The Scarcity Effect: Read now before it’s gone!

It’s about a 4 min. read.

Julia Walker
Account Director

The super busy Q4 at CMB is fueled by adrenaline, sweets from clients and vendors, and of course, caffeinated beverages served up in Starbuck’s famous (or infamous) red holiday cups. But this year, one red cup isn’t enough as the Seattle-based coffee giant introduced a second limited time only red cup on November 28. The cup features a simple red background with two hands holding a white heart—according to Starbuck’s the design symbolizes warmth, love, and goodness this holiday season. Customers are encouraged to write the name of a loved one in the center of the heart and share on social media using the hashtag #GiveGood.

So, what is it about these holiday cups that people go crazy for? It’s not just the aesthetics—though, the 20-year evolution of Starbucks’ red cup is pretty cool.

It’s the scarcity factor.

Scarcity is a tactic employed by brands in nearly every industry to boost the implied value of the product. From Book now!” banners on travel sites to retail flash sales, brands use scarcity marketing to motivate consumers to make purchases. The effect can be immensely powerful—witness the rise of a black market for rare craft beers that aren’t demonstrably better than what’s available at your local beer distributor. The “limited time” or “limited product” feeling creates a sense of urgency to act before it’s too late.

Scarcity factor: We want what we can’t have

Scarcity is an economic principle that posits when a good or service is limited in availability (or perceived as being limited), it becomes more attractive to consumers. This results in a mismatched supply/demand scenario—incredibly high demand for a low supply.

Psychologically, scarcity is an intuitive concept—remember as a child you wanted something more after your parents told you, “No”?

One of most well-known scarcity studies was conducted by Stephen Worchel in 1975. Participants were offered cookies from two identical jars—one had ten cookies while the other had only two. Worchel and his colleagues observed that despite the jars and cookies being identical, participants preferred the cookies from the jar that had two. The jar with two cookies (compared to ten) evoked a sense of scarcity from participants, which propelled them to choose that one.

FOMO: The fear of missing out is real

“FOMO” is more than a contemporary acronym coined for the “fear of missing out”. FOMO is a “pervasive apprehension that others might be having rewarding experiences from which one is absent” fueled by the “desire to stay continually connected with what others are doing.”

And in today’s connected world, social media only exacerbates FOMO—it’s easy for people to feel like they’re missing out when they’re Instagram-stalking friends out doing (or having) fun things.

Scarcity marketing: Playing on FOMO

Like I said, brands from nearly all industries will use scarcity to promote their products or services at some point. But to keep with the red cup theme, I’ll draw on two more Starbucks examples:

  • PSL Season: At the beginning of each September, Starbucks releases its perennial fall drink: the pumpkin spiced latte (PSL). PSL is only available for a limited time as people wait all year for this pumpkin-y treat. It’s grown to symbolize the fall season as much as back to school, sweaters, and football while helping bolster Starbucks’ fourth quarter sales.
  • Unicorn Frappuccino: Earlier this year, Starbucks added the “Unicorn Frappuccino” to its menu. Once customers learned this specialty drink would only be available for a few days, they flocked to their nearest store—resulting in the fruit and sour candy-flavored drink selling out in one day. This highly Instagrammable beverage garnered nearly 155,000 #unicornfrappuccino posts on Instagram.
Scarcity is not a silver bullet

In some cases, scarcity can have an adverse effect on consumers. A series of studies by researchers at McGill University in 2011 highlights instances where scarcity actually decreased the perceived value in a product or service. In short, if people are more aware of scarcity as a sales/persuasion tactic or are more exposed to scarcity claims (think repeated flash sales by the same store), they’re less likely to value a scarce product. Basically, if your scarcity claim isn’t true and your customers are smart (and they are!), this strategy won’t help your cause.

Conclusion—read now before it’s gone!

Scarcity can be an effective strategy for brands, but like most tactics, is dependent on the execution. Be authentic in your messaging and don’t manufacture the concept of scarcity. Even though we are prone to FOMO, consumers are smart and will see through your claims.

Scarcity isn’t the only effective marketing tactic. Don’t miss our latest 20-minute webinar on how brands can leverage social identity to create marketing strategies that drive customer purchase, loyalty, and advocacy. 

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