Scarcity selling – what is it, why it works and how it caused one woman to loose her fingertips

We have all seen it many times before. Scarcity marketing tactics  on sales pages warning us that if we don’t buy right now the price will double, if not triple by the time we make our purchase. This post will explore some common types of scarcity selling.

What is scarcity selling?

Scarcity selling is a marketing technique presented in a way that is causes a sense of urgency. This could be by limiting the quantity of products on sale or by temporarily lowering the price for  product or services.

Examples of scarcity selling

Scarcity selling can be presented to potential sellers in various form.  Here are a few of the more popular ways that scarcity selling is marketing today.

Limited time discount 

Limited time discounts are all around us in both the real bricks and mortar businesses and in the online world business. The one which most consumers will identify with is being offered a discount price that has a limited time span.   The duration can run for months, weeks, days or less.  You will likely find these scarcity promotions in your letterbox via direct mail advertising, otherwise known as junk mail.

These limited time promotions can also happen verbally when purchasing high ticket items.  Last year I was purchasing a fridge after my last one decided to retire. The sales man offered us a very good price, the catch, the discounted price would expire the moment I left the store. It ended up sounding like a used car sales pitch so I passed.

Pros: The benefit of limited time discounts is the perceived value of money saved.   In Robert Cialdani’s book Influence: The Psychology of Persuasion,  commitment and consistency is one of the key principles of influence discussed.  If a customer is buying a $120 product for $80 they are more likely to justify the sale to themselves as having saved $40 rather than having just spent $80. This is being consistent with their decision ‘commitment’ to make what could have very well been an impulse purchase a justified decision.

Cons: The real disadvantage of limited time discounts is that if you run these promotions too often you can unwilling create hesitant shoppers during your non-sales period. An example of this is the fabric and homemaker supplies store Spotlight. It seems every few months they are offering 40% off storewide. Each time they are running this promotion there is a heavy television, radio and print media promotion. There is no doubt that they get an influx of shoppers during the sales period but in the off-promotion period, when the stock is at full retail price, an informed customer has a choice  to make- do I purchase now or wait till the next promotion? For low ticket items  the customer may not be too fussed paying more, however, for higher valued items the hesitation could rightfully be there.

Limited stock

Limited stock is another way both online and bricks and mortar business create urgency. If you are a regular online shopper or eBay customer you might have noticed that many online retailers have the stock count next to the products that they are selling. They are essentially creating a problem ‘urgency’ and selling the solution ‘their product.’

Limited stock count can also be used to create a sense of urgency for live events, especially if the entire amount of tickets available is known.  The sales page for the annual Problogger event had a real-time count of how many tickets were left. I knew that 400 tickets were released (they later realised an additional 100 to cater to the demand) and each time I checked the sales page the number of tickets left kept dwindling, this sense of urgency resulted in the tickets being sold out within hours of going on sale.  I ended up purchasing my tickets on my mobile phone whilst standing in line at the supermarket checkout queue!

Pros: The biggest advantage of displaying limited stock is sharing social proof that purchasing your product is a good decision.

Cons: The downside to limited stock selling is that unless you have a fast turnover of a particular stock it can backfire if the customer visits your sales page a day or week later and the stock levels  hasn’t changed. This creates a low level of social proof for the product you are selling. limited stock selling

Introductory Prices

Introductory prices are becoming more commonplace in both the online and physical world.  The way it works is when a new product is launched the prices are lower than they will eventually be just for a limited time to allow for a greater first batch of customers to experience the product or service. These first customers are otherwise known as early adopters.

In the online world, introductory prices are becoming increasingly popular for membership sites offering the first batch of members significant lifetime discounts if they join up before a specific deadline.  This can yield high a turn-over of first customers.

Pros: The biggest benefit to introductory pricing is the fast influx of early sales. It is also a great opportunity to introduce your brand to as many consumers as possible.

Cons: The biggest risk with introductory pricing is the perception that you are increasing your price so soon after releasing your product or service.  As your product is new and has not already established a standard retail price, your introductory price becomes the perceived established standard pricing. Increasing that price so soon can alienate some customers.

Bonuses! Bonuses! Bonuses!

Offering limited time bonuses bundled with a physical or digital product is another way that scarcity marketing can be applied to your promotions.

Pros:  Offering bundled bonuses to your customer is a win-win scenario for everyone. The consumer gets added extra value at no additional charge and the business does not need to lower their standard price

Cons: Depending on what your bonus is you may be creating more work and spending more money by giving something away.

Use scarcity responsibly

Scarcity can be highly effective in marketing, however it also needs to be implemented responsibly. I was recently in a very well-known shoe  store with high ticket items, when it was announced over the loudspeaker that anyone who was purchasing 2 pairs of shoes would get 40% off both pairs if they were lined up in the queue in the next 2 minutes!

This was scarcity selling to the extreme and very irresponsible selling that I am sure would have ended up in customers buying a few ill-fitted pair of shoes just to make the deadline – I hope they had a good refund policy! It was also a safety hazard as it caused quite a few minutes of intense chaos in a crowded store and quite a bit of shoving and pushing was happening.

Here in Australia, Boxing Day sales is the one day of the year where limited-time sales will have the most significant discounts.  Back in the 90’s department stores in Melbourne Central would have dirt-cheap discounts such as TV’s for $20.  The catch however was that there were only ever an extreme limited quantity available, usually around 20 or less.   This practise ended up being regulated after a woman lost the tips of two fingers when it was caught in a roller door in the Japanese department store of Daimaru at Melbourne central as she was pushed and shoved by fellow customers looking or a quick bargain.

Why should I use scarcity in my business?

There is no doubt that scarcity sells. It’s human nature to not want to miss out on a good opportunity and if you have a product or service of good value packaging it around a sense or urgency will result in a higher turn over of sales. By nature customers are more likely to ‘think about it’ before committing to purchasing a product or service. The longer the customer has to think about the purchase the more likely they will spend researching your competitors, loose interest or simply forget about it. This is especially true if you are running an online business. There are far too many distractions online so you really only have a very brief amount of time to secure a transaction.

Have you seem some brilliant examples of scarcity selling? How about some poor examples of scarcity selling? I would love to see them – please post the examples in the comments below