Scarcity Illusion

Scarcity is defined as the condition of human wants and needs exceeding production possibilities. Quite simply, the less there is of a good or service, the more people desire that good or service. The scarcity principle serves marketers very well. Probably the most straightforward use of the scarcity principle occurs in the "limited offer/number/time" tactic, when a customer is informed that a product or service is available only for a limited time. The reason why the scarcity principle is so powerful is because the idea of potential loss plays a large role in human decision making. In fact, most people are more motivated about what they can lose rather than what they can gain.

Can this principle backfire on the marketer? The scarcity illusion is a common ploy. Consider this: Every day I drive down a street that has several housing developments being built upon it. Most of these developments are in the early stages, yet there are already signs on the road advertising scarcity. "Act Now only a few homes left" – the sign proclaims. The problem arises when the consumer knows this is a ploy. I called my Realtor friend and asked him to do some research on those developments. Turns out only 10% of the units are under contract.

Knowing this information, the development turns from a scarce resource to a place that seems desperate to attract buyers. The trick for the marketer is to walk that fine line between deception and scarcity.

[tags]scarcity principle, marketing [/tags]

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