Product Managers Want To Know: Does Scarcity Work?

It turns out that people only buy things under the right conditions
It turns out that people only buy things under the right conditions
Image Credit: Jurgen Appelo

I’m pretty sure that this has happened to all of us. We’ve found something that we are interested in buying, but we can’t quite make up our mind as to if we really want to get it right now. Then all of a sudden we discover that there are only a few of this item left. We understand that if we don’t buy it right now, we may never be able to buy it. More often than I care to admit, this can cause me to make a purchase that I had been on the fence about. Product managers want to know if telling their potential customers that there are limited supplies of a product really works.

The Concept Of Product Scarcity

Any of us who have bought a book on Amazon or made other online purchases are familiar with the message: “Only 2 left in stock – order soon.” These days, customers are finding all sorts of products with little or nothing left in stock. This doesn’t necessarily reflect a marketing strategy from the product managers of these products. In more normal times, however, such “quantity scarcity” messages can serve a valuable purpose for online product managers. Because online shopping makes it easy for customers to compare prices, many potential buyers will put off making a purchase decision while they go ahead and check out prices elsewhere or perhaps wait for a discount to be offered. Product scarcity messages give shoppers an extra nudge to buy without delay by making them fear they could miss out if they don’t.

The question that product managers need to answer is if such messages really work. Research has found that scarcity messages work best with time-sensitive and perishable products such as hotel rooms or plane tickets, as well as unique items like collectibles or limited editions. However, product managers need to realize that they are less effective with durable goods such as home-improvement products or kitchenware. The reason for this is because they can give shoppers the impression that the product is being pushed because it is undesirable, lower quality, obsolete or discontinued. In the case of items typically bought in larger quantities, such as batteries and lightbulbs, it has been found that scarcity messages can actually hurt sales by making shoppers believe they won’t be able to buy as much of a product as they want.

Getting Scarcity Right

Any product manager can enjoy the advantages of scarcity messages while avoiding the negatives if they know how to do it right. They should start things out by taking the time to spotlight quality. The key, specifically with durable goods, is for a product manager to use additional measures to amplify the shoppers’ psychological triggers to buy right now! For instance, product managers can counter the impression that a product is undesirable or low quality by sharing other customer ratings and reviews, posting the number of shoppers looking at the item at a given moment and the number of units sold in the past day. To ease concerns that the item may be discontinued, the product manager can say if the item is being replenished.

Product managers can also instill a sense of urgency in their potential customers. Since durable goods are both neither time-sensitive nor perishable, product managers need to induce “time urgency” by launching sales events that last just a short period in addition to posting the scarcity message. A product manager could display a countdown clock showing the hours and minutes until the sale ends as one way to nudge shoppers to buy right away. Some vendors during flash-sale events, will let shoppers know what percentage of the items have been claimed and include a countdown showing when the event will end—say, “in 2 hours and 3 minutes.” In some cases, they may also offer faster shipment free if shoppers can commit to making a purchase within a few minutes. Research has shown that by intensifying time urgency, each of these mechanisms can increase sales rates.

Finally, product managers can offer their potential customers a bundle. With clearance items, it can be hard to get rid of the last few items in stock using scarcity messages by themselves because shoppers may think these clearance items are either undesirable or low quality. Product managers could try to package the clearance item with complementary products that move faster, and by selling the bundle at a lower price than the two items together. As an example of how to do this, book product managers could post a scarcity message about the number of copies left of a new book written by an author and bundle that book with a book written years ago by the same author.

What All Of This Means For You

Product managers want people to buy their product. One way to motivate people to do this is by telling them that there is a limited number of each product left. When potential customers are on the fence about whether or not to buy a product, thinking that the product might go away can be what is needed to motivate them to make a purchase. However, how (and when) should product managers use this sales technique?

Studies have been done that show that scarcity notifications work best with time-sensitive and perishable products These can include hotel rooms or plane tickets. However, scarcity is less effective with durable goods such as home-improvement products or kitchenware. The reason for this is because telling people that there are only a few left gives shoppers the impression that the product is being pushed because it is undesirable. Product managers can take the time to show off the quality of their product. They can also install a sense of urgency into their customers. Bundles can also be offered to motivate customers.

One final note for product managers: don’t lie to your potential customers. Product managers can’t afford the loss of trust if consumers find that their notices of scarcity aren’t true. Even if they are true, the credibility of the scarcity messages can suffer – and shoppers can get tired of seeing them – if they are used too often by product managers.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that it would ever be right to tell customers that a product is scarce when it is not?

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What We’ll Be Talking About Next Time

The good news is that your customer has ordered your product. The bad news is that they don’t have it yet. It’s going to take some time for you to get it from where you store it to their location. This means that your customer is going to have to put up with a delivery delay. As a product manager, how should you go about dealing with this delay? Do you need to inform your customer when what they have ordered will arrive? How often should you do this? How is this going to make them feel?