if a customer were to sign up to the membership site post deadline, each month when the subscription will be  renewed the customer will be reminded that they are paying 50% more than they could have been. The danger of this of course, is setting up buyers remorse and resentment.

Companies also need to consider membership retention rates. A successful launch and a high-number of subscription sign-ups does not guarantee a sustained reoccurring revenue based on launch day subscription fees.  Membership retention will decrease each month through  cancelled  subscriptions and expired payment details.  Ongoing sign-ups are just as important as the first group of customers.

Price increases are a natural part of growth. Customers will understand wont they?

Price increases are absolutely a natural part of economic growth. However usually the price increase is gradual and potential customers are not constantly reminded what the price increase will be, more specifically how much more they will be paying.

Bonuses! Bonuses! Bonuses!

Scarcity marketing can still be applied to product launches in a way that is a win-win situation for both the new member and the business. Offering bundled bonuses during launch period is a great way to add value to the transaction. The bonus needs to be relevant to the website and of high content-value.   The benefit to the business in applying a bonus scarcity approach is that they do not need to lower their standard price and their members are still getting amazing exclusive value. Future members wont feel as disadvantaged as the bonus product is a once-off occurrence and they would still be on a level playing field with other members in the community.

What are your thoughts on scarcity selling and introductory and grandfathered pricing? Am I being too critical or do you share a similar view point? let me know in the comments below.