The Scarcity Principle

In psychology, the Scarcity Principle describes the urge to purchase, gather, or obtain something that a person feels that they may not be able to get in the future. Part of this urge stems from the need to ensure we have what we need to survive. We also tend to value things either rare or that we cannot have, but the pleasure principal also addresses the need to feel in control. By obtaining something that is difficult to get we demonstrate an ability to control our environment. This need to control is not just about self-worth, but also about "keeping up with the Jones'."

The Perception of Value is Just as Important as Actual Value

In post-war Japan, it was illegal to important diamonds until 1959. Diamonds were not highly prized by the Japanese as it was not a part of Japanese tradition to give diamond engagement rings. But in 1968 ad campaigns depicting thin, attractive Caucasian women wearing diamond rings flooded Japanese magazines. The ads conveyed the message that women who had diamonds epitomized western wealth.

Within the next thirteen years, Japanese consumers became the second largest purchasers of diamonds. By creating the perception that having a diamond ring was something reserved for the wealthy, the Scarcity Principle came into play, and the demand for diamonds soared. In order to continue the perception of the rarity of diamonds, another marketing ploy had to be developed.

Controlling Supply and Demand Stimulates the Scarcity Principle

Diamonds are not rare. The number of diamonds on the market at any given time is carefully controlled by only a handful of companies, including the De Beers company. These companies purchase the bulk of all diamonds and then control their availability. By making it harder to purchase diamonds, even though not rare in nature, they have become even more desirable.

This clever and sophisticated marketing ploy has worked since the 1960s. But the diamond industry took this control one step further. In order to keep diamond owners from reselling them, thereby creating less of a demand as more diamonds would become available, massive ad campaigns continue to associate diamonds with romance, sentiment, and the slogan “diamonds are forever,” in an effort to curtail the resale of privately owned diamonds.

When Scarce is “Too Scarce”

Simply controlling the amount of product available does not necessarily mean higher value or higher sales volume. Retailers know this, and limit the number and type of items on sale at any given time so that sales themselves do not seem as common place.

This limiting of “scarce” can be seen in sale ads that offer phrases such as “limited time only,” “while supplies last,” or even by limiting the number of items that will be produced “never to be produced again when supplies are gone.”

Banning and Censorship Creates Artificial Value and Stimulates Public Interest

Books, movies, even video games, that are banned or censored become taboo – something we cannot or should not have. This stimulates increased desire and interest in the item being banned. Evidence of this can be seen in prohibition laws the lead to an increase in the demand for alcohol far more significant than when alcohol was legal.

Other examples include government or war-time rationing, restricting the types of music, Internet, and movies your child is permitted to access, and even dieters who try to avoid certain foods altogether. When someone perceives that they are being denied something, it generally makes them want it more.

”Keeping up with the Jones” - Using Social Envy to Market Products

Because we tend to compare ourselves to others, we often want what others have, or, to have something even better. Many companies exploit this desire, which falls under the realm of the Scarcity Principle, by associating their products with social status reserved for the few.

This type of advertising is often seen in high-priced luxury items including cars, upscale travel arrangements and accommodations, and even in hair care products “costs more, but you’re worth it.”

If you can successfully create an aura of envy associated with your product or service, consumers will want it all the more – especially, if the item is already limited and a sudden increase in sales creates an even scarcer product.