Scarcity Principle

Scarcity Principle in a Nutshell: People are driven to acquire information, resources, and experiences that are in short supply, not available to everyone, or for some other reasons scarce. And the greater the scarcity, the more powerful sway it holds over us.

Why we are Swayed by Scarcity?

Why scarcity holds such a sway over us? Scarcity, for one, is based on a simple heuristic that anything that it is in short supply must be really valuable. So scarcity indicates high value. Also, having something that no one else has might raise social status and boost self-esteem. That’s why people buy Rolexes and other so-called Veblen goods; a $19,000 Rolex isn’t more functional than any $150 watch, but its exclusivity shows a certain social status.

Scarcity as a Means of Influence

Scarcity can be a powerful means of influence. It is likely to have the greatest impact when both information and resources are scarce. For instance, in one study, a beef importing company made a standard sales pitch, but it also mentioned to some buyers that the beef is likely to become scarce in the upcoming months. The buyers who heard the scarcity pitch bought twice as much beef as those who only heard the standard sales pitch.[1] This didn’t stop here—other buyers heard the double-scarcity pitch: that not only the beef was likely to become scarce, but that this prediction was based on scarce information, the information from exclusive contacts. The buyers who heard this double-scarcity pitch purchased six times more beef than those heard only the standard sales pitch.

Abuses of Scarcity

We should also be on the lookout so as not to be swindled by scarcity. It is one of the favorite methods of con artists, who will usually mention that some investment opportunity may become available, and then of course they will say that unfortunately they probably won’t be able to offer it to you. And the more they deny you an opportunity to have it, the more you will be eager to sign on.

Sources

[1] See Robert B. Cialdini, Influence: The Psychology of Persuasion (HarperCollins, 1994) p. 192.