The study of psychology has told us a lot about business and economics. One thing it’s taught us? Entrepreneurs can apply the illusion of scarcity to appeal to their customers and increase their desire for products and services – to put it briefly, entrepreneurs can use the illusion of scarcity to sell more. There’s a right way and a wrong way to do it, as we’ll outline with examples below.
First, a little background on the research behind the illusion of scarcity and how it works.
The research behind the illusion of scarcity
“When something is rare, it’s alluring – true whether you’re talking about precious gemstones or a pristine edition of the first issue of Action Comics (which introduced Superman). And psychologists have long known that you can make a good more desirable by making it appear rare.”
Researchers and psychologists Worchel, Lee, and Adewole started studying the illusion of scarcity in 1975.
In their first study, the three researchers placed cookies into jars to find out how they could manipulate the participant’s desire for those cookies.
In their second study, the researchers suddenly added or took away cookies from the participants’ jars to see if there was a change in perceived value.
The first experiment
For the first experiment, the researchers placed ten cookies in the first jar and two into the second jar. They wanted to find out which cookies people would place more value on if there was a difference at all.
Even though the jars and cookies were identical, the study participants valued the cookies in the nearly empty jar more. The researchers believe that happened either because:
a) Scarcity signals importance and value – less of a product means others must love it and buy it
b) Scarcity causes us to focus more on the product without being distracted by the abundance of it
c) The more abundant something is, the less we want it
The second experiment
For the second experiment, the three researchers decided to change the abundance or scarcity of the participants’ cookies in the jars. They divided participants into small groups and gave them jars like the ones described above – either a jar with two cookies or ten.
Next, they sent a researcher back into the room to either:
a) Remove 8 cookies (if the participants started with 10)
b) Add 8 cookies (if the participants started with 2)
Just like the researchers hypothesized, the groups that were left with just two cookies after starting with ten rated their cookies as more valuable. The groups that were left with ten cookies after starting with two rated their cookies as less valuable.
In fact, these groups valued their cookies even less than those that started with ten cookies from the beginning.
The second experiment is very important for entrepreneurs to understand because it details a principle that governs what triggers consumers to buy a product. This study showed that a product if perceived as being abundant, can become more valuable to a consumer when it’s perceived to become more scarce (taking away the cookies).
Likewise, it showed that a product that starts off as scarce can become less valuable to a consumer when it’s perceived to be more abundant.
Using the illusion of scarcity to sell more
Think of the world-renowned violinist Joshua Bell, who regularly charges upwards of $150+ for tickets to his concerts. He played a free show in a Washington DC subway and no one showed up. No one in the subway recognized him.
He was a well-known musician that people pay hundreds of dollars to see, but when he played his music for free, no one wanted to hear it.
Use this principle in your work as an entrepreneur. You know that your product or service has value – otherwise, you wouldn’t bother trying to sell it.
Your job is to communicate that value to your customers properly. According to these studies, one way to do that is by making your product or service seem scarce. You can do this in two ways:
- Quantity-related scarcity
- Time-related scarcity
Quantity-related scarcity says there are only so many of something left, so you better act fast!
Check out the example on the right of how Amazon applies the concept of quantity-related scarcity to sell more.
Time-related scarcity says there is only a small window of time for you to make this purchase, so you should do it right now.
In another great example from Amazon (boy, they’re smart), you can see the carefully placed “50% off until 4/30” time-related scarcity principle on the left.
Use the illusion of scarcity in similar ways to help consumers see the value in your product.