What is the best way to get rid of products that are not selling well? You can reduce the price to generate more demand. But there is a way better way to manage it. It is known as scarcity principle and it works by making customers believe that the item will not be available if they wait longer. The technique works because of human psychology that makes people want something more when they are told they cannot have it. Fear of losing out on something can be a powerful motivator.
You don’t have to use this principle to sell only slow moving items. You can incorporate it in the normal marketing practice to increase the sales of regular products. If you look around you will notice that many businesses are already using this principle in various forms. QVC always shows how many items are left when promoting their products on television. The last few items are always sold very quickly. When a sales person tells us that the item is out of stock, but he can probably find it at another store your reaction will always be to order it so as not to miss out from that store too.
There are several approaches you can take to implement this scarcity principle in practice as shown below:
- Give Limited Time Offers – This is probably the most widely used approach. The advertised sales have time limit after which customers have to pay full price. You can even take this one step further and provide an outrageous offer that lasts for very limited time. How about 50% off for only 1 hour!! This can produce more excitement than having a week-long sale. The best part is it can even generate residual sales after the offer has expired.
- Produce in Limited Quantity – Fashion designers use this technique to create buzz for their clothes or fashion accessories. If everyone in the world possesses an item you are looking to buy what’s the point of buying it! It’s only when you can stand out from the crowd by showing a unique item you will want it badly. Small business owners can use the same technique by producing a unique item in limited quantity and selling it at higher price.
- Show Quantities Left – This is a variant on the earlier limited quantity tactic. As mentioned earlier QVC uses this very extensively on television. You can create a signage – physical or digital – that shows that there is only X items left after which there will be no more. You can be sure those remaining items will be snapped up in no time.
- Create Competition amongst Customers – This technique is borrowed from the world of auction. Have you ever seen two bidders fighting for an item in the auction? It’s amazing how the price of the item gets out of hand without any rationale. Auctioneers have mastered this art and you can use the same for your business. If you are a car salesman have two potential customers play against each other to get the highest possible price.
- Emphasize the Loss – Research shows that customer react positively and quickly when they are shown what they will lose by not buying a product rather than what they will gain from buying it. If you are selling mattress tell them how much sleep they will lose by buying an inferior product as opposed to showing the advantage of your products. Is it worth saving $200 and suffer from sleep deprivation for the next 3 years? Of course not!
Have you used scarcity principle using one of these or any other tactics? If so, we would love to hear from you in the comments.
