How Scarcity Can Influence Buying Behavior

Editor's Note: This
essay is adapted from Hooked:
A Guide to Building Habit Forming Products by Nir Eyal. Nir also blogs
at NirAndFar.com.

There are many counterintuitive and surprising ways
companies can boost users' motivation to buy by understanding heuristics ' the
mental shortcuts we take to make decisions and form opinions. Even though users
are often unaware of these influences on their behavior, heuristics can predict their actions.

In 1975, researchers Worchel, Lee, and Adewole wanted to
know how people would value cookies in two identical glass jars.[1] One jar
held ten cookies while the other contained just two stragglers. Which cookies
would people value more?

While the cookies and jars were identical, participants
valued the ones in the near-empty jar more highly. The appearance of scarcity
affected their perception of value.

There are many theories as to why this is the case. For one,
scarcity may signal something about the product. If there are fewer of an item,
the thinking goes, it might be because other people know something you don't.
Namely, that the cookies in the almost-empty jar are the better choice. The jar
with just two cookies left in it conveys valuable, albeit irrelevant,
information since the cookies are identical. Yet, the perception of scarcity
changed their perceived value.

In the second part of their experiment, the researchers
wanted to know what would happen to the perception of the value of the cookies
if they suddenly became scarce or abundant. Groups of study participants were
given jars with either two cookies or ten. Then, the people in the group with
ten cookies suddenly had eight taken away. Conversely, those with only two
cookies had eight new cookies added to their jars. How would these changes
affect the way participants valued the cookies?

Results remained consistent with the scarcity heuristic. The
group left with only two cookies rated them to be more valuable, while those
experiencing sudden abundance by going from two to ten, actually valued the
cookies less. In fact, they valued the cookies even lower than people who had
started with ten cookies to begin with. The study showed that a product can
decrease in perceived value if it starts off as scarce and becomes
abundant.

For an example of how perception of a limited supply can
increase sales, look no further than Amazon.com. My recent search for a DVD
revealed there were 'only 14 left in stock,' while a search for a book I've had
my eye on says only three copies remain. Is the world's largest online retailer
almost sold out of nearly everything I want to buy or are they using the
scarcity heuristic to influence my buying behavior?

You can hear Nir
speak at the upcoming Future of Consumer Intelligence Conference 2014 in Los
Angeles, California. The Future of Consumer Intelligence 2014
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[1] Worchel, Stephen,
Jerry Lee, and Akanbi Adewole. 'Effects of Supply and Demand on Ratings of
Object Value.' Journal of Personality and Social Psychology 32, no. 5 (1975):
906' 914. doi: 10.1037/ 0022-3514.32.5.906.