Scarcity as a Marketing Tool Part 1: Leveraging Limited Supply

Scarcity is a powerful force in commerce. Most of us have experienced firsthand the way that scarcity can make products more desirable. But as marketers, understanding how scarcity affects consumer behavior helps us to use it more effectively, whether for product drops, ongoing sales, or special promotions.

This post is the first in a series exploring scarcity in marketing, drawing insights from research, especially Barton, Zlatevska, and Oppenwal (2022). Scarcity tactics in marketing: A meta-analysis of product scarcity effects on consumer purchase intentions. https://doi.org/10.1016/j.jretai.2022.06.003. (PDF link).

What is Scarcity?

In marketing, scarcity refers to the inability to satisfy demand for a product. This can happen for three main reasons, which are not mutually exclusive:

1. Limited supply quantity
2. Excess demand
3. Limited availability time

This post focuses on the first of these conditions, limited supply, its impact on consumer behavior, and usefulness as a marketing strategy.

Examples of Supply Limits

Any cap on the quantity of a product available to customers creates a supply limit. This can occur naturally, as when an artisan is limited to very small production batches, or artificially for marketing purposes.

There are many examples of limited supply in action:

• Concert tickets: Limited seating and venue capacity create a form of supply scarcity.
• Luxury goods: Limiting production and cultivating long waiting lists is a longstanding strategy used by brands such as Hermès for its Birkin bag.
• Limited editions: Special editions of books with distinctive covers, author signatures, or other features are prized in part for their scarcity.

The Impact of Limited Supply

Limited supply scarcity tends to create feelings of exclusivity in consumers. This makes it particularly effective for:

• Products that convey status
• Items that differentiate owners, especially those with visible consumption
• Collectibles, which derive much of their value from their rarity

Practical Tips for Using Limited Supply in Marketing

1. Clearly communicate limited supply: Consumers react to their perceptions, so marketers need to highlight the fact that supply is limited to get the most impact.
2. Balance scarcity with accessibility: Creating a special edition of a commonly available product can spur demand for the entire product line.
3. Be authentic: Stay aligned with your brand values and product positioning, especially when artificially limiting supply.

Conclusion

Limited supply strategies have broad applicability, but they are a central characteristic of product drops. Limiting supply creates excitement and enhances the value of products launched through drops. By understanding this effect and implementing campaigns thoughtfully, you can make your marketing efforts more successful and turn your customers into dedicated fans.

Stay tuned for our next post, which will cover the impact of scarcity due to excess demand.