In his book ‘Influence: The Psychology of Persuasion’, Robert Cialdini describes 6 principles of persuasion:
These principles can be used to nudge citizens into behaviours that are beneficial to them. This blog post will discuss the Scarcity principle.
An introduction to Scarcity
Why do we rush to get the limited edition trainer? Why is the last biscuit in the barrel more appealing? And why do we pay so much for uniqueness?
This is because of the Scarcity effect. The Scarcity principle is the discovery that humans value something more when it is scarce (Waschenfelder, 2020).
For example, Lee and Seidle ran an experiment using wristwatch advertisements. They showed one set of participants in the experiment an advert that read ‘Exclusive limited edition. Hurry, limited stocks’, and the other participant group an advertisement that read ‘New edition. Many items in stock’. The experiment found that the average consumer was willing to pay an extra 50% for the watch if advertised in short supply (Lee and Seidle, 2012).
The Scarcity effect works because humans are proven to be loss averse. Daniel Kahneman and Amos Tversky illustrated how humans lose more satisfaction if they lose $100 than they gain if they win $100 (Tversky and Kahneman, 1991).
If we don’t purchase the limited edition trainer, our future selves will no longer have the choice to purchase it when it is out of stock. We will rush to buy it because we are naturally averse to losing that choice.
How has it been used?
One of the most successful ways the Scarcity effect has been utilised is by Nintendo when releasing the Wii. Nintendo managed to keep the demand above production levels for nearly three years after the first Wii was released in 2006. Nintendo did this by starting with a low monthly production number to ensure consumers were clamouring for more. Forty-eight million Wii consoles sold later, and their supply finally caught up with demand (Bernazzani, 2021).
Additionally, Starbucks frequently employs the Scarcity effect. Every year the coffeehouse chain changes its cups to be Christmas decorated for December. Even when Starbucks received a lot of criticism for designing the 2015 plain red cup, its net income during that quarter increased by 12% (Yu, 2021). Consumers know that the cup will only be available for a certain period, so they rush out to get their hands on it.
How can it be used digitally?
Many organisations use the Scarcity effect online. For instance, Ikea has a ‘notify me when back in stock’ section on their product web pages (Ikea, 2022). This makes the information scarce, thus giving visitors the desire to be better informed (Cardello, 2014).
Also, organisations highlight limited time or quantity of a product. For example, eBay shows if more or less than ten items are available for every product. They are anchoring* the visitor to the number ten, so they believe that the number of items left is scarce.
*Note: Anchoring is an arbitrary numerical value that a person considers when estimating an unrelated numerical value. Studies have shown that people tend to stay close to these anchors when estimating other values (Jacowitz and Kahneman, 1995). For example, If asked if you think Mahatma Ghandi was older than 50 when he died, your estimates of his age of death would likely be closer to 50 than if the question used 90.
What to be careful of
Highlighting scarcity can lead to chaotic situations getting more out of control. For example, right at the start of the Coronavirus pandemic, many people were panic buying. One particularly difficult item to get hold of was toilet roll. There was a 732% increase in toilet paper purchases in the US on the 10th of March 2020 (Geller and Baertlein, 2020). The earliest articles from CNN about the pandemic in the US are from January 2020 (CNN, 2020), so why wait until March to start panic buying toilet paper?
This could be because the earliest articles on CNN about panic buying toilet paper were on the 6th of March 2020 (Toh, 2020), when the spike in toilet paper sales was 80-90%. Highlighting the toilet paper shortage would have triggered the scarcity effect in the US, making the public averse to not being able to purchase toilet paper in the future, thus increasing sales to 732% in the following days.
When reporting on scarce items, we need to ensure we are not adding to an already significant problem.
How can this help Welsh local authorities?
Local authorities will not want to drive demand for their services. They want citizens to know that they are there when they need them, but local authorities will have no desire to nudge citizens to services if they are not required. So, does this mean that the Scarcity principle is useless to local authorities?
It might not be the handiest nudging technique for local authorities, but it’s certainly worth being aware of. As per the toilet roll example, local authorities need to be wary of promoting the scarcity of services. By highlighting a shortage of spaces at the tip, people will likely rush to book their places rather than wait to see if they can go on a different day.
How do you think Scarcity can help citizens and local authorities? Let us know in the comments.