Tuesday, April 22, 2014

How Scarcity Can Influence Buying Behavior

Editor’s Note: This essay is adapted from Hooked: A Guide to Building Habit Forming Products by Nir Eyal. Nir also blogs at NirAndFar.com.

There are many counterintuitive and surprising ways companies can boost users’ motivation to buy by understanding heuristics — the mental shortcuts we take to make decisions and form opinions. Even though users are often unaware of these influences on their behavior, heuristics can predict their actions.  

In 1975, researchers Worchel, Lee, and Adewole wanted to know how people would value cookies in two identical glass jars.[1] One jar held ten cookies while the other contained just two stragglers. Which cookies would people value more? 

While the cookies and jars were identical, participants valued the ones in the near-empty jar more highly. The appearance of scarcity affected their perception of value. 

There are many theories as to why this is the case. For one, scarcity may signal something about the product. If there are fewer of an item, the thinking goes, it might be because other people know something you don’t. Namely, that the cookies in the almost-empty jar are the better choice. The jar with just two cookies left in it conveys valuable, albeit irrelevant, information since the cookies are identical. Yet, the perception of scarcity changed their perceived value. 

In the second part of their experiment, the researchers wanted to know what would happen to the perception of the value of the cookies if they suddenly became scarce or abundant. Groups of study participants were given jars with either two cookies or ten. Then, the people in the group with ten cookies suddenly had eight taken away. Conversely, those with only two cookies had eight new cookies added to their jars. How would these changes affect the way participants valued the cookies? 

Results remained consistent with the scarcity heuristic. The group left with only two cookies rated them to be more valuable, while those experiencing sudden abundance by going from two to ten, actually valued the cookies less. In fact, they valued the cookies even lower than people who had started with ten cookies to begin with. The study showed that a product can decrease in perceived value if it starts off as scarce and becomes abundant. 

For an example of how perception of a limited supply can increase sales, look no further than Amazon.com. My recent search for a DVD revealed there were “only 14 left in stock,” while a search for a book I’ve had my eye on says only three copies remain. Is the world’s largest online retailer almost sold out of nearly everything I want to buy or are they using the scarcity heuristic to influence my buying behavior?

You can hear Nir speak at the upcoming Future of Consumer Intelligence Conference 2014 in Los Angeles, California.  The Future of Consumer Intelligence 2014 explores the emerging role of decision science and the convergence of knowledge points - insights, foresights, social science, marketing science and intelligence with technology as a central driving force and profound connector. For more information on the event, click here to download the interactive brochure: http://bit.ly/1qzXDjP

Register for FOCI and see Nir in person! http://bit.ly/1p43bWl

[1] Worchel, Stephen, Jerry Lee, and Akanbi Adewole. “Effects of Supply and Demand on Ratings of Object Value.” Journal of Personality and Social Psychology 32, no. 5 (1975): 906– 914. doi: 10.1037/ 0022-3514.32.5.906.


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1 comment:

Anonymous said...

Hi!

Thanks for your article!
Im just finding out the most I can about the work of Cialdini
I'm just intrigued by how easy it seems to influence people.
Just finished reading another article about the scarcity principle. The scientists of that research found that not only quantity and wording matters. but also personality and the kind of products you try to sell. you can read it here if you like. http://www.newneuromarketing.com/the-best-ways-to-apply-scarcity-appeals-in-advertising

It really made sense to me and felt like an eye opener. Please let me know how you feel about it!