Saturday, May 07, 2005

The Power of Scarcity

We're going to get back to the step-by-step niche discovery and motivation discussion on Monday. This weekend, however, I wanted to insert a brief discussion from the book about the psychology that drives eBay transactions.

Here it is:

Perhaps the biggest motivator that drives eBay sales is scarcity. People want things that are out of their reach or potentially out of their reach. They also want more of what they can have less of (and sometimes hoarding ensues).

This is especially true of auctioned items. At any given point in time, shoppers can see how many of a particular item exist on eBay and what the going rate is. If they decide to bid on a particular item, they’re hooked into a potential transaction where the scarcity of the item is directly linked to the will of another bidder. If someone else wants it more than they do, they have to bid higher. That’s the beauty of eBay. It pits you in a competitive bidding situation that oozes with feelings of scarcity.

How many times have you heard this?: “There was this incredible __(insert name of product here)___ on eBay, and I wanted it so bad. But I got outbid. I wish I was watching it closer. I would have paid more than the final bidder got it for.”

That item may come up on eBay again. Plenty of them may exist in the world – at prices lower than the final auction price. Manufacturers in China may be making them by the millions this very moment. The auction process, however, creates scarcity in the moment. When you bid on something you want, you immediately start imagining how long it’s going to take to ship. You picture it in your posession. You want to buy it now, as in “I want an Oompa Loompa now, Daddy!!!”

When you do win the bid, you feel like you’ve attained something of great value – whether or not it actually is. That’s what the feeling of scarcity does on eBay. If you lose the bid, you feel like something of great value has slipped through your fingers.

We see the scarcity phenomenon every year at the malls during Christmas. Demand spikes, supplies are low and the mobs descend on the toy stores. There’s also something Hollywood script writers call a “timelock” in place. You’ve got until Christmas Eve to buy one, and the clock is ticking. Back in the 1980’s it was mad mayhem with Cabbage Patch dolls. Remember Furbies?
The way you describe and discuss your goods and auctions can communicate the feeling of scarcity. First, however, you need to make sure there’s something genuinely scarce about your products.

Warning: Don’t use scarcity as an artificial ploy. If your goods have some scarce qualities to them, by all means, emphasize that. However, if your goods can be easily attained elsewhere, don’t try to fake out bidders. They can make a fool of you by easily searching eBay and discovering the truth. The result: you lose trust.

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