Scarcity sells. We all know that. Scarcity coupled with urgency persuades many a person to buy. This is because opportunities seem more valuable to us when their availability is limited. Because of this reason, its use is widespread and common. All sorts of variations exist, helping businesses and manufacturers gain new customers and clients all the time. For example 'sales periods' can be seen as producing the scarcity influence amongst buyers. For a limited time only (the sales period) products are cheaper than ever (discounts and bargains) prompting lots of people to rush and buy them, which in turn increases the products demand as with each product sold the product becomes a scarce item. A typical thought process upon hearing a new sale could be ‘everyone is buying this item, it’s cheaper than ever- oh no they only have 5 left at this price!’ Bargain prices,can always be seen as a great tactic to increase sales.
BUT what if your sales period is constant- what if your products are ALWAYS made to look scarce? It would become extremely obvious that there is no real threat of the product selling out or even the price being returned to normal. The illusion of scarcity could in theory backfire. Welcome to the DFS problem.
The above advert is just one of many highlighting the DFS sale and its amazing discount prices on sofas which seems like a must buy for the bargain. DFS so notorious for its never-ending sales could be at a risk here- and indeed might already be. My dad pretty much sums it up after seeing yet another DFS sale ad as ‘I bet it’s never even a REAL sale anymore…’ And I’m sure my dad’s not the only one person to have caught onto the DFS scarcity of products scheme through the use of seemingly short real sale periods. This could impact the number of sofa sales at DFS, people will just assume that the price was never really changed and might not jump at the bargains as expected.
So what could DFS do differently? A potential answer can be found in the well-known cookie study by Worchel, Lee, and Adewole (1975). Participants were given cookie jars that were either abundant (10 cookies) or scarce (2 cookies). After a period these cookie jars in the scarcity condition were either constantly made scarce or they began in abundant supply and then decreased to 2 cookies (made scarce), either due to an accident or due to a high demand for the cookies. In the abundant condition, the cookies were either constantly abundant or first scarce and then abundant. The increase in supply was either due to an accident or to a lack of demand for the cookies. Participants were later asked to rate the cookies on dimensions of liking, attractiveness and cost value. These conditions were crossed with a manipulation in which subjects thought either a high or low number of additional subjects were still to participate in the study.
The results in Table 1 show that first of all that cookies were rated as more valuable when their supply changed from abundant to scarce than when they were constantly scarce. Which suggests that newly experienced scarcity after a period of abundance first is more powerful then scarcity alone for increasing likeness and consumption. Secondly being in competition for scarce products seems to work the best in terms of valuing the product more too.
Clearly then you should use scarcity tactics sparingly and not as a constant strategy to gain sales. DFS should be sales scarce for REAL (have a sale every so often, in between a normal price period) and limit the time discount sales are actually on for. Even better, would be to have the sofas at original price for a while- so everyone has a comparison rate and then make the sofas heavily discounted at a sales period that lasts for a month or so (abundance then scarcity). They could also advertise also the limited availability of particularly cheap or best-selling sofas that are now only the last 2 left for this price, within this sales month (competition for scarce products). This should in theory make people feel more like the products are in demand and if DFS wish the last two sofas that are on the sale could be increased in price ever so slightly to make more profit- as then they really are scarce products that customers might assume are worth more. Thus the scarcity tactic would be free to do what it does best. But for now just remember, every time you see a DFS sale, this should probably be an immediate reaction…
Worchel, S., Lee, J., & Adewole, A. (1975). Effects of supply and demand on ratings of object value. Journal of Personality and Social Psychology, 32, 906-914.