On a recent Saturday, I tagged along with my husband to Total Wine near our home. While he was looking around, I headed to the white wine section in search of Sauvignon Blanc I could use in sangria. The selection was overwhelming. Bottles lined the shelves from all different regions and in all different price points. My eye was drawn to a handwritten sign that indicated a particular bottle was the best value. I didn’t recognize the brand, so I proceeded to pick up the bottle to see where it was produced.
My concern was that the wine was just short of $6. Now, I don’t have an issue drinking inexpensive wine. Some of my favorites are not even two digits. Yet, I was skeptical. How good could this wine actually be at that price point?
As I stood in the aisle deep in thought with the bottle in my hand, a saleswoman approached me. When she saw what I was holding, she instantly explained how great that wine was and that she was surprised they even had it in stock. She went on to tell me that a woman had called the day before to see if Total Wine still had that particular wine. When the woman showed up, she purchased three cases.
I found that interesting, but still wasn’t 100% convinced this was the wine for me. Then, another salesperson walked by and also expressed his surprise that the wine was in stock. He went on to say that the wine was a great value and he didn’t know how much longer they would have it.
I was now sold.
I found my husband and told him we were going to buy a full case of this Sauvignon Blanc. He didn’t argue and proceeded to help me load up our shopping cart. On the drive home, I expressed my plan to go back to the store the next day to buy more bottles. After all, it keeps selling out and who knows if Total Wine will restock it?
That night, I couldn’t wait to try a glass. After dinner, I poured us each a glass, we did a toast and then took a sip. I paused a moment and then asked my husband what he thought. His response? “Well, it’s okay for white wine. But, outside of Sangria, I don’t really like white wine.” My comment? “Yeah, me neither.”
Here’s the thing, besides white wine in sangria, my husband and I prefer red wine over white.
So, why did we buy not just one bottle, but a case of 12?
The simple answer is our decision was driven by scarcity. There are a few principles at play, which we will cover in depth.
1. When a product is popular, we assume it must be good.
When an item is in high demand, we place a greater value on it. After all, there must be some reason people are buying that product. They wouldn’t buy it if it were bad, right? With this mindset, we begin to value something to the degree that it is unavailable to us. Scarcity actually becomes a market-based indicator of value and increases our desirability for a scarce product.
For me, knowing the wine was popular indicated that the wine must be pretty good.
In 2015, two marketing professors conducted a study that investigated this very thing. This small research team recruited a little over 200 people to participate in their study. Those who participated were told that the study was about people’s gift card choices and that they would be presented with $25 gift cards from five stores, including Amazon, Target, Walgreens, Whole Foods and Home Depot. The researchers told them to pick four gift cards and it was explained that after the research was complete, three lucky participants would be chosen at random to receive the four gift cards they had selected. What the study was really trying to uncover is whether limited availability made a difference in preference. To put it simply, would people prefer one gift card over another if they thought that gift card was in limited supply. The answer is yes.
Participants were divided into groups and told to rank their preferences for the gift cards. It was explained to one group that only a few gift cards were available from each store and to the other group that there were many gift cards available from each store. When the gift cards were perceived as low in supply, participants reacted to the news that the gift cards were scarce. As we have seen in countless examples so far, this reaction was to want the gift cards more.
This leads right into another principle that was at work in my wine example.
2. We have a physiological reaction when something is scarce.
One of the things discovered in the 2015 study was that participants had a higher level of physiological arousal when learning about a gift card with low supply, meaning they had a physical reaction to the news that the gift cards were scarce. While this might sound odd, it is supported by psychological concept known as reactance theory.
This theory, which dates back to 1966, is based on the idea of motivation. According to reactance theory, when we are faced with a perceived threat or loss of a behavioral freedom, we will have a physiological reaction and will be motivated to restore that freedom. This means we might feel our hearts start to beat faster, hands become sweaty and other physical signs of stress. We get into a state of anxiety, resistance and even distress.
it is assumed that we have a set of free behaviors we believe we can enact. These free behaviors are actions we have done before, are currently doing or could do in the future. It is also assumed that when our free behaviors are threatened or taken away, we become motivated to restore our freedom. This reactance happens involuntarily and involves little mental deliberation. It can be so strong that it causes us to make decisions that have negative consequences, such as spending money we shouldn’t or buying something we didn’t need or truly want.
That might seem like an extreme response to a product running low in stock, but think about the last time you were told no or that you couldn’t have something. Most likely, you had some type of reaction, whether that was agitation or a faster heartbeat.
When I was faced with the wine that was running low in stock, I subconsciously felt my freedom to choose that wine was being threatened. My response was to buy it (and in bulk) before anyone else could get the remaining bottles.
I reacted and felt a sense of competition, which is our third and final principle.
3. We will compete for scarce items.
One of the most powerful effects of scarcity is the sense of competition. When there is only so much to go around, we find ourselves in a position where we feel like we must compete with others. Just think about Black Friday. You might have found yourself in the frenzy of holiday shoppers waiting in lines for hours to secure the big deals of the day. The thing about Black Friday is supplies are generally limited and sell out. Even if you haven’t gotten caught up in the frenzy, you have likely seen news reports of fights erupting in stores and terrible violence.
The instinct to compete for scarce items is primal. Our ancestors constantly experienced periods of famine and abundance and had to cope with resource scarcity. Throughout human history, we have competed for survival, meaning we have fought to obtain the resources essential for our continued well-being. Evolutionary biology and economics tells us that this competition for survival revolved around scarce resources. The effect scarcity has now is caused by a combination of deep-rooted instincts and modern challenges.
This competition starts young. A 2018 study involving six-year-olds found that not only did the young participants prefer items they viewed as scarce, but their desire for those items only increased when they thought they were competing with the other children.
The study involved 32 children who were given the option to select from a pile of many items identically wrapped or a separate single item (also wrapped). When offered the choice to select an item between the two piles, the young participants preferred the single (or scarce) items.
This preference went up when they were told they could choose before two “competitors” (i.e. other participants) made their choices. These children made sure they received the single (scarce) item by choosing before their competitors had the opportunity. When the child felt that the scarce item was at high risk of being taken by the other children, there was a greater urgency to select that item.
Going back to the wine example, learning that other customers were calling and buying the wine in large quantities made me want to take action immediately. I wanted to ensure I was able to buy the available bottles before anyone else.
Even if you are not in the business of selling wine, there are many practical ways to implement these concepts. If a service or product you offer is one that is popular among your customers, make that clear. It could be a simple “Most Popular” label on your website or a sign attached to a product shelf. It could even be a proposal that explains the option that most clients choose. The same applies if an item is low in stock. Make that clear to your customers. If you are in a service-based business with limited time available, that is also something to communicate. In each of these scenarios, you are letting your potential customers and clients know about scarcity, which can lead to action.