CHAPTER 14

The Law of Scarcity

Get Anyone to Take Immediate Action

Without a sense of urgency, desire loses its value.

—JIM ROHN

You have seen the stories. You probably have experienced the tension. That Friday after Thanksgiving—Black Friday! People are not going to sleep because there is a limited supply and they need to make sure they are at the store in time to get the deal of a lifetime. We hear countless stories of fights, arguments, and people becoming hysterical in the lines waiting for the deals. Are these human beings? Do these people live with us in our communities? Sometimes I’m not so sure. When people feel that there is a limited number and there is only so much to go around, you see a different side of humanity. If they sense for one second that you will take away what they deserve or want, look out. This is scarcity in action. When items are limited, when items are scarce, when you cut in line—unimaginable things will happen.

eBay also drives us makes crazy with scarcity. I find an item I like and put in a reasonable offer. I promise myself that I won’t bid any higher, but I always get caught. The outbid notice arrives, and I can’t believe somebody outbid me. The scarcity starts having its effect. What if I can’t find this item again? What if it is more expensive in the future? The other bidders 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 increased price.

WHY SCARCITY DRIVES US WILD

The Law of Scarcity states that the more scarce an item becomes, the more the item increases in value, and the greater the urge is to own it. Scarcity drives people to action, making us act quickly for fear of missing out on an opportunity. The law 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 one on the shelf.

Whenever choice is limited or threatened, we humans need to get a piece of the limited commodity, making us want it and crave it all the more. Scarcity increases the value of any product or service. 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 own. We want to get around any restriction. We feel uptight and want back our freedom, leading to tension and unrest. The Law of Scarcity pertains not only to physical products, but also to time, information, price, and knowledge.

This law is the most abused and overused of all the Laws of Persuasion. It is always being misused. How often can a furniture store go out of business? Do you really believe the salesperson when you hear it is the last one in your size? Or how many times have you been told to act now because the sale ends today? The law works, but only when used correctly.

The Threat of Potential Loss

Anytime people feel their freedom—to choose, think, or act—is being restricted, they will attempt to restore that freedom.¹ Facing this restriction, we ironically are psychologically driven to latch onto the very thing that we fear will be restricted. Suddenly, that restricted item is even more important to us. Researchers call this tendency psychological reactance.² This is an intense motivational state. Reactance causes us to be emotional, single-minded, and even irrational when we feel a threat to our ability to make a choice or to our personal freedom. We react by attempting to restore our freedom. 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.

Psychological reactance develops during our childhood. A study involving a group of male toddlers illustrates the power of the Law of Scarcity, even in very small children. In the study, the toddlers were brought into a room that held two equally exciting and appealing toys. A clear barrier was set up so that one of the toys sat next to it, whereas the other sat behind it. 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 too high to reach over, so they could reach the toy only if they went around and behind the barrier. The researchers wanted to see whether the obstructed toy, being scarcer, 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!³ Even toddlers felt an urge to defy restriction of choice!

The Law of Scarcity works because it makes people feel as though they will lose their opportunity to act and choose if they don’t do so immediately. The threat of such a 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.⁴ For example, if homeowners were told either how much money they would lose if they didn’t improve their insulation or how much money they would save, which message would create a greater feeling of urgency to act? They are more likely to act if they are told about their potential loss.⁵

YOU CAN’T HAVE IT

The mental trigger of potential loss causes such great anxiety in people that they act to prevent the loss, even though they might not be completely interested in the product itself. Imagine making a decision where you have all week 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, weeks, or months 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 is pulled. You are driven to acquire something to alleviate the threat of potential loss. What we can’t have is always more desirable and exciting than what we already possess. As the adage goes, “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. The forbidden nature of the relationship between Romeo and Juliet, for example, made it even stronger and more appealing to them. Parents need to be cautioned about forbidding their child’s friends and lovers because the Law 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 interesting study, researchers gave subjects a cookie jar containing 10 cookies. Then, taking the jar back, the subjects were given a new jar containing only two cookies. One group of subjects was told that their cookies had been given away to other participants because of the demand for their study. Another group was told that their cookies were taken away because the experimenter had made a mistake and had given them the wrong cookie jar. The cookies that had become scarce through social demand were rated considerably higher than the cookies that had become scarce through the experimenter’s oversight. In addition, they were the most highly rated of all the cookies used in the study!⁶

There was an extreme water crisis in Orange County, California (where I was born and grew up). The drought was announced as dire because of the lack of rainfall and a reconstruction of a major water main. The authorities told everyone to please conserve water and prepare for the worst. They said it could come down to water rationing in the future or not being able to water their lawns. What do you think happened? Water consumption dramatically increased! Water was now perceived as scarce. With potential water rationing in the future, everyone was watering their lawns, filling their pools, and using it before it could be taken away.⁷

THE LAW OF SCARCITY IN MARKETING

Psychologist Anthony Pratkanis is recorded as saying, “As consumers we have a rule of thumb: If it is rare or scarce, it must be valuable and good.”

Even if it is not the day after Thanksgiving, department stores understand the Law of Scarcity. Fights break out at department stores when people go after those scarce items, which are 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, whether they need it or not. For example, you see patrons buying three DVD players. You ask them, “Why three?” 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 the 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 and examine the sale sign. Then the salesperson plays the numbers 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 had been only mildly interested. 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?”

Odd, we don’t even realize this is happening. The technique works like a charm. We are asked to commit to a product when it seems as though 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 Law of Scarcity frequently employed by cable shopping networks. They make both time and quantity scarce resources. A little clock is always running in the corner of the screen, along with a sales counter. Sometimes the counter runs down with every sale. So the host says, “We have only a limited number of these imported widgets, and when they’re all gone, we will never sell them again.” This will be the last time they will be available. You only have a few 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. You will also hear, “Not available in stores.”

Creating a Demand: Can You Say, “Limited Supply”?

An owner of a successful beef-importing company decided to conduct a study among his people. 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 told 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!⁸

As mentioned, some popular night clubs continue to have waiting lines outside because long lines seem to make the clubs more desirable and fashionable. These night clubs do not eliminate the waiting line by increasing their prices because removing the lines would eliminate the scarcity factor, and demand would collapse. This also happens when you are buying airline travel online. Next to the special price is the notice that only four seats are left at that special price.

How about when you take your child to be photographed? The photographer takes 10 shots and then sends you proofs for all of them. You’re told to select the shots you like best and how many copies of each you’d like. Then you’re told the files will be deleted if you don’t purchase. Of course, you feel like you’d better get all the prints you want now, or you won’t be able to later!

Creating Allure

When a woman wants to come across as more attractive to the man of her choice, she can set things up so that she will just happen to meet him while on a date with another successful, handsome man. She then will appear to be more desirable than if she were merely to meet him alone at a club or bar. She creates allure.

Or if you were selling real estate, you would be smart to have several interested people along for the tour of the property because 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 on this, or the other guy’s going to get it before I do!”

Court judges have to deal with their jurors being influenced by scarce or secret information. Attorneys often strategically introduce information that the jury really isn’t supposed to evaluate. When this happens, the judge can either declare a mistrial (rare) or tell the jury to ignore the information. In most cases, when the jury is told to ignore the information, doing so heightens its validity in the minds of the jury members. In a study on this issue done by the University of Chicago Law School, a mock jury was to decide the amount of damages in an injury lawsuit. When the professor made it known that the defendant had been insured against the loss, the damages went up 13 percent. When the judge told the jury they had to ignore the new information, the amount went up 40 percent. The censored information was actually embraced even more, jumping the damage payment by $13,000!⁹

HOW TO USE THE LAW OF SCARCITY

Scarcity helps us make decisions. Most of us fear making a decision, so we naturally put it off to allow ourselves time to think and ponder. As a persuader, however, be aware that when your prospects put off the decision, chances are they won’t ever make one. You could have the perfect product for them—something they really need right now. If you let them go, however, 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.

In sales, this urgency is called the takeaway 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 whether your prospect is really 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 the prospect is just looking and not willing to make a decision, do a takeaway. Anyone who is truly interested in your product will perk up and become more interested. If not, the prospect will walk away. Either way, you have saved yourself time and energy.

When you want to increase the impact of your scarcity and adapt it to different personalities, make sure you buffer your scarcity with some type of reward. For example, “This offer ends today [scarcity], but when you enroll today, I will give you in an extra six months of support [reward].”

To create scarcity, be sure you have at least one of these elements firmly in place:

  Deadlines: Give your prospects a deadline or a point of no return. We all operate on deadlines in our personal lives and in our businesses. Deadlines 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 15, most of us don’t pay our taxes until the last possible second. No deadline—no consequence means no action.

  Limited Space, Numbers, or Access: If your prospects feel 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 products are 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 or secret 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.¹⁰

  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 something you restrict. Create a state of emotion in which your prospect will fear the loss or negative consequence for not taking action. This is an overwhelming feeling they won’t be able to ignore. Motivated by restriction, your 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.

  Restrict Freedom: We want what we can’t have. When we are told a product is or 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 prospects that the offer is good for only 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 weren’t there when we returned. Walk through clearance stores, and you will see “Sold” signs on many of the items. These signs create urgency because somebody else has found a deal, and so should you.

Three critical elements are needed to create legitimate scarcity:

1. Believability: There has to be a good reason for the scarcity. Does it make sense? Is it perceived as legitimate? Is the scarcity clearly understood?

2. Choice: When influenced or threatened the wrong way, prospects may resist or do the opposite of what you want.¹¹ They must feel that they have a choice, not backed into a corner.

3. Alternatives: Did they need or want it? Is there an easy alternative? When they come back, will it still be available?

If your prospects feel backed into a corner or have no immediate need, this law will not work. If they don’t believe you or if the scarcity sounds invented, the Law of Scarcity will backfire. When you threaten freedom, it could backfire on you and have the opposite effect.

CASE STUDY

A martial arts studio was concerned with their ability to persuade call-ins to come into their studio to see the benefits of their service. They would advertise a specific class that was their most profitable. Potential clients would call in, and the staff would answer all their questions, let them know of all the times, and tell them that there was plenty of room in all the classes. In reality, the classes would fill up. Everyone was told they were welcome to the studio and that they could come by at anytime to see their options. Only a small percentage of these call-ins would actually show up at the studio. Using the Law of Scarcity, how would you help them increase their business?

They created urgency by saying, “Let’s see if you your son/daughter qualifies for that class. Our classes tend to fill up, and there is a qualification process, and it is first-come-first-served. We keep it small and limit the numbers for personalized, individual attention.” The people who called in would show up, and the studio’s enrollment increased.

Additional Resources: Increase Your Scarcity Questions (maximuminfluence.com)