How to ethically use scarcity in marketing

26th Jul 2017

Scarcity is a huge marketing tactic. Companies can gain an advantage over their competitors by producing something that addresses a scarcity problem.

In this article, you will discover how to use scarcity in a way that is ethical and fair.

What is Unethical Scarcity?

Unethical scarcity is what people refer to as ‘false scarcity’. This is where one or both of the following scenarios happen:

·         A company lies about the scarcity of a product.

·         Someone actively restricts the flow of a product in order to create scarcity, which they then solve with a product of their own.

It is remarkably easy to use scarcity in an unethical way. The fact is scarcity is a fountain of innovation, but unless you use it in an ethical way, you are not setting any foundations for good business.

When people discover the truth, they will turn away from you.

When Intentional Scarcity is Ethical

There are some examples of intentional scarcity that are perfectly legitimate. For example, luxury carmakers only make so many cars because otherwise it would lose its value as a status symbol, thus defeating the point of the product.

Also, consider the use of rare U.S. coins as a wealth preservation tool. The reason it works is that the market is comprised of historically significant, exclusive items that are very limited in supply. The scarcity and exclusivity of many rare U.S. coins creates an environment for excitement where opportunities to purchase these items may only occur once in a lifetime. Ultimately, availability becomes more important than price. This puts an investor with holding power in a very powerful position not only to preserve principal, but also to profit based on the principles of supply and demand.

So how can you profit from the principles of scarcity without losing the trust of your clients? Try these:

Resale Rights – Restricting the number of vendors is another legitimate method. If there is too much competition through too many vendors, the price is driven down so nobody makes a profit from the item.

Dime Sales – Customers who buy early get the better deals. This is a type of pricing scarcity. The more customers that buy the closer to the regular price the item becomes. This is a way to drive sales in an ethical way.

Limited Offer – This is a variation of dime sales. For example, a remortgaging advisory service provider with a track record of over delivering on their promises to customers could limit their service availability sign up window for a particular period of time to ethically boost sales by converting more of the leads they have on the fence along with repeat costumers. In this scenario, there are only so many products or service. Once they are gone that is it. It’s hoped vendors can use this to fuel sales.

Scarcity as a Business Model

Daily deals websites use scarcity as their core business model. These deals are only available for a limited period of time and are rarely repeated. It has enabled companies in this category to make millions.

You can do this by creating deals that are genuinely one-time only. There may be similar deals further down the line, but you are ultimately taking advantage of the impulse buy. Customers are not given the opportunity to spend a few days thinking it through.

Another form of scarcity as a business model is eBay. They have made a large profit off the idea. In addition, it is not a new idea. They use online auctions with a timer so customers are forced into making a decision. They know this exact same auction will never appear again, even if the product does.

Using scarcity as a business model is perfectly valid as long as it is done in a genuine way. Offers that appear every other week are an example of unethical business practices. You are lying to your target audience.

The Business in Question

One point that is vital to make is that, the way you use scarcity will differ from industry to industry. Regular discounts won’t work for everybody. For example, a real estate company could not afford to do this. They would soon be selling houses at a rate that doesn’t guarantee a profit.

Scarcity shouldn’t be employed in every single marketing campaign you can come up with. It should be employed on occasion for maximum effect. For example, you may decide to run sales during various holidays that use scarcity.

Additionally, customers should feel like they are getting a one-of-a-kind deal. Don’t run scarcity on the same products in the same manner too often or it can quickly come back to bite you.

Last Word

Scarcity is a marketing tactic that can be employed in both ethical and unethical ways. Get it wrong and you can permanently damage your brand. However, in many ways it’s perfectly valid. It simply requires you to always tell the truth.

You can employ scarcity in many ways. Start testing and see what results you get today!

Related content

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.