Yaro Blog

Marketing With Scarcity: How You Can Apply The Most Effective Selling Technique To Your Business

Growing up like everyone living in a Western country, with shopping malls and TV informercials, I was well exposed to the concept of the time limited offer.

Whether it was the 24 hours I had to order within to get the extra set of steak knives during the late night commercial, or the “Christmas Special” with discounted prices until the end of the holidays at Target, there was always something with time running out.

One of my favorite examples that everyone who has ever watched TV in Australia will know about, is the Rugs-A-Million closing down sales. Rugs-A-Million is a rug store that, if you were to believe their commercials, was either closing down or in liquidation all the time, hence they had “crazy prices”. The strange thing is they never seemed to close down, and every week a new commercial was up with yet another reason for the crazy deals.

Obviously as consumers we start to develop some skepticism towards these offers, especially if they prove untrustworthy and keep repeating week after week. However the concept of the limited offer is a proven selling technique, especially when done honestly with justification.

Scarcity Sells

During the early 2000s I was heavily into studying internet marketing. I was following all the popular online information marketers, and reading about sales and direct response marketing.

It was during this time that I learned about a concept called “Scarcity”, which put a label on all those limited offers I was exposed to growing up.

Scarcity refers to any limitation placed on a product or service with the goal of increasing sales through pressure placed on the consumer. The fear of missing out causes people to make the decision to buy. The limitation can be a time based deadline or a limited quantity, often mixed with some kind of perceived benefit for acting quickly, like a reduced price, a bonus item, or an increase in status (you got in, where others missed out).

While I had no doubt been influenced by scarcity selling countless times as a customer, I had yet to apply it to my own business. Although prior to blogging I had an e-commerce store and a services based business, I never applied scarcity to these offers. I played around with pricing structures that would change based on speed of delivery, but they were always available, there was no limit or deadline.

This all changed once I became an information marketer. When I started promoting affiliate products I experienced the power of a deadline first hand. It amazed me how as the closing time approached sales picked up. You could almost feel the sense of pressure as the last 24 hours would see a flood of orders come through.

Using Scarcity In A Product Launch

After affiliate marketing, the next step for me was to launch my own product. By this point I had studied plenty of launch techniques and was eager to put them into practice. Scarcity was mixed in with concepts like proof and social proof, rapport, story telling, risk reversal and the offer to deliver a powerful online selling machine.

Although all these concepts are part of a complete marketing process, it never ceases to amaze me how effective scarcity is. Based on the many launches I have been a part of, no other single concept is more powerful as a sales driving mechanism.

I became so accustomed to the online launch process that I developed a sense of intuition about how a launch would go. My intuition was also backed up by the numbers from previous launches.

It became apparent that during a complete online launch process with a time based deadline (usually closing down of the offer, or a hefty price increase after deadline), that in the last 24 hours the total number of sales would increase by at minimum 50%, and could even double.

For example, if a product was “open” for a week, and during the first 6 days I made 100 sales, then within the last 24 hours I’d make anywhere from 50 to 100 more sales. This happened every single time.

In fact, over time scarcity was even more effective. My first launches had 50% of the sales come through during the final day, where later launches would get closer to double the numbers on the final day. In one instance, I tripled the number of sales during the final 24 hours.

Although the launch process is becoming somewhat over-used in certain industries, that doesn’t mean it doesn’t work. Marketers still launch products using scarcity in similar ways, but with today’s popular tools.

For example, Webinar promos are a fantastic example of scarcity driven selling. A webinar offers the chance to teach and give away free value to a live audience, and then make an offer that’s only available during the Webinar, once again a time dependent limitation made directly to people in that moment.

Some of the most successful information marketers today are setting up automated webinar systems that include limited time offers throughout the marketing process. Webinars occur once a week or even once a day using automated delivery software, recorded presentations and email autoresponders. For the people who attend live, they receive a special offer that can only be acted upon during a preset time frame during the webinar or the days following it.

Earlier this year, Leslie, Gideon and myself did an internal launch to our own audiences for our Become A Blogger 2.0 course.

We taught a live webinar and offered entry to the program for a $1 trial plus bonuses. We had an offer for those who joined at the end of the webinar and during the 48 hours that followed and one more for the week after until we closed the doors. This gave us three different limited time offers – the earlier you joined, the better the deal you received. Needless to say, the most sales came through at the deadline times.

Scarcity In Today’s Biggest Business Models

Some of the current trends in online shopping are heavily driven by the scarcity model.

Group buying is one prime example.

Services like Groupon have become super-popular because they take the scarcity concept and apply it as part of their core business model.

Deals are only available for short periods of time, usually 24 hours, and offer a hefty discount on regular price. That is all you need to drive sales. A very short deadline, a discount and a sense of exclusivity for those quick enough to pounce on the offer. Throw in the power of email marketing as a communication tool and you have one of the best business models I have ever seen.

I wish I came up with that.

Another business I wish I came up with that also has fantastic scarcity elements is eBay, or online auctions to be specific. An auction has a time and quantity based limitation. The countdown timer for the auction to end spurs bids that increase price. There’s one item and multiple people bidding for it, so there can only be one winner. This is like a perfect storm of scarcity, and thus eBay became a huge company.

If you’re selling online, I’d have a good think about about these scarcity elements demonstrated by Groupon and eBay and see if you can apply them to your business. Using scarcity in an environment where people have already expressed interest in your product, and doing it regularly, can drive a lot of sales.

Justification And The Buying Environment

Daily deal sites like Groupon work because they set the expectation of a discount environment. People sign up knowing what they are going to receive and Groupon works with retailers to come up with the deals.

Using daily deals like this won’t work in all industries, but scarcity will. You need to determine the best way to apply it, and how often to apply it, considering closely what the expectations of your customers are (remember how important Expectation Management is).

You don’t want to abuse this technique because it will damage trust. If people stop trusting you, they will stop listening to you.

It’s okay for Rugs-A-Million to become a bit of a running joke with how often they do closing down sales because they are a discount rug store. If they were a real estate agent, a regular “going out of business” sale on all their properties would not fit right – they wouldn’t have a good reputation and people would be very skeptical about the houses they were selling.

It’s important when you apply scarcity you justify it. You need to have a believable reason for offering a limited time deal. It might be because you have a limited number of product, or a limited number of seats at your event. Perhaps you are running a small beta trial for an early version of your product, or you are taking your product off the market (a genuine closing down sale).

Whatever you do, don’t mess with your audience. You know what your people expect and you know what your style is. Make sure your scarcity offers are congruent with your brand and the expectations you have set.

Why Scarcity Works

Scarcity works because it forces action. You can’t be a fence sitter if the product is coming off the market tomorrow. If you want it, you have to decide now.

One of the easiest things for a consumer to do is put off buying something until later. I don’t need this now, or I’ll buy it when I get my paycheck or when I have the time to use it. There are endless justifications for not doing something, with good old procrastination being one of them, so you need to have a reason for taking action now.

You might think you are being “evil” and manipulating your audience, but if you believe in your product and know it will help them, using scarcity to make them get off their lazy butt and take action is a good thing.

Humans are human, we all have emotions and face the daily challenge of dealing with our problems. A good marketer knows how to sell to people using emotions, which when done in the spirit of mutual gain, means that everyone can feel good about a transaction. Of course you can’t please all of the people all of the time, but if you really consider your product something that can have a positive impact on people, you owe it to yourself to use all the selling techniques available to you.

Just remember, the online world is a very skeptical one, so abusing techniques like scarcity will not do you any favors. You might experience short term gains, but if you damage your reputation, it won’t last long.

Your next step is to consider how to make an offer for your product or service that includes an element of scarcity. Once you come up with an idea, please explain your plans as a comment reply to this article. Your ideas may help others come up with ideas, so be specific.

I look forward to reading your responses.

Yaro Starak
Limiting Offers

Photo courtesy of IvanWalsh.com