How the Power of Free and Scarcity Influence Decision Making

The Power of Scarcity

Now that we have seen how free makes a decision to acquire a product easy—both because free is an emotional hot button and because free is powerful due to people’s loss aversion—let’s look at the effect of scarcity on decision making.

Loss aversion is also at work when people encounter items that are scarce. Scarcity creates a subconscious drive to take action now. When something is available in only limited supply, we automatically make an assumption that it is more valuable, which leads us to want it—even though we wouldn’t ordinarily want it if it weren’t in scarce supply!

The assumption that something is more valuable because it is scarce is a common mental shortcut. This shortcut makes logical sense in many situations. When something is in demand, it is often because the item is of good quality and, hence, desirable. If you have a choice between eating at two local restaurants and one has a waiting line, but the other doesn’t, you might assume that the one with the waiting line has better food. Mental shortcuts are often beneficial because they enable us to more efficiently navigate the complexity of life.

But the power of scarcity can also mislead us. To demonstrate the power of scarcity, researchers conducted a study in which they asked people to rate chocolate chip cookies according to a variety of different attributes. One group of participants took a cookie from a jar in which there were ten cookies. Another group of participants took a cookie from a jar containing only two cookies. Even though the cookies were exactly the same, people considered those they took from the jar with only two cookies to be more desirable. [1]

Revisiting Gut Versus Head

Free and scarcity differ from other types of mental shortcuts in that they have a subconscious emotional component that makes them particularly powerful. Gut exerts such a strong influence that it usually takes considerable effort for Head to override Gut’s decision. Gut is highly attuned to contrast—for example, the difference between light and dark, perfect and imperfect, or good and bad. Because Gut’s concerns include the basics of survival, the perception that we may lose something is particularly negative.

Scarcity complicates the Gut/Head decision process because, often, there is only a brief window of opportunity in which we can select something that is in scarce supply. When we can see the supply diminishing before our eyes, we feel particularly compelled to take action. One reason this is so compelling is that the experience makes scarcity both concrete and salient. TV shopping networks have known this for years and are masters at leveraging the power of scarcity to its fullest extent.

Scarcity and Framing

In a previous column, “How Anchoring, Ordering, Framing, and Loss Aversion Affection Decision Making,” I discussed framing and how you can use it to direct people’s attention and, consequently, influence their judgments and decisions. Framing can leverage the power of scarcity by proposing mental images that compel us to take action. Consider, for example, these two statements:

• Operators are standing by to take your call.
• Please stay on the line. We’ll get to you as quickly as we can.

Each of these options brings to mind a completely different picture. In the first scenario, you might envision operators who are drumming their fingers on their desktop, waiting for the phone to ring. In the second scenario, however, it appears operators are scrambling to get to each caller in a timely manner.

Implications for UX Design

The Web site shown in Figure 6 displays items that are sold out and, consequently, not available for sale. From a traditional usability perspective, you might consider this a waste of valuable screen real estate. If a person can’t buy it, what’s the sense of displaying it?

But is it really? Which site do you think would sell more—a site that includes items that have sold out or a site that shows only available items? This example shows how decision architecture differs from traditional usability.

You could also show scarcity as time left to buy—for example, in Figure 7, 6 days and 6 hours. However, the power of scarcity would become even greater if the offer showed a limited number of deals available rather than the amount of time remaining in which to make a deal. If there were only a limited number of deals available, a shopper wouldn’t know when or how quickly others might take advantage of them, ultimately causing the deal to become unavailable at some unknown time. The additional ambiguity makes the deal even more compelling.

The Web site in Figure 8 shows visitors, in real time, how much time is remaining in which they can open an IRA for 2010. The seconds tick backward, giving a compelling sense that time is running out. Drawing visitors’ attention to this countdown through the constant changes to the seconds field augments the sense of urgency.

The gourmet meal shown in Figure 9 demonstrates the synergy between the combination of scarcity of food on a plate with the high price of a meal that may operate on a subconscious level, making a customer perceive a meal as tasting better and well worth the high price.

Final Thoughts

In this column, I’ve examined the power of free and scarcity, as well as the psychological processes that make them so influential. I’ve also suggested that, sometimes, decision architecture and usability can be at odds with one another when it comes to allocation of real estate on a Web page. Decision architecture recognizes the powerful psychological processes that drive human behavior and decision making and how leveraging them through a Web site’s design can enable a business to achieve its objectives for a site. 

Reference

[1] Worchel, Stephen, Jerry Lee, and Akanbi Adewole. “Effects of Supply and Demand on Ratings of Object Value.” Journal of Personality and Social Psychology, Vol. 32, Issue 5, November 1975. Retrieved April 8, 2011.