Anyone who has stood in line at Aldi as they rationed one bottle of Prime per person would know the value of scarcity, even for mass brands. The price of a queue jump? Well, let’s just say you could get a £2 bottle of Prime on eBay for £50.
And it doesn’t get more mass than potatoes.
Popularising potatoes through scarcity
In the mid-1500s, the French were introduced to potatoes but quickly rejected the vegetable calling it “hot feed”.
The situation only changed when a French pharmacist by the name of Parmentier developed a novel idea. He served as an army pharmacist during the Seven Years’ War between 1754 and 1763.
During this time, the Prussians captured and imprisoned him, forcing him to eat potatoes as his prison rations. Once released, he studied the vegetable only to find that they were a great source of nutrition.
No rational argument he made worked to convince the French of the merits of the potato. Instead, it was only when King Louis XVI gave him a plot of land, which he turned into a potato patch, did things start to change.
The key to the endeavour was that Parmentier placed heavily armed guards around the patch to symbolise how valuable and scarce potatoes were.
The best part was that the guards were told to allow scrupulous intruders to steal or bribe their way to attain the potatoes, creating a scarce ‘black’ marketplace for this valuable commodity.
This act changed the potato’s fate across Europe into what it is today. By it becoming a scarce resource, its value went up tremendously.
Luxury Goods; Kings of Scarcity
Let’s move away from mass marketing for a minute. In a recent article, Professor Scott Galloway highlighted that the kings of scarcity have got to be some of the most iconic luxury brands, such as Hermes. He says;
“The richest man in the world doesn’t make cars, rockets, or enterprise software — he makes handbags. Bernard Arnault, the CEO of LVMH, is now worth more than Warren Buffett and Mark Zuckerberg combined. He’s made his fortune not selling things people need, but things they want.”
He goes on to discuss the concept of artificially supply-constrained companies. He says that “the companies that trade at the greatest multiples are artificially supply-constrained, where the supply/demand imbalance puts a dial on the spigot the manager’s control. For example, imagine the decision to have more revenue is just a function of when you’d like more revenue.”
Oh, what a lovely position that would be, and of course, the Prime boys (Logan Paul and KSI) learned this lesson that the most valuable marketing tool they can use for their product is to restrict the flow of it.
Shoes and bags
Galloway paints an incredible picture of this phenomenon by comparing Nike and Hermes.
“Hermès, the iconic luxury brand. With $12 billion in annual revenue, Hermès has a larger market capitalisation than…
Nike, which boasts $47 billion in annual revenue.”
Why?
As Galloway puts it, the sexiest word in the English language is – no.
Source: https://www.profgalloway.com/scarcity-2/
So while Nike is a yes-man’s company, sure, it’s got a premium feel, but it certainly is not out of reach of most. And they open the doors to everyone wanting to be “an athlete”.
On the other hand, do an experiment, walk into a Hermes store and ask for the latest Berkin bag (that will set you back around $14k), and see the look on the face of the assistant.
You’d be lucky to get put on the waitlist; imagine that just getting on the waitlist is prestigious!
Could Hermes manufacture a ton more Berkin bags? Absolutely. Will they? Not a chance.
Tiffany lost its shine until scarcity brought it back
Let’s turn to another example, Tiffany’s. I remember the excitement of walking into Selfridges and heading to Tiffany’s counter. It felt like the ultimate gift that oozed class, aspiration and exclusivity. Nothing said I love you quite like a Tiffany’s bracelet. Ah, what a little romantic I was!
Cut to the last few years, and it’s plain to see that Tiffany’s lost its mojo. Suddenly, the once iconic, aspiring and exclusive shiny silver range didn’t seem so sexy.
And it showed in the numbers. After double-digit growth from 2000 to 2010, the company crossed $4 billion in sales in 2013. This was the heyday period.
But revenue started to fall in 2015, widely attributed to their move into more affordable entry price point jewellery. They began to become less exclusive and more available.
This is what they believed the next generation of consumers wanted. Unfortunately, Tiffany’s was no longer aspirational when the reality was meant. It lost its way and took a new owner, LVMH, to buy it to find its feet again. Lucky for the brand, LVMH with Arnault at the helm, knew a thing or two about injecting scarcity back into the brand.
Tiffany’s make a come back
Today, according to Euromonitor, Tiffany’s is the most significant contributor to LVMH’s growth over the past two years. Management knew the key to success was to take Tiffanies back to where it began, i.e. its classy and exclusive positioning, and embed a sense of artisanship into the brand with some fantastic collaborations.
They partnered with Patek Philippe and Supreme and even had an upstart art collective, Mschf, which made a $1k limited-edition Trophy with the jeweller. It boasted the tagline: Those who can’t play, pay!
So we can see that when we open up the treasure chest to all, we lose a sense of mysticism that made us desirable in the first place.
So, what can brands do today to inject scarcity into the mix?
Let’s look at several things brands can do to achieve this.
1. An artesian movement
This is a lovely turn of phrase that Galloway suggests in this context.
It refers to the fact that when a few make something, it intrinsically holds more value.
We can see this with numerous exclusive partnerships between influential brands and influencers, such as the Prime example, we discussed.
The question to ask is, are there ways to introduce this element of artisanship into your approach?
2. Artificially control supply (and demand)
Undoubtedly, when something is in short supply, it’s in greater demand, and we can charge more for it. So even if it’s not your entire range, are there parts of your proposition that zings of “money can’t buy easily!”.
Tactically, you can also create anticipation by deploying things like waitlists, pre-launches and member exclusives, to name a few.
3. Create FOMO
There is nothing like creating a bit of FOMO amongst your customers. Google found that when you make time-bound, short product supply offers, i.e. just two remaining (!), it directly impact conversion.
4. Price discounting is a no-no.
Ah, it may seem easy to do; have a sale to remove your stock. But when was the last time you went to the Hermes sale? Never. Much has been written about the false economy of price discounting in any case (link to article). So if you are looking at creating scarcity, this is one area to stay clear.
Summary
Scarcity represents a powerful technique to be deployed regardless of what category or segment of the market you sit in; it’s not the preserve of the high-end space.
So next time you think of how to supercharge your marketing activities, think of this technique and how to deploy it effectively. Simply put, think of potatoes!
