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Chapter 7 - Westside Toastmasters is located in Los Angeles and Santa Monica, California

The Rule of Scarcity--Get Anyone to Take Immediate Action

Overview

Without a sense of urgency, desire loses its value.

—JIM ROHN

Online auctions drive me nuts. In most auctions, I find an item I like and I put in what I think is a reasonable, winning bid. I promise myself that I won't bid higher. But I always get caught. When I get the outbid notice, I can't believe somebody outbid me. What if I can't find this item again? They obviously think this item is worth more than I do. Then I find myself wanting it even more — whatever it is — and I bid far more than I originally intended. The thrill of winning usually outweighs the pain of the price I paid.

In 1996, Jackie Kennedy's personal belongings were put up for auction. Everyone knew such items would reel in top dollar. More than 100,000 catalogs were sold prior to the auction. Hardcover catalogs sold at ninety dollars a copy, while paperback catalogs cost forty-five dollars a copy. The week the belongings were on public display, more than 40,000 people took part. The hype and anticipation surrounding the event catapulted prices far beyond the originally anticipated prices. For example, a brooch estimated at $6,000 to $8,000 sold for $415,000; John F. Kennedy's golf clubs were estimated at $700 to $900 but sold for $772,500; a wooden cigar box estimated at $2,000 sold for $547,500; even a cigarette lighter inscribed with the letter "J" — estimated at $300 — sold for $85,000.[1]

Think about potatoes. Nothing special, right? There was a time in history (late 1700s) when potatoes were not a popular food. The French thought potatoes were connected with leprosy, the Germans thought they were nothing better than feed for livestock, and Russian peasants actually thought they were poisonous! Then Catherine the Great came along and turned potatoes into gold. She had high fences installed to enclose her potato fields. Signs dotted the land warning the Russian citizens not to steal her potatoes. With the potatoes suddenly off limits, they became the talk of the town! Imagine what those peasants were thinking as they watched those big, tall fences go up: "Why are they fencing in the potato fields? Why are the rich keeping the potatoes all to themselves? Why are we restricted to the same old beef stew every single day? We deserve potatoes, too! We need potatoes! Give us potatoes!"[2]

[1]See http://www.usatoday.com/life/special/jackie/ljack000.htm

[2]A. Pratkanis and E. Aronson, Age of Propaganda (New York: W. H. Freeman, 1991), p. 188.

Why Scarcity Drives Us Wild

The Rule of Scarcity plays a large role in the persuasion process. Opportunities are always more valuable and exciting when they are scarce and less available. We want to be the ones to own the rare items or to get the last widget on the shelf. The more the scarcity of an item increases, the more the item increases in value, and the greater the urge to own it.

Whenever choice is limited or threatened, the human need to maintain a share of the limited commodity makes us crave it even more. Scarcity increases the value of any product or service. Scarcity drives people to action, making us act quickly for fear of missing out on an opportunity. Potentially losing something before we've even had an opportunity to possess it drives people to action. We don't want to miss out on anything we could have had. We want to get around any restriction placed upon us. We feel uptight and want back our freedom. This causes tension and unrest. The Rule of Scarcity not only pertains to physical products, but also to time, information, price, and knowledge.

The Threat of Potential Loss

Anytime someone feels their freedom — to choose, think, or act — is being restricted, they "experience psychological reactance and attempt to restore their freedom."[3] With this restriction on freedom we are driven to latch on to that thing which we fear will be restricted even more. Instead of standing by and saying, "Okay, I'll give that up," we take the opposite approach. Suddenly, that restricted item is even more important to us. Researchers call this tendency "reactance."[4] An intensely motivational state, reactance causes us to be emotional, single-minded, or even irrational. We hate feeling restricted, so we are highly motivated to resolve anything that creates that feeling. It is due to reactance that we act, and that we want it now.

A study involving a group of male toddlers illustrates just how powerful the Rule of Scarcity is, even in very small children. In the study, the toddlers were brought into a room that held two equally exciting and appealing toys. A Plexiglas barrier was set up so that one of the toys sat next to it, while the other sat behind. The barrier wasn't very tall, so some of the toddlers could simply reach over the top and grab for the toy. For others, though, the barrier was still too high to reach over, so they could only reach that particular toy if they went around and behind the Plexiglas. The researchers wanted to see if the obstructed toy, being more "scarce," would draw more attention and be more desirable. The boys who could easily reach over the top showed no preference toward the obstructed or the unobstructed toy; the unobstructed toy was approached just as frequently and just as quickly. For the boys who could not reach over the top, however, the obstructed toy was clearly the more desirable of the two — in fact, the boys made contact with it three times faster than with the unobstructed toy![5] Even in toddlers, there was an urge to defy restriction of choice!

You Can't Have It

In another study involving children, researchers told the children they could select from a wide array of candy bars. They then pointed out a particular candy bar and told them they should not choose that one, but any of the others would be fine. The children reacted to the threat to their freedom of choice by choosing the bar they'd been told not to select. In doing so, they felt they had preserved their freedom to select whatever bar they wanted.[6] It makes you wonder if that is also why Adam and Eve, who had the entire Garden of Eden to play in, couldn't stay away from the forbidden fruit.

The Rule of Scarcity works because it makes people feel like they will lose their opportunity to act and choose if they don't do so immediately. The threat of such loss creates urgency in our decision making. Have you ever noticed how people tend to be more motivated when faced with potentially losing something than when they might take steps of their own accord and gain something of equal value? Studies have verified that this is a common and consistent phenomenon.[7] For example, do you think homeowners would feel more urgency to act if they were told how much money they were going to lose if they didn't improve their insulation, or if they were told how much money they would save? They are more likely to act if they are told about their potential loss.[8]

The mental trigger of potential loss causes such great anxiety in people that they act to prevent the loss — even though they likely are not really interested in the product itself. Imagine making a decision where you have all day to make up your mind and you have the reassurance that when you return tomorrow, the item will still be available at the same good price. You could take days to make that decision.

However, when scarcity enters the picture and you feel that the availability of the product, the timing, or even the price is bound to change without notice, the mental trigger of scarcity begins to operate. You are driven to acquire something to alleviate the threat of potential loss. That's why shoe salespeople always bring you back the last pair of shoes available in your size at the sale price — which ends today. What we can't have is always more desirable and exciting than what we already possess. As the adage says, "The grass is always greener on the other side of the fence." Any parent knows the result of telling a child she can't have or do something. The child will immediately drop everything and want the one thing she can't have. Look at Romeo and Juliet. The forbidden nature of their relationship made it even stronger and more appealing to them. Parents need to be cautioned about forbidding their child's friends and lovers because the Rule of Scarcity will come back to haunt them.

The manner in which an object becomes scarce also contributes to making it more desirable. In a particular study, researchers gave subjects a cookie jar containing ten cookies. Then, taking the jar back, the subjects were given a new jar containing only two cookies. One group of subjects was told their cookies had been given away to other participants because of the demand for their study. Another group was told their cookies were taken away because the proctor had made a mistake and had given them the wrong cookie jar. The results indicated that the cookies that had become scarce through social demand were rated considerably higher than the cookies that had become scarce through the proctor's oversight. Not only this, but they were also the most highly rated of all the cookies used in the study![9]

The Rule of Scarcity works even when the desired object or thing isn't going to really benefit the recipient. A county in Florida enacted legislation forbidding the sale and use of laundry detergents containing phosphates, as phosphates negatively impact the environment and don't help clean the clothes. Before the ban went into effect, stores experienced an increase in sales of the phosphate-containing detergents. After the ban was underway, stores within the city saw a drop in laundry detergent sales overall, while stores in surrounding counties not affected by the ban saw an increase in sales of the phosphate-containing detergents.

Later, when consumers were polled as to which detergents were better, the residents where the ban had taken place rated the restricted detergents higher than any others in all categories. The Rule of Scarcity had made the limited product dramatically more appealing.[10]

[3]S. Brehm and J. Brehm, Psychological Reactance: A Theory of Freedom and Control (New York: Academic Press, 1981).

[4]F. Rhodewalt and J. Davison, "Reactance and the Coronary-Prone Behavior Pattern: The Role of Self-Attribution in Response to Reduced Behavioral Freedom," Journal of Personality and Social Psychology (1983): 44.

[5]J. Brehm and M. Weintraub, "Physical Barriers and Psychological Reactance: Two-Year-Olds Response to Threats to Freedom," Journal of Personality and Social Psychology 35 (1977): 830–836.

[6]Thomas Hammock and Jack W. Brehm, "The Attractiveness of Choice Alternatives When Freedom to Choose Is Eliminated by a Social Agent," Journal of Personality 34 (1966): 546–554.

[7]A. Tversky and D. Kahneman, "The Framing of Decisions and the Psychology of Choice," Science (1981): 453–-458.

[8]M. Gonzales, E. Aronson, and M. Costanzo, "Increasing the Effectiveness of Energy Auditors: A Field Experiment," Journal of Applied Social Psychology (1988): 1046–1066.

[9]S. Worchel, J. Lee, and A. Adewole, "Effects of Supply and Demand on Ratings of Object Value," Journal of Personality and Social Psychology (1975): 906– 914.

[10]M. Mazis, "Antipollution Measures and Psychological Reactance Theory: A Field Experiment," Journal of Personality and Social Psychology (1975): 654-666.

The Rule of Scarcity in Marketing

Psychologist Anthony Pratkanis of the University of California, Santa Cruz, is recorded as saying, "As consumers we have a rule of thumb: If it is rare or scarce, it must be valuable and good."

Department stores use the Rule of Scarcity to bait consumers into an uncontrollable shopping frenzy. Fights break out at department stores when people are going after those scarce items, which are being offered at bargain prices for a limited time only. The lower prices are bait — a loss leader for the store, but certain to generate a buying frenzy that is contagious. Blinded by scarcity, consumers will buy anything and everything even if they don't need it. For example, you see patrons buying three DVD players. You ask them why "three," and they don't know. All they know is that the store said supplies were limited, the sale was only for today, and each shopper was limited to three. So they bought three DVD players.

Some stores have this "limited number" thing down to perfection. Often when we go shopping, we are only casually interested, telling the salesperson, "Just looking, thanks." We glance over the packaging, examine the sale sign, etc. Then the salesperson plays the number's game. Approaching us, she says, "It's a great model, isn't it? Especially at this price! Unfortunately, I just sold our last model." We suddenly feel disappointed. Now that it's no longer available, we feel that we really want it, even though we were only mildly interested before. We ask whether there might be another one in the back or at another location. "Well, let me see what I can do. If I can get another one for you at this price, will you take it?" she baits. Trapped!

Funny thing is, we don't even realize the trap is being set, so the technique works like a charm. We are asked to commit to a product when it seems like it will soon be totally unavailable, and therefore seems incredibly desirable. Threatened with potentially losing a great deal, we agree. Then, of course, the salesperson comes back with the great news. The product will be shipped to the store in three days. In the meantime, all you have to do is sign the sales contract.

We also see the Rule of Scarcity being frequently employed by home-shopping television networks. They know that rare things are highly valued in our society, so they always have a little clock running in the upper corner of the screen. You only have ten minutes to purchase this precious item, and the clock lets you know how little time you have left to make this buy of a lifetime. Home-shopping channels make time the scarce resource.

They often have a counter on the screen too. Sometimes the counter runs down with every sale. So the host says, "We only have a limited number of these imported widgets, and when they're all gone, we will never sell them again." And the counter showing the number of items remaining continues to tick down. The counter creates the impression of scarcity.

Creating a Demand: Can You Say "Limited Supply"?

Have you ever wondered why some "in" restaurants continue to have waiting lines outside? Long lines seem to make the restaurants even more fashionable, increasing the length of the line by an even greater degree. Why don't restaurants eliminate the waiting line by increasing their prices? They don't because removing the lines would eliminate the scarcity factor, and demand would collapse.

Consider how the Rule of Scarcity created the Beanie Baby phenomenon. When Ty Warner, the creator/mastermind behind Beanie Babies, took certain Beanie Babies off the shelf and limited their availability, prices skyrocketed for the discontinued and suddenly rare and valuable Beanies. Spurred on by the threat of losing out, collectors began hoarding the stuffed animals and speculating as to which ones would be retired next.[11]

The Rule of Scarcity was also used to create demand for diamonds. In spite of a dramatic leap in production from 15 million carats to a whopping 100 million carats, DeBeers, the company maintaining a monopoly over diamond supply, still managed to render the diamonds scarce. Running only ten diamond sales per year and inviting only a select number of dealers, DeBeers easily controlled the supply and pricing. Not only this, but each invited dealer got only a limited amount of diamonds. DeBeers selected for them, and if they complained, they were not invited back![12]

An owner of a successful beef-importing company decided to conduct a study among his staff. The staff members were assigned to call the company's customers and ask them to purchase beef in one of three ways. One group of customers just heard the usual presentation before giving their orders. Another group was given the usual presentation, but they were also presented with evidence that imported beef was expected to be in short supply in the coming months. A third group was given the usual presentation as well as the information about the beef's upcoming scarcity, but they were also told that this news was not available to the general public, and that the information provided was exclusive to the company. Not surprisingly, the sudden demand for beef created by these phone calls exceeded the supply on hand, and the company had to scramble to fill the orders. Customers alerted to the coming scarcity of the beef bought double the amount of those receiving only the standard sales pitch, and those learning both of the coming scarcity and that this was "secret information" bought six times the amount as those hearing only the standard sales pitch![13]

How about when you take your child to be photographed? They take ten different shots and then send you a proof for each. You're told to select the shots you like best and how many copies of each you'd like. Then, you're told the negatives will be destroyed within a certain number of months. Of course, you feel like you'd better get all the copies of all the shots you want now, or you won't be able to later!

Creating Allure

Think about when a woman wants to come across as more attractive to a certain man. If she can set things up so she will just happen to meet him while on a date with some other successful, attractive man, then she will appear to be more desirable than if she were merely to meet him alone at some club or bar. Or what if you were selling real estate? You'd be smart to have several interested people along for the tour of the property, since the interest of one client will heighten the interest of another. Instead of your potential buyer thinking, "Okay, I'm going to try to wheel-and-deal here," he will think, "I'd better jump or this other guy's going to get it before I do!"

In one experiment, students were given a written description of a particular novel. Half of the students' copies included the description, "a book for adults only, restricted to those twenty-one years and over," while the other half contained no such restriction. When polled about their feelings about the novel, students reading about the restriction indicated that they thought they would like to read the book, while students who had not read the restriction expressed significantly less interest.[14]

Restricting access to information or material often makes it that much more appealing. Although this topic typically brings to mind material of a sexually explicit nature, scarcity can apply to anything. Consider a form of censorship at the University of North Carolina. When students learned that a speech in favor of coed dorms was banned, they became more smitten with the idea of coed dorms. It is of great significance to realize that, without ever having heard the actual speech, the censorship alone heightened the students' interest. The students didn't even need to hear the speech to be persuaded to support or become more committed to the notion of coed dorms.[15]

Think again about the study conducted by the University of Chicago Law School that was discussed in Chapter 4, The Rule of Obligation. The Rule of Scarcity was also at work in this scenario. When the judge ruled that evidence on the defendant's insurance was inadmissible, and therefore had to be disregarded, the jurors actually increased the award amount. The censored information was actually embraced even more, jumping the damage payment by $13,000![16]

Additional Forms of Scarcity in Marketing

Consider the following "scarcity" tactics we see day-to-day:

[11] "The Beanie Baby Prices Are Insane," U.S. News & World Report, July 28, 1998.

[12]B. Nalebuff and A. Brandenburger, Competition (New York: HarperCollins, 1996), p. 114.

[13]A. Knishinsky, "The Effects of Scarcity of Material and Exclusivity of Information on Industrial Buyer Perceiver Risk in Provoking a Purchase Decision," unpublished doctoral dissertation, Arizona State University, 1982.

[14]D. Zellinger, H. Fromkin, D. Speller, and C. A. Kohn, "A Commodity Theory Analysis of the Effects of Age Restrictions on Pornographic Materials," Paper No. 440 (Lafayette, Ind.: Institute for Research in the Behavioral, Economic and Management Sciences, Purdue University, 1974).

[15]S. Worchel, S. Arnold, and M. Baker, "The Effect of Censorship on Attitude Change: The Influence of Censor and Communicator Characteristics," Journal of Applied Social Psychology (1975): 222–239.

[16]D. Broeder, "The University of Chicago Jury Project," Nebraska Law Review (1959): 744–760.

How to Use the Rule of Scarcity

Sometimes scarcity is necessary to help us make a decision. Most of us fear the point of making a decision, so we naturally want to put it off and allow ourselves time to think about it. As a persuader, however, be aware that when your prospects put off the decision, chances are they won't make one.

You could have the perfect product for them — something they really need right now — but if you let them go, they will probably not come back later and tell you, "Okay, I finally decided. Let's do it." Creating scarcity helps your prospects make their decision. It also eliminates the amount of time you waste tracking down prospects who are still undecided about your product or service. You can create legitimate scarcity with your product or service without violating your morals.

To create scarcity, be sure you have the following elements firmly in place:

  1. Deadlines. Give your prospects a deadline or a point of no return. We all operate on deadlines at home and in our businesses. They are what cause us to take action. If there is no immediate reason to take action now, we won't. Many people don't pay their bills until they have to. Judging by the lines outside the post office at midnight on April 15th, most of us don't pay our taxes until the last possible second. No deadline means no action.

  2. Limited Space, Numbers, or Access. If your prospect feels like they are competing for a limited resource, they will be much more motivated to take action. When people fear they're going to miss out on a great deal, they feel an urgency to act. Think of shoppers at closeout sales. They've got to speed over there and check things out before all the stuff is "picked over." Otherwise, with the store's limited supplies, they'll miss the deal forever! This limit can also include access to information. Our response to banned information is a greater desire to receive that information and a more favorable outlook toward it than we had before the ban was set in place.[17]

  3. Potential Loss. Prospects must recognize that they might be limited in their actions if they don't take advantage of your offer. People will always overvalue the thing you are restricting. Create a state of emotion in which your prospect fears the loss. This is an overwhelming feeling they won't be able to ignore. Motivated by restriction, this prospect becomes an emotionally motivated buyer. They will not be denied. The more you deny them, the more energy you give to your cause. You have denied their right to something, so they'll do anything to have it. I can recall occasions when I tried to talk people out of purchasing a certain product because I honestly felt it was not appropriate. The more I took the product away, the more they wanted it. Think about all those sweepstakes messages that say, "You may already be a winner!" They used to say, "You can be a winner!" but the notion that you may already be a winner spoke even more loudly! Do you think people can throw away such an envelope without even opening it just to check and make sure? With the change in slogan, the sweepstakes company experienced a marked increase in their response rates. Suddenly, people were afraid they might lose something they potentially already had!

  4. Restrict Freedom. We want what we can't have. If we are told a productisor will soon be unavailable, we want it even more. Our desire goes up and so does the urgency to act. Create a scenario where you tell your prospect that the offer is only good for so long. Tell them they have to act now to take advantage of the opportunity or they will lose out. This technique works so well because we have all walked away from offers like this before, and they really haven't been there when we returned. Walk through clearance stores and you will see "Sold" signs on the furniture. These signs create urgency because somebody else has found a deal, and so should we.

In sales, this urgency is called the "take away" close. If you take away your prospects' opportunity to get involved with your product or service, they naturally want it more. This strategy also works well when you want to see if your prospect really is interested in what you are providing. If you are stuck and not sure how much time you want to spend with a prospect, or if they are just looking and not willing to make a decision, do a take away. If they are truly interested in your product, they will perk up and become more interested. If not, they will walk away. Either way, you have saved yourself time and energy.

[17]Worchel, Arnold, and Baker, "The Effect of Censorship on Attitude Change."

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