You Can’t Have One! The Art Of False Scarcity

by Thomas MORADPOUR on July 16, 2011 · 19 comments

PEOPLE, WE’RE FALLING FOR THE SAME TRICK TWICE IN THE SAME MONTH.

It’s a good one. It’s called False Scarcity.

When goods are free and widely available to everyone without constraints…. do we really want them? Probably not as much as if we’re convinced that they are rare and have to go through a guarded gate before we can put our hands on them.

Reverse psychology, play on vain egos…it’s very effective if you can pull it off, since economics teach us that only things that are rare have value.

GOOGLE+… A BETA PHASE, REALLY??

In the last two weeks, over 10 million geeks have rushed into Google+, the new social network everybody talks about (at least, on Google+). How did it reach such blockbuster proportions in such a small time? By framing a full scale launch as a ‘field beta’.

It’s not open to the public yet! It’s still being tweaked! it’s private people, you need an invite!

OK. Whatever you say Google, but last time I checked, 10 million users is on the higher side of typical testing requirements. By these standards, Foursquare too is still in field beta! Fact is getting an invite was as easy as just asking for one, directly on the site or through your networks (I got mine after 15 minutes asking around on Twitter).

Did they need to limit users? Come on, it’s Google – they know how to scale servers, don’t they?
Of course, it was a launch tactic designed to make G+ look cooler,  and insulate Google against any risk of public failure. Reach a big number, it’s a success; fail, and it was just the beta phase, move along, nothing to see. Meanwhile they made every new sign-up feel like a privilege, they oversignified the “early adopter” status of the first members and made every geek around join proudly from the get-go.

SPOTIFY KLOUTS IT WAY TO THE U.S.

The European music business is using a similar tactic this week, in their attempt to conquer the US.
In case you’ve missed the headlines, Spotify is a streaming service which lets you listen to any music, for free on your computer, or on your mobile for a monthly subscription fee. All my friends in Paris, London and Stockholm swear by it, for good reasons.

In any freemium model, you want to get as many people as possible to sign up for the free version to build awareness and  trial, and then get hooked users to upgrade to the premium service. You make the free version widely available, and the premium one “scarce”. Spotify did the reverse, partnering with the influencers-scoring company Klout.

While anyone can already sign up for premium, the free version is ‘invite-only ‘ for now – and the main gateway to an invite is your Klout score. Reach Klout’s secret conditions for the “perk”, and you qualify for a free Spotify account plus 5 invites for your friends (note to readers – I’ll happily give mine to the best commenters!)

Does Spotify have to be scarce? Come on, let’s be serious… their challenge is to stand-out in a competitive market that is far from the Blue Ocean they came from in Europe – and their big bet is to make you want an account because you can’t get one (must be great, no?). Note also the great tactic for Joe Fernandez’s Klout – the perk is a great way to boost awareness and subscription to his own service. Win-win.

DOES IT WORK?

Time will tell. Google+ will be judged by its ability to attract more than the geeks and social media addicts, and keep them participating; Spotify will be judged on how much revenues it drives from premium services and advertising, not just on how many people line up for a free account. So it’s very early.

But something has to be said for the noise and momentum created by the sense of scarcity they manufactured. They did not put a price tag on free, but they definitely created desire and value. Think about it – is there something in your business that you could reframe as scarce and valuable?

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  • http://twitter.com/jkcallas Jure KLEPIC

    Great Post Tom. I agree with you google know very well how to scale servers, but as well they got what they were looking for. For last two weekes every one is talking about Google+ and awerness jumped from zero to 100 mil users in two weeks. 
    If nothing else other brands out there good a great free lesson how to introduce new product. 
    Will Google+ last ? Dificult to say, they only thing that I can say they will need to start working on spam proctection as spammers are growing over the Google+ like mushrooms. 

      

    • http://twitter.com/TomMoradpour Thomas Moradpour

      Let’s look again in three months and see what happens after the initial hype subsides :-)

      I’ll make a note ;-)
      thanks for commenting and sharing ;-)
      Cheers, Tom

  • http://asocialmediaenthusiast.wordpress.com Sherree W.

    Awesome post Tom. 

    It’s the “exclusivity” of  the invites to G+ & Spotify that made people want it. We all want to be in “that” group, isn’t that human nature? When we have “something” that others don’t, we can say we were on the ground floor of something big Ha! 

    Google Plus knew exactly what they were doing – 10million users later shows us that.  As you pointed out Spotify is already huge in Europe. People in the US have been asking Spotify to come here for ages. There was no reason whatsoever to make the free version “limited,” (if you went to the Spotify website, you could sign up for an invite pre-US launch) but by joining with Klout and making it a perk, they made it “exclusive.” What a great marketing ploy for all of them.

    The bottom line though — it has worked, for now. I would think at some point, people are going to start getting a bit tired of this game and it might come back to bite a company down the road. Then again, maybe people won’t – human nature being what it is.

    My 2 cents worth.

    • http://twitter.com/TomMoradpour Thomas Moradpour

      We’re in full agreement!

      The risk is pretending something is exclusive, but actually faking it!Tom

  • Joey

    Yep. It works too. A Spotify invite is like cat-nip. Can I have one?

    • http://twitter.com/TomMoradpour Thomas Moradpour

      Sure… but I’d need more of your details, mate.
      Tom

  • Anonymous

    Great blog, I agree in that this is a cheap trick. However, it works, it has always worked long before the social media. Creating a hype or the “thought” of something being scarse or finite has always effected people.
    Google has done it perfectly and the same goes for spotify. Spotify used this trick for years in Sweden before growing to a full service.
    Nevertheless, if the service is good enough, it will survive and evolve.
    So far, I think Google+ is the best attempt by Google so far. A connection to the documents, pictures, analytics … they will be hard to compete against.

    • http://twitter.com/TomMoradpour Thomas Moradpour

      Yes, you’re right!

      It’s not new to Google either – they pulled the same trick with Gmail back in the days… although back then they really limited access, unlike today where it seems everybody was allowed in!Cheers
      Tom

  • http://www.wonderoftech.com Carolyn Nicander Mohr

    Fantastic post, I couldn’t agree more. False scarcity seems to be the key to marketing these days. Google and Spotify are trying to create an elite faction of members who feel as if they are “in” because they received an invitation. And who isn’t more likely to join with an invitation?

    The invitation model may not have worked so well with Google Music though. No numbers seem to be available, but I don’t hear Google crowing over how many people have joined so far.

    • http://twitter.com/TomMoradpour Thomas Moradpour

      Thanks for reading and commenting – fully agree!
      Cheers
      Tom

  • http://www.facebook.com/andyrbaker Andy Baker

    Tom, 

    Good points however Google has a money never the issue problem – in its Beta phase it also has given everybody who has a google Analytics, adwords, gmail, blogger or any other google access account a sign up to Google+ so the actual numbers are very small as most people had the other accounts by default not requirement. As you mentioned the long tail approach to the interface will be the test – where do you post your thoughts and where does it get seen – post on Facebook to your linked in, twitter, Google+, & Apple Cloud ? who knows but the killer interface and interaction will will long term or total apathy will set in and they will all rot very slowly.As for Spotify, its a business model looking for revenue, and will fold with the next 18 months as Google and Apple gets its act together on Music distribution and playlist.

  • http://twitter.com/solete Anne S.

    I totally agree Tom. Great post. Just commented about this on FB. After all the G product failures you think they’re going to open a beta, bug-ridden version of G+ to +10M users? Not likely. This was a full-scale launch disguised as a beta to build up hype. You said it best: “a launch tactic designed to make G+ look cooler, and insulate Google against any risk of public failure.” I mean come on, take a look at Google’s long history of product failures: Wave, Nexus One, Buzz, G Video, G Talk, Orkut (ok used in Brazil but nowhere else), Google Health… the list goes on.Consider that a few months ago new CEO Larry Page announced that 25% of all Google employees’ salaries would be tied to the success of social… And, don’t forget a few months ago ex-CEO Eric Schmidt took a bullet for G’s social shortcomings by saying “I screwed up.” http://bit.ly/o7JaiGSo, after all that history and drama would Google really open up a beta-version to millions? I think not.

  • Anonymous

    Scarcity as a sales/marketing tool probably goes back centuries and guess what? Even in the age of social media, transparency, authenticity, and all that other silliness – it still works.
    Nicely written.

  • http://twitter.com/BrandonPDuncan Brandon Duncan

    Very well written piece. Got me to thinking, that’s for sure—I almost felt like a lemming! You are right, though. I watched people go nuts over G+ and I am willing to bet the circles design and simplicity will keep people coming after the new wears off for the early adopters. Spotify, I’m willing to admit, I knew absolutely nothing about. I got the Klout perk, but when I started looking around, I noticed people like Demi Moore talking about it, of course the Klout heavy crowd was screaming about it, and when I mentioned it on FB, the response I got was from people I knew to be fans of exclusivity. Spotify had some tricks up their sleeves.

    Again, nice piece. You are a fantastic writer!

  • http://twitter.com/thesantoses Andre Santos

    Hi Tom,

    Nice topic… scarcity is definitely a tactic that is being used more and more.

    I’d say the best user of that tactic is that little company that builds a lot of iProducts. I mean, it happens all the time – iPhone4 stock is short, iPad stock it short.  You’d think by now they should have their sales forecasting, but they know that you always want what you can’t have more than what you can.  And (as much as you know it’s a gimmick) it works.

  • http://www.dogwalkblog.com/ Rufus Dogg

    My daughter sold a hell of a lot of fund-raising candy/pretzels creating false scarcity. She would go up to a house and tell them it was her last box. And they would buy it. And the product too.  She was always the top seller on her soccer team. False scarcity works if done right.

    That and curly blonde hair and a pleasant smile :-)

  • http://twitter.com/Galactic Cristian Gonzales

    Great post Tom.

    Considering Google Plus is now at over 20 million users, and Spotify signed up more than 70,000 new subscribers in little more than a week, it looks the like the “false scarcity” tactic worked.

    http://hothardware.com/News/Spotify-Jettisons-to-70000-Paid-Subscribers-Should-Pandora-Fret/

    Brands need to be able to stand out somehow, someway. This is especially the case in the digital era of today where consumers have hundreds of messages coming at them from hundreds of places and in hundreds of different ways. Whatever a brand/business can do to make their product more desirable to a consumer can only benefit them in the end—even if it’s only an illusion.

  • Sexy Saydie

    I agree with you on the false scarcity!!  This works with just about anything…think to just recently with the new Ipad2, and even going back to the Iphone!!  The same people who are waiting on line for these not inexpensive products are the same ones who are crying they have no money at the same time!! 
    In regards to Spotify, if I received a free invite it probably would not be as appealing then if you told me I had to compete for one from you…that is just human nature. 
    BTW, can I get an invite please??
    I have retweeted your post.
    Thanks!!!

  • Pingback: Creating Scarcity – Purpose, Goal And End Result | More In Media

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