As marketing people, we are often reminded of the principles of supply and demand. With the advent of digital marketing we’ve become pretty good at applying market timing (right time, place, and offer) to our methodology. Current digital has enabled us to adopt an “everything/anything at our fingertips” mindset. However, it has not escaped my notice, or that of others, that few practice the principle of scarcity as skillfully as they could. That is, when demand can be heightened through the illusion of short supply. Short supply can motivate us to act sooner than we would normally. It causes us to buy for more and maybe even buy more than we want or need. It seems that every year we witness a few skilled practitioners who may be pursuing a new smartphone pre-launch, for example, where hype creates a heightened demand. That demand is because of the notion of limited availability that ultimately spills over to sales of accessory products or other items nearby not even related.
There are risks in the above approach however, potentially resulting in more discerning online customer reviews, or even a negative backlash for unanticipated demands not being met. But the scarcity model is much more than just underestimating demand. Let’s take an example from the most familiar to me; Automotive, when an all new model is first introduced. It plays something like this….
Firstly, the OEM (manufacturer) incentivizes their top volume dealers by offering them enhanced availability of an all new model. Secondly, they ship only highly optioned (and higher margined) versions to all. Lastly, they encourage the dealers to stock up on other models in their product line as payback for getting the new model first. This expanded inventory benefits from a spillover effect with that increased showroom traffic who first come to see that new model, but drive home in something else.
Scarcity can be a benefit or a hindrance depending on how it is supported by messaging. Even in the case of actual or contrived scarcity, planned or inadvertent, you can employ tactics that help you profit from the mistake or omission.
With the exception of ones like my example above, today most internet marketers are not taught the nuances of scarcity because they are not helped to understand marketing concepts before tech and automation concepts. Most marketers today respond to demand by lowering prices to increase online sales volume. The result is often higher costs and lower margins. But if you can differentiate and market a “scarce good or service” that others can’t or don’t know how to, you can win the margin game. Maybe it’s a brand attribute that’s difficult to convey. But if you think about it, ideas, values, and quality are the only things not in ever increasing supply. Since it’s now easy to learn how to analyze, audit, and produce just about anything, those concepts and principles are what determines success or struggle. So what can we do to avoid that race to the bottom when these qualities are not self-evident? We create something scarce, something special, and something people will pay more for in word or deed. The marketing attributes will be created for us along with them. Maybe it’s through design simplicity and elegance, or maybe it’s understanding what people want even before they do.
It’s hard to change the status quo. It’s hard to resist that race to the bottom. It’s not fun, it’s not profitable, and it’s entirely predictable by the consumer. Marketing’s future will go to those who can create the reality, or more importantly the illusion, of scarcity. To create something scarce is indeed harder than to tell someone something is now cheaper. Let’s begin that race back up to the top through knowing more about our customers and doing great work.Digital & Social Articles on Business 2 Community