There’s a reason this Nugget is #1 in our library.

The concept of Scarcity lies at the core of economics, and greatly influences perceptions of value, status and our competitive desire to attain certain items over others.

Unfortunately, it's also one of the more poorly-applied concepts out there, along with Defaults and Loss Aversion.

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Mastering quantity scarcity‍

An airline stating that there's 
“Only 3 seats left” may well be using accurate data and not simply using faux-scarcity to artificially suggest that there's less supply of seats than there actually is.

However, from the user's perspective, the buildup of mistrust around the use of scarcity means cynicism is higher, so one must be careful with information presented.

Similarly, hotel websites telling you that “30 other people are looking at this item” engineer stress to compel people into action without changing supply yet highlighting demand in a manipulative way.

Instead, use quantity scarcity to focus on the craft and high quality of what you're selling.

Make your scarcity feel valuable, not stressful.

‍

Mastering time scarcity

Ensure that any time restriction is highlighted primarily for the purpose of maintaining the quality of your product or service, and not merely to cause stress that could be avoided.

As an example, use time scarcity to launch unique or experimental products that are only available within a particular window (say a week, month or season).

This use of time scarcity is positive and encourages brand exploration, used creatively to highlight your unique value.

There’s a reason this Nugget is #1 in our library.

The concept of Scarcity lies at the core of economics, and greatly influences perceptions of value, status and our competitive desire to attain certain items over others.

Unfortunately, it's also one of the more poorly-applied concepts out there, along with Defaults and Loss Aversion.

‍

Mastering quantity scarcity‍

An airline stating that there's 
“Only 3 seats left” may well be using accurate data and not simply using faux-scarcity to artificially suggest that there's less supply of seats than there actually is.

However, from the user's perspective, the buildup of mistrust around the use of scarcity means cynicism is higher, so one must be careful with information presented.

Similarly, hotel websites telling you that “30 other people are looking at this item” engineer stress to compel people into action without changing supply yet highlighting demand in a manipulative way.

Instead, use quantity scarcity to focus on the craft and high quality of what you're selling.

Make your scarcity feel valuable, not stressful.

‍

Mastering time scarcity

Ensure that any time restriction is highlighted primarily for the purpose of maintaining the quality of your product or service, and not merely to cause stress that could be avoided.

As an example, use time scarcity to launch unique or experimental products that are only available within a particular window (say a week, month or season).

This use of time scarcity is positive and encourages brand exploration, used creatively to highlight your unique value.

146 people were asked to rate identical cookies that were either presented in a jar as scarce or in abundance. They were then asked how likely they would be to want to eat a further cookie.

When scarce, the cookies were rated as more desirable and having a higher value. They were also seen as more valuable when going from an abundant state to scarce than when always scarce.

Scarcity comes in 4 flavors:
Quantity, Time, Access & Rarity.

Control quantity.
‍To increase perceived value of your product, release it in smaller and diminishing quantities, emphasizing its finite nature.

Restrict time.
When the clock is ticking and we’re overwhelmed, we take mental shortcuts that speed up decision-making.

Motivate customers by emphasizing the limited time remaining in which to act.

Limit access.
Restricting access to your products or services will increase desire and perceived value. Do this selectively for certain features and / or customer segments.

For instance, you might want to design valuable, unique rewards that are only unlocked for very special efforts on the part of the customer.

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150  students completed a simple task and were split into two groups and given either positive or negative feedback on their performance. They were then shown either a one-off print or a mass-produced one and asked how much they’d pay for it.

Those given negative feedback were willing to pay almost 4x more on average for the unique print than those with positive feedback, showing how we use consumption to heal our sense of status.

There are multiple ways to elevate brand status:

‍Form strategic alliances with successful others with whom you share compatible goals (Thorndike, 1920), e.g. Go-Pro and Red Bull.

Develop your core purpose to raise your products’ perceived value (Chernev & Blair, 2015), e.g. Patagonia who “use business to inspire and implement solutions to the environmental crisis.” 

Create and control new ways of promoting industry excellence. Dribbble, a platform for design teams to show off their work provides paid-for "Pro Business" status badges to distinguish the best from the rest.

Invest in a tiered loyalty scheme to elevate consumers’ status & brand attachment (Nunes & Dréze, 2006), e.g. British Airways Executive Club.

32 dog-phobic children were split into 3 groups and shown 8 videos of either one child playing with a dog,  many children with different dogs or no dogs, and then asked to interact with a dog themselves.

Those who watched another child play with a dog performed far better. Those who watched many children also kept this up a month later.

Provide mental shortcuts through the judgements of others; the more people, the more persuasive.  First-time consumers of your product will benefit the most from this approach. 

Persuade with similarity. We're most influenced by those who we deem similar to ourselves. Communicate characteristics relevant to that segment, such as proximity, gender / age, profession or social class to successfully direct behavior. 

Use role-models. Understand the emotional drivers of your audience and seek out positive, aspirational individuals to direct specific consumer decisions and reinforce behaviors.

You’re walking down the street. Consider two realities:

A: You unexpectedly find $10 in your pocket. 

You feel positively-surprised!

Or:

B: You left the house with $10 in your pocket.

But you reach in and it’s gone.

The pain you feel from its loss is greater than the good feeling of finding it.

Prospect Theory explains that our perceptions of value differ based on how something is framed, and losing things feels worse than getting them feels good.

As one of the grand concepts that underpinned a lot of the early ideas within behavioral science, Prospect Theory is a beast with many aspects to it, such as Loss Aversion, Framing, Certainty, and Risk.

But for now, take your practical understanding a step further by reading the Aggregation Effect and Segregation Effect Nuggets.

You’re walking down the street. Consider two realities:

A: You unexpectedly find $10 in your pocket. 

You feel positively-surprised!

Or:

B: You left the house with $10 in your pocket.

But you reach in and it’s gone.

The pain you feel from its loss is greater than the good feeling of finding it.

Prospect Theory explains that our perceptions of value differ based on how something is framed, and losing things feels worse than getting them feels good.

As one of the grand concepts that underpinned a lot of the early ideas within behavioral science, Prospect Theory is a beast with many aspects to it, such as Loss Aversion, Framing, Certainty, and Risk.

But for now, take your practical understanding a step further by reading the Aggregation Effect and Segregation Effect Nuggets.

Prospect theory is explained with a graph. Negative losses and positive gains recorded on the horizontal are set against a vertical intensity of feeling for those losses or gains.

As we gain more, we feel less for each gain. In contrast, even a small pain (shown in red) feels a lot more negative than an equal-sized gain feels good.

Package pain. Consumers will feel less overall pain from any costs incurred when you package and deliver them all together rather than when they're felt as separate, smaller pains.

Spread out rewards.

Instead of offering larger, chunkier benefits to consumers, break these down into smaller pieces, spreading them out across time.

$10 given 4 times feels more valuable overall than $40 given once.

Offer mixed product bundles.

We feel less good with each thing we consume. Therefore, the first can of soda tastes better than the fourth.

This means we'd get more complimentary value from a bag of chips instead.

Look for ways to offer relevant, mixed product bundles to offset diminishing consumer sensitivity.

We call Reciprocity the glue that binds us as a society.

No surprise then that it’s a powerful tool to help people make decisions that are both pro-social and a win-win.

When the Behavioural Insights Team were asked by the UK Government to increase the rates of job-seekers turning up to interviews, they applied the principle of Reciprocity to boost rates.

They changed the text message being sent out from:



“You’ve been booked an interview at Tesco on Friday at 10am”

to:

“Dave,
‍

I’ve booked you an interview at Tesco on Friday at 10am. 


Good luck. 


Roxy”

This shift from a passive tone of voice to an active tone, where Roxy had done something kind for you (and you then wanted to reciprocate by turning up), increased attendance from 10% up to a whopping 27%.

We call Reciprocity the glue that binds us as a society.

No surprise then that it’s a powerful tool to help people make decisions that are both pro-social and a win-win.

When the Behavioural Insights Team were asked by the UK Government to increase the rates of job-seekers turning up to interviews, they applied the principle of Reciprocity to boost rates.

They changed the text message being sent out from:



“You’ve been booked an interview at Tesco on Friday at 10am”

to:

“Dave,
‍

I’ve booked you an interview at Tesco on Friday at 10am. 


Good luck. 


Roxy”

This shift from a passive tone of voice to an active tone, where Roxy had done something kind for you (and you then wanted to reciprocate by turning up), increased attendance from 10% up to a whopping 27%.

407 pedestrians in Brittany, France were approached by a young woman and asked to complete a survey. Before the request, half were offered candy and the other half were not.

The results found that people - especially women - were far more likely to reciprocate and answer the survey after receiving a gift than when not.

Act first.‍

Find ways to initiate reciprocity with consumers.  Merely asking those satisfied to go tell their friends will work (Söderlund et al., 2015).

Make it a ‘common habit’.

When we’re told that a behavior is a social norm shared by others, we’re more likely to reciprocate. Households in USA and India consume significantly less electricity when told that their neighbors are consuming less (Sudarshan, 2014). In the long-term, any consistent, successful behaviors will be adopted as the default for others.

Do it in person.

Reciprocation appears to be more powerful when requests from strangers are made face to face rather than online. This is due to the persuasive impact of immediacy that physicality affords, the higher levels of digital suspicion and the sheer number of emails people receive (Meier, 2016).