Today’s discussion is about scarcity marketing. Here you will be introduced scarcity marketing as an effective marketing tactics; so that by the time you are done reading, you will know what it is, its benefits and disadvantages and how to use it to effectively increase revenue for your business.
What is Scarcity Marketing?
To better understand what scarcity marketing is, let’s first take a look at what scarcity means in economics. In economics, the word “scarcity” is used when demand for resources (e.g. products, services, land, etc) is considerably higher than the supply, such that allocations have to be made in order that what is available would be distributed efficiently.
Scarcity marketing then, simply involves the process of motivating people to buy a product or service by devising a way to tell them there is a shortage in what is available and that they only have a limited time to act. The ultimate goal with this sort of marketing is to systematically create a sense of urgency through an aggressive call to action; so that interested parties fear they will miss out on the chance to acquire something that they want if they don’t act fast.
Today we see scarcity marketing tactics being implemented in many ways. We see them in TV ads and infomercials where we are urged to ‘call now’ to buy a product or service as only limited amount is available within a certain time frame. We also see them on web pages all over the internet, with visible counters counting down to the time the sales is set to finish.
Benefits of Scarcity Marketing
One of the main benefits of scarcity marketing is the opportunity it grants you as a marketer, to position your product and/ or service as a commodity. This will effectively drive up the apparent value of the products and/ or service, thereby leading to a fear in your potential customers that there is only a limited amount available, with little time to act.
Another benefit of scarcity marketing is the chance to engage your audience in a new and totally different way. By creating a background story that clearly outlines the reasons for your scarcity, (e.g. a special/ limited edition or a one-of-a-kind product that has significant meaning), you can capture your customers’ attention easily, which could lead to potential sales.
Also, by implementing scarcity in your marketing techniques, you have the potential of selling products and services in large quantities within a short time frame, if your services and/ or products add good quality and value to the customers.
Last but not the least, when implemented effectively, there is a strong chance that scarcity marketing could lead to a potential cult following. For example, a limited edition stereo headphone and a reasonable price made available with scarcity marketing may lead to a frenzy of people wanting to get their hands on one. It can lead to strong loyalty and following among your audience.
Disadvantages of Scarcity Marketing
Scarcity marketing can backfire in a number of ways; some obvious while others are not. Below are some of the disadvantages to using scarcity as a marketing technique:
- In many cases you, as a seller, have a limited number of products or service to sell within the short time frame when you could have it open for much longer and perhaps sell more.
- Implementing scarcity marketing for products and/ or services with low value has the potential to severely hurt your reputation as a marketer.
- Creating an illusion of scarcity could come across to some customers as a form of trickery.
- Building a sense of exclusivity could actually make you lose customers who can’t afford your product or service there and then, rather gain or keep them.
- And of course, the possibility that the fear the scarcity creates could turn some people off or push them away.
How to Effectively Use Scarcity Marketing
As we have highlighted in the advantages and disadvantages of scarcity marketing above, there is a fine line when it comes to this marketing tactics; so that if done correctly business owners will win and win big but lose big time if they do not implement it well for whatsoever reason. This is why many big companies like Apple and Volkswagen employ top notch marketing companies to carry out their marketing campaigns.
That said, to effectively use scarcity marketing, marketers must understand their products and/ or services and have the ability to estimate the desires of their customers. With this information they will be equipped to know how to systematically implement an effective use of scarcity marketing.
A good example of a case where scarcity was effectively implemented as a marketing strategy was in the case of Apple’s iPhone, where they had months and months of media coverage and drip feeding the world with information about their product, thereby making customers fear there will only be a limited supply. The tactics worked well in the sense that on lunch days, people queued up in their thousands worldwide to get their hands on the product.
The draw back in this case was that small glitches in any of the iPhones were completely blown out of proportion with bad press coverage and reviews on the blogosphere. But in the end, the scarcity marketing tactics worked for them as they sold millions of units of their products and are still doing so today.
To see how you can successfully implement scarcity marketing on your online business, click here to check out our post on Scarcity Samurai.