Scarcity is the psychological bias that makes us place a higher value on things that are in short supply than those in plenty. Basically, we are inclined to have a preference for objects that are harder to get hold of (owing to typical human nature).
I was working on a project for which I had to do a ton load of research. That’s when I stumbled upon this hotel listing on Booking.com
At the first glance, this might look like a regular hotel listing. But look, look closely. They’re trying so hard. There are precisely 8 indications for crying out loud, in an effort to convince you to take a look at this hotel. But we’ll come to that later. Let us first understand the origin of this very idea.
Like most tactics that have been implemented online, the concept of scarcity, also first took place in the physical market. Elite restaurants in an attempt to imply how exotic and rare the ingredients are, serve humble portions. In a similar endeavour, prestigious educational institutes have limited seats, higher cut-offs, shorter application times, just to maintain the sense of exclusivity. Owners of brick and mortar stores unethically hoard commodities to increase their demand and surge the prices. As businesses online matured with time and digital products became a lot more distinguished, scarcity was endorsed and has now become one of the most adopted methods to boost desirability.
Coming back to the point, I would like to highlight how Booking.com has exploited (in a great way), the takeaways from the principle of scarcity. This 5-star hotel, is in high demand, has been booked 47 times in the last 24 hours, an all-time bestseller, situated in a prime location, preferred by its guests, reviewed 2,625 times! Phew! The plethora of tags and labels make you feel like you’re about to make the deal of your life! They definitely owe much of their success to it. Although all of the information might come off as a little overwhelming, as long as it’s working, who cares?
Scarcity has gained popularity because of the ease with which it can be implemented. And the reason it’s so effective is its ability to combine multiple biases into one:
Loss aversion: Scarcity is largely successful because of a cognitive bias known as loss aversion. People tend to put added subjective value on loss than on gain and thus strongly prefer to avoid losses than to acquire gains.
Anticipated regret: Another explanation of why scarcity works is freedom—or rather loss of freedom. If something is insufficient at the moment, it may be unavailable in the near future. And that idea isn’t easily digested by people—it contravenes our sense of control over a particular situation.
Social proof: Because word of mouth is still the best type of marketing and because we’re too indecisive most of the times, social proof boosts our decision-making process. In the form of reviews and ratings, businesses use this tactic to increase their sales.
Despite the fact that scarcity can be applied to unquantifiable attributes like quality or experiences, its outcome is much more potent when assessing calculable resources like objects or places. It’s the reason the likes of Amazon and Booking.com have adopted it and been using it extensively.
On the basis of these quantifiable resources, scarcity can be classified as that of:
Time: Countdowns, limited period offers, seasonal and festive discounts are a few examples of how businesses utilize the time-invoked scarcity. From a UX stance though, time-limited scarcity puts a user through a lot of pressure which might obstruct him from making an informed decision, thereby showing a lack of empathy.
Amazon puts a countdown on deals’ of the day to highlight the urgency.
Quantity: To create a sense of urgency, scarcity is created in terms of the quantity of the product. The constant fear of missing out leads to an increased demand for the commodity in question. The good old demand and supply principle plays out in this scenario. The typical phrases used in such settings are: ‘stocks running out’, ‘only a few seats left’, etc. or in this case, MakeMyTrip uses a crisp ‘Few rooms left. Book Now!’ to limit the quantity.
Access: Some companies offer freemium services. The basic functionalities are accessible to all members at no cost. But to unlock a range of features, a premium membership is required. LinkedIn gives its premium members a host of features resulting in a sense of distinctiveness since people are prone to place a higher value on restricted features.
Information: The information provided is scarce. The articles are accessible to anyone who becomes a member of Medium. But articles that are premium, both in terms of quality and quantity are only available to its premium members.
If fitting for the product we design for, scarcity can optimize user flows and have a mighty impact on one’s business goals. It prioritizes information and alerts users when there is a need for urgency. Scarcity can be used as a powerful persuasive tactic to influence users' behaviours and experiences. Whether people feel pressured or delighted depends on how scarcity is implemented. Customers might regret purchasing something they didn’t really want. But they might also be overtaken with relief to have made the right choice or to have laid their hands on something exclusive.
Scarcity has significance beyond being a mere sales tactic; it can encourage participation as well as quality. A lot of games create a thrill by making gaming rewards and elements scarce. Imagine Monopoly with limitless cash or any arcade game with unlimited lives. Yes, there’s certainly a pressure that’s attached to scarcity. But it’s the kind of pressure that creates a suitable level of anxiety, which can in fact make things more fun, playful and exciting. Scarcity is a constructive psychological means that can be applied to software and web design in many creative, productive ways. We can encourage users to value something more by introducing simple economics into our designs.