At last spring's Yale Conference, Kevin Ryan, CEO of Gilt Groupe, spoke on using scarcity as a tactic to induce purchase. I was particularly struck when he described the technique like musical chairs: “If there are enough chairs, it’s boring. Remove a chair, and it’s fun.” In my own experience, this sense of scarcity really seems to hit a chord with consumers. And, with the new pervasiveness of mobile, consumers can quickly act on marketers’ prompts to ensure they don’t miss out on a deal.
That leads me to think about companies with limited-edition strategies. In my former life in brand management, I learned first-hand the difficulties in planning strategies like this correctly—you could probably get the overall forecast right, but sometimes not the store-by-store forecast. So in the end, you would wind up over producing—to ensure no one ran out—but would end up with returns, overall.
It makes me wonder if a better strategy is to actually under-produce (at the risk of irritating the sales force) and leave consumers wanting more. I haven’t looked at the data in a long, long time, but I suspect that the majority of those who come for the limited edition, and miss it, leave with the regular-edition as a substitute. Likewise, I would surmise that shoppers on gilt.com, who come for limited-quantity items but end up missing the deal, still probably surf around and find something else.
So while we see that scarcity does indeed work in the market place, there’s one place I’ve become aware of (in my current career) where it doesn’t work: ideation. Imagine what kinds of ideas you’d wind up with if people said, “I’ve only got three ideas—but if you act quickly you can have one of them.” That person may appear to have valuable ideas by how they’re positioned, but in reality you need lots of ideas to find the one really good one. Or what if, in the midst of concept development, you decided to create just one concept? Talk about putting all your eggs in one basket.
All things considered, scarcity in business is both a friend and an enemy. When it comes to tempting consumers with a final product, it can yield great success. But when it comes to tempting consumers with a great idea—the more, the merrier.
Beth Storz is President and Innovation Process Facilitator at Ideas To Go. She co-authored the book, "Outsmart Your Instincts: How the Behavioral Innovation™ Approach Drives Your Company Forward." Beth has been a guest on many innovation podcasts and her work has been featured in media outlets such as HuffPost and Fortune. Beth holds a BS in Business Management from Cornell University and a MBA from New York University’s Stern School of Business, and has worked in brand management at some of the premier consumer packaged goods companies—including Unilever, Kraft and Nabisco. Since joining Ideas To Go, Beth has established herself as a leader in the Innovation landscape and designed and facilitated projects for hundreds of companies—from CPG to financial services to pharmaceuticals.