Scarcity = Value
I've never refreshed a website so quickly.
My fingers were flying. I was laying in my bed with devices sprawled out around me. My phone, my ipad, and my laptop all reloading the same website. I was hitting the refresh button constantly. Tap. Tap. Tap.
"Error adding to cart. Please try again." That damn error. I wanted to scream.
I was was waiting 'in line' for Analogue's Super Nt, a faithful recreation of the Super Nintendo from my childhood. A very limited number were made available at 8am. I'd been refreshing for 30 minutes. 8:30am and my cart was still empty. Shit.
I started to panic. What if they were already sold out? What if they stopped making them? What if I missed it?
I turned to Twitter, reddit, and google, all while continuing to juggle refreshing across my devices. Someone said you could pay with Apple Pay and skip the line. No luck. I switched browsers. No go. Someone said they cleared their cookies. Nope.
Surely they were sold out. The thought of never having one was churning my stomach. "It's just a damn console," I told myself. "You don't even play video games any more." But something inside me told me to keep trying. I couldn't miss this. I couldn't handle it.
Eventually, my persistence paid off. I ended up in the queue and purchased the console. A huge sense of relief washed over me.
That moment stuck with me. Why was I so torn up? Why did this stupid sale have such a dramatic affect on me? After some reflection, I realized what was happening:
I was afraid I couldn't share the experience of playing Super Nintendo with my son. Somehow I felt that sharing that formative experience from my childhood would be lost forever if I missed out on this sale.
It wasn't about the console, it was a dream about my future.
My dream was tied to a limited time flash sale on a buggy website. I was afraid of missing out. The console was a scarce resource and I wanted it badly.
I had been aware of scarcity forever, but I never truly internalized the powerful effect it has on us. I started noticing scarcity everywhere. It was like The Matrix and I knew Kung Fu.
Abundance vs. Scarcity
Scarcity is powerful. Scarcity takes something you want and makes you scared you won’t be able to have it. We live in a society of abundance so scarcity feels rare and fleeting. The idea of not being able to have something because there isn’t enough of it is not a concept we grapple with day-to-day life.
Walk into a grocery store, you can find any produce or canned good you want. Amazon can deliver nearly anything to your doorstep in ~2 hours. Spotify has every freakin song on the planet. Youtube has howto videos for any niche you can think of. The list goes on.
In todays world of abundance, we don’t know how to cope with scarcity.
Why is Scarcity Effective?
Scarcity constrains access. Scarcity makes it harder to acquire something you want. As a result, you want it more and are willing to pay more or go to greater lengths to acquire it.
Scarcity increases value.
Today, companies use artificial scarcity to drive up demand:
- Quantity (e.g. There are only so many of these things)
- Time (e.g. Available for a limited time)
- Price (e.g. high price point that few can afford)
Scarcity in physical products
Weller 12 is a $20 bottle of bourbon. As bourbon has grown in popularity over the past few years, manufacturers haven't increased production. Prices have surged to over $200 per bottle in aftermarket sales, with black market buying groups popping up online. The most popular Whiskey, Pappy Van Winkle now sells for over $2000.
Vanity is another powerful motivator for scarcity. People love to show off their hard-to-find items.
Sneaker companies have been capitalizing on limited time and quantity for years. There is a huge market for Air Jordans, Yeezy's, and other shoes that are released in limited quantities with special new colorways. These shoes are often not worn and instead put on display.
NFT's are the latest mix of limited quantity, limited time, and vanity. NFT's are auctioned off over a period of days. You can bid against others for digital assets that otherwise have little to usage. The quantity (typically just one) is what creates scarcity around what would otherwise be an image on the internet:
NFTs, explained. pic.twitter.com/Dcale4cd2L— Jack Butcher (@jackbutcher) March 22, 2021
Scarcity in Apps
Gmail famously used limited invites to throttle membership when it launched in 'beta.' Users would receive two invitations when they joined. Not long after, invites started showing up on eBay, with prices topping out at $150 for an invitation to the free email client.
Clubhouse followed a similar pattern, but added vanity. Not only could you invite a finite set of people, you would show up on their profile as the person who invited them. This created an additional incentive to invite people that you thought highly of. Who wouldn't want to be the person who invited Elon Musk?
Li Jin runs a class that teaches startup founders how to build successful products for creators. She created a lengthy signup form and capped registrations for her cohort-based-course. People were so excited to get accepted for one of the limited slots that they tweeted their acceptance emails, similar to an Ivy League school.
Scarcity can also cause humans to behave irrationally
The dark side of scarcity
On Black Friday, America's most depressing holiday, shoppers rush through doors and get into fist fights over common objects like discounted flat screen TV's. The site Black Friday Death Count catalogues deaths and injuries that take place during Black Friday sales. So far we're at 14 deaths and 117 injuries, which is terrible. All of these casualties were a result of artificial scarcity.
The Toilet paper shortage at the start of the pandemic is a similar dark moment for scarcity. People across the globe were uncertain how long we'd have to stay at home and started hoarding toilet paper, again leading to fights and arguments over a (supposedly) scarce resource. Interestingly, this wasn't the first toilet paper shortage America has faced. There was a similar toilet paper scare back in 1973 triggered by Johnny Carson (a popular talk show host) telling people “there is an acute shortage of toilet paper” on his late night show.
Recently, people have flocked to cryptocurrency in an attempt to get rich quick. Meme coins such as Safemoon were promoted by influencers on social media and quickly spiked, were sold, and then dropped. Normal people were afraid of missing out on another bitcoin goldrush so they rushed to purchase and were left with valueless coins.
Scarcity = Value
Scarcity is incredibly powerful. It can drive desire and demand for your products and cause people to go to great lengths to be included. But it also has its dark side. Be thoughtful and think deeply about the incentives you're creating when using scarcity in your products.
Which products use scarcity well? Let me know: @bdickason
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Post last updated: Apr 23, 2021
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