Scarcity

NO. 6 SCARCITY

Extracted from: Robert Cialdini – Influence. 6 Weapons of Influence.

Why is it that when something we want or need is difficult to obtain our desire to possess it increases? This is the strange phenomenon of scarcity, a powerful weapon of influence, often used by advertisers, salespeople, and compliance professionals in order to focus our attention and our behavior. We have a natural bias for valuing things more simply because they are less available or represent a potentially lost opportunity.

The brothers' story

Robert Cialdini tells a story of how his brother funded his college studies by buying and selling cars. He would scour the papers looking for a car he considered undervalued and he would purchase it, wash it and clean it and advertise it with a compelling ad in the local paper. When people called to see the car, he would give them a specific time-slot to view the car.

What he didn’t tell them was that they all had the same appointment time.

When the first person arrived to view the car, they would begin to inspect it to see if the price was negotiable. Then the second person turned up, so the psychology of the situation changed. The availability of the car to both the first and the second buyer became limited by the presence of the other. If the first buyer didn’t assert their right to complete their inspection, Cialdini’s brother would do it for them stating something like “This gentleman was here before you. So, can I ask you to wait over there for a few minutes until he’s finished? Then if he doesn’t decide, I’ll show it to you.”

By this method, the agitation of both could be seen to rise. The first person because they were now in a now-or-never, limited time decision. If he didn’t decide in the next few minutes, at the asking price, he might lose it forever to the waiting second viewer. The second buyer would be equally agitated by rivalry and restricted availability. The car had suddenly become more desirable. Then, of course, the situation became even more pressurized when buyer No. three arrived.

The increased desire spurred them to buy but had little to do with the merits of the car. The emotional reaction to the situation made it difficult for the buyers to think rationally.

Rarity.

Rarity has a strange compelling draw to our emotions. Things become more valuable if they are in short supply or are rare. Their preciousness increases by the scarcity of their availability. Limited editions work in this way. By limiting the production of an object, we increase its desirability and, as a result, its value.

When, for instance, we go to buy a home appliance and we see one we like, it will often be the case that the salesperson may say that this one is sold and was probably the last one in stock. Now we want it a little more, to which the salesperson counter, that he will check in the storeroom and see if there might be another. Would we like that? Yes, of course! (even more so now) Sale transacted.

Rarity is often artificially constructed in order to increase perceived value. This is supremely evident in the Art Market, where uniqueness and value (and the desire to be included in an exclusive owner’s “club”) increase the cost beyond the quality, just by virtue of its perceived rarity.

Time pressure.

Buy now or this offer is gone forever!

Limited time also builds pressure to act now. We so often see a timer on internet offers and we can feel the pressure increase as the timer gets closer to zero. “we can only offer this price if you purchase today, after that this offer will be taken down…” This is known as a boiler-room operation and the idea is to get you to buy without thinking about the purchase. It also plays on FOMO, fear of missing out. According to Daniel Kahneman in his book, Thinking, Fast, and slow. We are far more concerned about what we might lose than by what we may gain. Missing the chance, not only plays on our emotions but also increases the perceived value of the thing being sold.

Scarcity trades on our weaknesses for shortcuts.

Psychological Reactance

Things that are difficult to possess are typically better than those that are easy to possess. When free-choice is limited, we tend to overcompensate and react against it. When things are difficult to possess are often better than things that are easy to possess. Generally, this holds true for most things. As an opportunity becomes less available, we lose freedoms; and we hate to lose the freedoms we already have. The desire to preserve our established prerogatives is the centerpiece of psychological reactance theory. Whenever free-choice is limited or threatened, the need to retain our freedoms makes us desire them significantly more than previously. We react against interference.

In a Virginia-based study, researchers invited two-year-old boys to come to their lab to play with some toys. In the first experiment, they erected a low plexiglass barrier that blocked access to one toy. In the second experiment, the plexiglass barrier was tall enough to prevent direct access to the toy. The results were clear. When the barrier was too small to prevent access, the boys showed no interest in getting to it. However, when the barrier was high enough to obstruct access, the boys went directly to the toy three times more often than otherwise. A limitation of freedom led to outright defiance.

This holds true throughout our lives but is especially true of teenagers. Adolescents tend to focus less on duties than on rights they feel they have as young adults.

Romeo and Juliet had restrictions placed upon their freedom because of the feud between the Capulets and the Montagues. They defied all parental attempts to keep them apart. Psychological reactance plays out as a resistance to a prohibition or a perceived attack on freedom.

Censorship

Likewise, censorship restricts information and thereby creates a greater perceived value for the censored item. Banning information increases our desire to receive that information. Lady Chatterley’s Lover by D H Lawrence was censored when originally published in 1928 and when republished in the 1960s was the subject of an obscenity trial against penguin publishers, which Penguin won, and promptly sold 3 million copies of the book.

In a Purdue University study, they published an advert for a novel in two versions. The first said the book was for adults over 21 only, the second advert had no restrictions. People responded in far greater numbers to the restricted advert and said they wanted to read the book more and they believed they would like the book more.

Censorship increases desire and value.

Inadmissible evidence

When jurors hear evidence and are told that this evidence is inadmissible it is impossible, because of psychological resistance to ignore that evidence. In fact, the opposite occurs and more weight is given to the inadmissible evidence as a result.

In a study by the University of Chicago Law School, juries were asked to assess cases involving a woman injured by a careless driver. In the first study the researchers found that, as you might expect, when the driver had insurance, they awarded an average of $4,000 yet when the driver said he had no insurance the jurors awarded $3,300. This confirmed what insurance companies suspected that larger awards were given when the driver had insurance.

However, in the second study, if the driver said he was insured and the judge ruled the evidence inadmissible (directing the jury to disregard it), the instruction had the opposite effect of causing an average award of $4,600. So when the juries were told to disregard the information they increased their award, because they used the inadmissible evidence to increase their award. Again, here the banned information seems to have more value than ever.

Information Commodity Theory

This happens in communications and knowledge too. Where information is scarce, we find that information more persuasive. This phenomenon was identified by psychologists Timothy Brock and Howard Fromkin who developed a theory called “commodity theory of information”.

In their research, a salesperson for a beef importing company telephoned their customers and asked for purchase in three ways. The first group were given the normal sales presentation before being asked for their order. In the second the potential purchasers were given the usual sales presentation and were told that the supply of imported beef was likely to be scarce in the next few months. The third group received the same sales presentation and the information about the scarcity of beef but were also told that this information was not generally available. The information had come from an exclusive source that the salesperson had. The results spoke for themselves the second group bought twice as much beef and the third group six times as much. Proof of the persuasive potential of information scarcity.

Newly Experienced Scarcity

A similar principle has been applied by social scientists, including James C. Davies, to determine the primary cause of political turmoil and violence. They state that we are most likely to find revolutions where a period of improving economic and social conditions is followed by a short, sharp reversal in those conditions. Once people are given a taste of a better life and it is taken abruptly away, they are more likely to revolt. This followed studies of French, Russian and Egyptian revolutions. In each case, a time of increasing well-being preceded a tight cluster of reversals that would burst into violence.

In 1991, Mikhail Gorbachev began granting the soviet population new liberties, privileges and choices under glasnost and perestroika. Following which a small group of government, military, and KGB officials staged a coup. They wanted to resume the old order, back to normality. When the new freedoms were threatened the people rose up and overturned the new coup. Freedoms once granted will not be given up so easily.

Competition and scarcity.

Competition plays an important role in the pursuit of limited resources. Not only will we desire something more when it is scarce but we will want it most when there is competition for the same item. This is why we see banners that state “popular demand” and “hurry to buy”. These act as powerful motivators. As Cialdini states “the ardor of an indifferent lover surges with the appearance of a rival”. Estate agents and realtors use a similar principle (as does the car sales principle above) to get people off of the fence. They will introduce the prospect of another potential buyer. This technique is often called “goosing ‘em off the fence” and serves to focus attention and stimulate desire for the deal.

If you have ever been to an auction you will understand how this can have a devastating effect. Often, in the heat of bidding, we will go way over our original safe estimate in the fervor of competitive bidding.

What this illustrates is our vulnerability to the tactics of competent compliance professionals. Scarcity feeds into our primal desires to win and to win before either time runs out or some else gets the prize. Rarity and scarcity increase our perception of value.

Perhaps without the prohibition and interference of their families in trying to keep them apart, Romeo and Juliet may not have been thrust into such forbidden and ardent love and may have lived to tell their own tale.

6 WEAPONS OF INFLUENCE:

Reciprocation,

Commitment and Consistency,

Social Proof,

Liking,

Authority

Scarcity