In today’s world, what decides if a product or service is successful or not, no longer solely depends on how practical or useful it might be. For a product to truly be attractive to consumers, it doesn’t even have to be unique – it just has to be marketed well. And marketing often relies upon the help of a human science: psychology. Businesses attempt to understand our innate cognitive biases and decision-making processes in an endeavour to take advantage of what drives our purchasing behaviour. One notable marketing tactic used is scarcity.
Austrian neurologist and founding father of psychoanalysis, Sigmund Frued, first proposed the ‘pleasure principle’ in 1895. He suggested human’s innate tendencies were to seek pleasure and avoid pain. Despite this reductionist approach, in many ways, the foundation of scarcity as a tactic perhaps relies on this very theory.
A professor at Cornell, Dr.Michael Lynn, explored “The Psychology of Unavailability: Explaining Scarcity and Cost Effects on Value,” compiling research from economic, psychological and sociological literature. A significant point mentioned addresses “unavailability” as a “heuristic cue that sometimes implies quality and other desirable attributes.” Heuristics are simplified decision strategies often used by humans, which while efficient, are often prone to biases – especially when our assumptions are false. For example, when products are presented as scarce, they often appear as more valuable to us then they are in reality. This entices us to make sometimes uneconomical or exorbitant purchases in the place of more reasonable or cost-efficient options. Furthermore the paper discusses how “the possession and display or unavailable resources,” acts as “a source of status.” The appeal of unavailable commodities can evidently be attributed to our vanity. For instance, the rising streetwear brand ‘Supreme’ used limited-edition, timed “drop” models in order to exploit consumer’s irrational desires. Having access to something that other people want but cannot have tempts us with the illusion of exclusivity and power – something which is hard to resist.
The tactic of scarcity is quite intriguing – especially when one considers that despite being aware of this strategy, consumers cannot help but fall for it anyway. It shows us the amount of power that presentation can have on our perception of value.
Thank you Shruti for this first assignment. And indeed for your engagement in class. I hope term has started well for you.
The scarcity principle is an excellent example of what we might think of as a cognitive bias. One might argue that if we were perfectly rational that would be no such biases; However I wonder if this is actually a rather limited view of rationality. When we are trying to judge the value of something there is this idea that we can judge it objectively. However, given that we have very limited resources (not least information and time to pay attention) and we know we are fallible it could be very rational to judge something’s value by consulting many other people.
Now if something is very scarce that may mean that it is in very high demand. So it may be that scarcity is actually a reliable indicator of something value In many cases. And perhaps it is precisely this that advertisers have understood when they limit the supply of something in order to make it look scarce artificially.
I think there’s quite a lot to say about this and links to reason, bias, evidence and rationality.
So what you have identified here is a great potential real life situation 🙂 However I would also encourage you to think about having a specific concrete example.
Thank you for this very interesting and perceptive first post; this is a great start to year – well done.
Nick