How Scarcity Works

What if you could paralyze the minds of the people visiting your website – so they do your bidding?

According to whom you ask, or how you feel at a given moment, the world is full of either abundance or scarcity. I know – I’m supposed to see abundance everywhere! And maybe you feel you are too. But it’s hard, isn’t it?

Maybe that’s because anti-abundance – scarcity – is everywhere, every day, all day. It comes in a few forms.

  1. Genuine scarcity
  2. Artificial scarcity you create
  3. Artificial scarcity others create 

I get genuine scarcity. That’s just reality; it’s often sadly preventable but it’s real.

But artificial scarcity – why? So why is it so prevalent?

Because it’s profitable.

Ever since social scientist Cialdini published Influence 36 years, thousands of other researchers have also demonstrated that scarcity motivates people to take action, whereas they otherwise might do nothing. That is to say that it helps sell, as I have written about previously

But what is less understood is why – scarcity paralyzes thinking.

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One scarcity study took place in the hottest and Southernmost part of India, Tamil Nadu. The researchers didn’t frame it as a scarcity study, but that’s what it was. They wanted to document the effect of poverty on IQ.

They studied over 400 farmers before and after their annual harvest, which yields them 60% of their annual income, in one fast swoop. These farmers are usually poor, but for that one brief period of time, they are flush with cash. They have options.

The researchers found that the farmers’ IQ increases by 10% after their harvest cash comes in.

Then, as in Flowers for Algernon, their IQ plummets as they descend again into poverty. Actual scarcity in action.

The same researchers found similar results among a similar-sized group of low-to-middle income shoppers at a mall in New Jersey. One sample group faced a hypothetical $1,500 car repair bill. The other faced a $150 car repair bill.

Those faced with the $1,500 car repair bill lost 14 IQ points – instantly. Do you keep your car or pay your rent? Or this or that? The mind races with stress hormones and cognitive capacity shrinks.

Let me interject a quick takeaway – if you sell your thinking for a living as a problem-solving consultant, you must avoid scarcity in all its forms. It directly dilutes your value proposition.

But it matters for those who afflicted with poverty. More than anyone, they need their ability to make good decisions to escape the cycle.

Presidential candidate Andrew Yang used that very study to pitch his concept of UBI, Universal Basic Income. As has Rutger Bregman, who has made the impeccable argument that what the poor need is not social programs, but cash money.

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Every marketer I know including myself has tried using scarcity in her marketing and come to the same conclusion: it works. Really well. Not all of them will tell you that it works by impairing cognitive abilities. Scarcity makes you stupid; amygdala trumps neocortex, etc.

I don’t think it always makes you stupid, though, not if it’s genuine and not if it doesn’t prey on serious deprivations such as poverty.

Instead, genuine scarcity can actually help potential buyers focus their attention on a potential opportunity. Maybe there really is just two hours for you two turn your term paper in; maybe there really are only 7 seats available in that course.

Whether genuine or artificial, scarcity works by almost instantly changing the way that people’s brains work. And people are starting to figure this out. In fact, I’d hurry to understand how to use genuine scarcity in your own marketing – time may be running out.