Artisan Spirit: Fall 2021

Page 59


hen it comes to alcohol, purchasing behavior can seem like it’s influenced by a wealth of factors before the quality of the juice inside is even considered. As consumers, we are much more susceptible to unseen psychological marketing tactics than we may realize. Among them is the concept of scarcity marketing, a tool that has been employed, purposefully or not, to great success within our industry. Scarcity refers to a basic economic problem: the gap that develops between limited resources and limitless wants. When a good or product (or service, if this applies) has a cap on the amount that can be sold, and public desire for the product surpasses that cap, then allocation becomes necessary to decide who should be able to purchase a product (Shi and Chumnumpan, 2020). Sometimes a direct result of this scarcity is that the price of said good or product jumps up, leading to increased profits for the supplier. Whether it was caused intentionally or not, the scarcity correlated with a better market performance for the supplier and a positive final position overall. Scarcity can be the result of supply bottlenecking, mismanagement in forecasting production, or even deliberate marketing schemes, and there is no guarantee that a dip in supply will immediately lead to a boost in sales. There are good reasons why a company might not keep an excess amount of stock — the cost of maintenance, potential to spoil, and inflexibility among them — but getting caught without any stock creates a risk that customers will feel unsatisfied and develop a negative impression of your brand. There’s also the chance, however, that the opposite will be true. Running low or even running out of products can sometimes be a boon to sales, and there are ways to take advantage of the same psychological forces at play through actions such as temporary promotions.


THEORETICAL BACKGROUND There are four main theoretical lenses through which the value of scarcity marketing has largely been observed. These factors are typically at play when someone feels compelled to buy a product due to a perceived or real sense of scarcity. First is the COMMODITY THEORY, which basically states that the adoption of scarce products can satisfy a consumer’s need for uniqueness. Under the commodity theory, consumers attribute a higher value to products that they feel can signify their uniqueness, and the scarcity of said products enables the satisfaction of this need inherently (Shi and Chumnumpan, 2020). To see commodity theory in action, look no further than the world of commercial art sales. CONFORMITY THEORY also influences purchasing, as certain consumers align their attitudes, beliefs, and behaviors to group norms. Consumers with greater needs for conformity value a product based on the number of people who are buying it. It’s the reason that Amazon lists the number of reviews that each product has or why certain consumers will be compelled to select something from the grocery aisle that’s already been depleted. Clearly, uniqueness and conformity represent competing ideas of purchasing behavior, and they each interact with scarcity marketing in different ways. Consumer need for uniqueness leads to higher product prices and higher profits, while conformity needs tend to lower prices and profits per individual sale. Consumers that have a high need for uniqueness have been found to be more willing to adopt radically new products into their buying regime, but supply scarcity will alter their purchasing behavior, making them more willing to adopt new brands incrementally. Discussions of product scarcity often mention the role of signaling that occurs.

Some companies use product scarcity to implicitly signal a product’s superior quality and/or a consumer’s social status. This clearly ties in with the commodity theory discussed earlier, but conformity theory can also be relevant to signaling literature when it discusses product scarcity (Shi and Chumnumpan, 2020). With products that are rare by nature, such as conspicuous or customized products, there is often an observed need for both uniqueness and conformity. At its core, product scarcity influences a consumer by offering a choice: Buy now or risk missing out on the purchasing opportunity. Consumers with a great need to avoid future regret end up purchasing a scarce product not because of utility, but for concern that they won’t be able to do so in the future. This feeling is easily observable when consumers are faced with time pressures, such as limited-time discounts, which can lead to hoarding behaviors. Empirical evidence suggests that the regret from inaction was a more salient trigger to purchase than that from action, meaning that when the clock is ticking, consumers worried more about the loss of opportunity than they did overspending (Shi and Chumnumpan, 2020). Buying frenzies occur when consumers are placed in these situations. Under normal circumstances, consumers are rewarded if they take a wait-and-see approach to purchasing. But when REGRET THEORY, which describes potential regret from a missed purchasing opportunity, coincides with conformity theory, the result is conditions that penalize wait-andsee behavior since consumers will be worse off after price increases and discounted utility over time. Insufficient supply can cause feelings of agitation in consumers, causing their