How does the Scarcity Principle Works?

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Source: Amazon

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How often have you scrolled through Amazon and landed on today’s deals?

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How often have you clicked on it?

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The designers at Amazon and hundreds of other brands are using the scarcity principle. The scarcity principle is one of the most effective ways to convert users into customers. This article will discuss:

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What is Scarcity Principle?

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The scarcity principle refers to the idea that people will buy more when something is promoted as being in short supply. If a product is promoted as being scarce in terms of time, availability, or quantity, then the desire to obtain it increases. Users will often buy the product on impulse, thus leading to faster conversion rates.

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This is often used in marketing campaigns and advertisements. A recent real-life example includes people buying a lot of toilet paper during COVID-19. This can be understood with simple economics too. That is, when the supply of a product decreases, the demand increases.

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It is most commonly used in eCommerce or booking websites where a "sale ends in 2 hours" or "2 items left in stock."

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Scarcity Principle works on three important cognitive biases

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Loss aversion

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People buy a product if it is scarce to avoid losses. The pain that follows a loss is perceived to be greater than the pleasure that follows a gain. For example, special occasion deals like Black Friday Sale or Independence Day Sale lead more users to buy a product to avoid loss of getting the product at a cheaper price.

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Source: Myntra

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Anticipated regret

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Otherwise known as FOMO, people anticipate regret if they miss out on something or make the wrong decision. According to a study by Eventbrite, 69% of millennials (who also have purchasing power)  experience FOMO. Regret often follows after we have missed out on an opportunity or taken the wrong decision.

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Users predict that they will regret not buying a limited-stock item if the item goes out of stock in the future. This urges them to buy the product. For example: WhiteHat Jr shows copy “Limited Spots Left” for their coding classes.

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Source: White Hat Jr

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Social proof

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This refers to the phenomenon when people who don't know what to do would turn towards others to guide their next action. A tourist will look at a queue and stand there to buy a ticket or teenagers will copy the next trendy outfit promoted by social media influencers.

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In websites and apps, messages like testimonials, positive reviews, or how many people bought a product and similar products are all examples of social proof. One of these websites is Udemy that showcases testimonials of learners.

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Source: Udemy

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How ethical is the scarcity principle?

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The scarcity principle is one of the many principles of persuasive design practices. The persuasive design uses these cognitive biases and behavioural science to influence decision-making.

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It meets the goals of users and businesses by giving cues for a faster decision-making process. The question of ethics comes into the picture when persuasive design becomes deceptive design where information is deliberately hidden like hidden costs, shaming users to buy a product, or use of false testimonials. 

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Overdoing the use of the scarcity principle can also be dangerous. For example: If a sale deadline was today, but it continues tomorrow and the day after, users can feel betrayed.  They will lose their trust. If they felt pressured to buy the product, they will seek a return, refund, or write negative reviews. All of this can make them never buy the product again.

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How can I use the Scarcity Principle in UX design?

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Give Honest, Limited-Time Offers

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Source: Nykaa

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Create a sense of Urgency in Copies through words like Instant, Hurry, Now, Soon, Close, Fast, and Today

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Source: Bigbasket

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Use a Countdown Timer for Temporary Discounts

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Source: Interaction Design Foundation

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Use Scarcity of Quantity to show Real-Time Stock Shortages

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Source: Tata Cliq

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Remember to always conduct A/B tests and usability tests to find out how users feel about these messages.

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Conclusion

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The scarcity principle makes us place a higher value on items perceived as scarce. This explains why luxury items like bags and cars get sold at higher prices even if they appear ordinary.

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It is a powerful psychological principle that plays on cognitive biases and can be leveraged in UX design to increase conversion rates. Be it signing up, purchasing a product, or completing a task, it can urge users to take action. But it is essential to use this tool ethically and not deceive users.

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In the end, the goal of UX design is to create useful, usable, and pleasant products for users and this principle can help in achieving these goals

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Read More:

5 Key Factors to Consider When Choosing a UX Design Agency: Visual Design Expertise

6 Step Guide to Master Dashboard UX Design

Best UX Strategies for User Retention that Actually Works

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