In 1975, a group of collegiate researchers in the US wanted to know how the perception of scarcity would impact on how much people valued an item. They conducted a simple test, placing two jars of cookies in front of a user group.
In one jar, they placed 10 freshly baked, doughy chocolate chip cookies.
In another, identical jar, they placed just two cookies, from exactly the same batch.
Which jar would the group value more?
Without fail, though all the cookies were identical, participants valued the near-empty jar more highly.
This is the value of scarcity, and it’s a perfect example of cognitive blindspot that we all have – the appearance of scarcity positively impacts our perception of value.
The last cookie in the jar is the one that makes your mouth water because, our thinking goes, if there’s fewer of an item, it’s more valuable. Just like any precious metal, secret club or desired fashion item, we fear potential shortage of supply, even if it’s irrational.
According to Rolf Dobelli in his book ‘Thinking Clearly’, this scarcity heuristic (or mental shortcut) is down to a psychological trait called ‘reactance‘ – when we are deprived of an option, we proceed to deem it more valuable and desirable. We want what we can’t have.
Any right thinking marketer will see this as a huge opportunity. If, as Rory Sutherland says, a marketer’s job is to create perceived or intangible value for a product or service, using scarcity in an ethical manner should be an effective tactic.
Look at Groupon, Ebay or Amazon for a simple example. How often do you see simple copy lines like ‘auction ends in 5 minutes’, or ‘only 15 left’ or ‘only 24 hours to purchase’ used by these e-commerce giants? That’s the scarcity principle at work, and it influences buying behaviour, nudging browsers closer to pulling that trigger.
Similarly, web services like Gmail, Google+, Twitter, Spotify, Pinterest, Medium and others have launched on an ‘invite only’ basis, designed to allow beta testing, but also to ramp up buzz. Apple’s enforced handset scarcity around new iPhone launches is another good example.
One of the most effective examples I’ve seen in recent times has come from an Australian watch brand.
‘The Fifth Watches‘ have come up with a novel distribution system that doubles as a shiny magnet for our magpie like brains.
On an invite only basis, the brand releases five styles of watch on the 5th of each month, which are then sold online for five days only. According to them, it’s ‘due to the popular demand of our products’ and ‘the process ensures a quicker turn around for the customer while creating an identifiable sales window for when our products will be available every month.’
While part of that may be true, like the cookie example above, we know that emphasising scarcity through a ‘VIP waiting list’ and making people wait means they want it even more. Thus, when the 5th of each month comes around, there’s a clamour to purchase.
Indeed, the $94 price tag serves to show how an understanding of simple behavioural psychology can help marketers drive perceived value, and thus real value.
The irony of it is, even if you’re aware of this tendency to value scarcity, it doesn’t matter.
Though we know it’s illogical, as Kahneman tells us in his seminal book ‘Thinking, Fast & Slow’, humans are irrational. Our primal emotional desire (type one thinking) overrides our slower, logical, reasonable brain parts (type two thinking). The typical response towards scarcity is a lapse in clear thinking, no matter what the scenario. The Fifth Watches understand this clearly, and design their purchase process around it.
Ahem. I can’t wait until my new watch arrives!