Scarcity is one of the main triggers of the urge to buy. It creates a sense of urgency and important in our day to day lives. Scarcity is an essential part both our nature as humans and as a form of marketing strategy. By creating a sense of urgency, scarcity can be used to indicate that something is valuable and we should buy it. Scarcity has also been proven to influence people’s purchasing behaviors, by changing their attitudes towards products or brands, making them appear more desirable and further increasing their desire to own them.
In his famous paper “Predicting short term stock price movements” (1999), Carl Huber reiterates a very important point about scarcity. “A common approach to a stock market price is to look at the fundamentals of the company, such as its earnings and sales. The other approach, which I will call the Scarcity Approach, is to use charts derived from price. These are called Technical Analysis Charts.” Huber’s paper was created using a “big data” of 12,000 years of stock data. Through his analysis he found that prices had an upward tendency and were scarce if they were below their 200-day moving average. Although Huber didn’t study business in depth, he did take a different perspective on the stock market and looked at it through a quantitative approach rather than one based on macroeconomics.
The same scarcity principle was applied to commodities and used to explain the cause behind the recent ascension of gold, silver, and oil. Scarcity applied to commodities is a fundamental principle behind several other theories such as: Scarcity drives inflation, Scarcity drives productivity growth, and even scarcity drives growth. “Less supply leads to higher prices,” according to Lee Robinson (2002).
The scarcity principle is also related to the law of demand. The law states that when there is a lack of available quantity for an item in the market, then its price will increase. Therefore, there must be a poor supply for something in order for its price to rise.
An example of scarcity in the physical world, is the lack of water during a drought. Scientists say that droughts are caused by a lack of rain, but in this case, scarcity was created by humans. Humans control the amount of water available for us to use (the water economy), and if there are more people wanting more water than there is available then the price will rise. Studies have shown that this principle does occur in our society but it is not always perceived as a scarcity due to technology. Today, electricity is abundant and plentiful even though we do face shortages in some areas. However, scientists predict that there could be a shortage of oil around the year 2030 which will cause its price to rise.
Scarcity is a tool that marketers can use to increase sales. Marketers would like us to believe that we need the things that they are selling. They want us to believe that our lives would be incomplete without their product. A good example of this is fashion, especially in clothing. We tend to buy clothes when companies make new collections every season, and we don’t know what will be in next year’s collection. Companies want you to buy their product when they are the only option or when you perceive them as being scarce. Another example of scarcity being used in marketing is electronic products such as mobile phones, tablets or computers.
