Strategic Tool: How to use the 'Scarcity Illusion' to boost your launch.

By Carleen Hawn, September 14, 2007 — 1 Comment

Harvard Business School’s “Working Knowledge”:http://hbswk.hbs.edu/ weekly newsletter has a very helpful piece today, authored by marketing professor “John A. Quelch”:http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facEmId=jquelch@hbs.edu about how you can take advantage of what he calls “the Scarcity Illusion Strategy”:http://hbswk.hbs.edu/item/5776.html when you’re getting ready to introduce your new product or service.

By using the illusion of scarcity, [you] can accelerate demand. This false scarcity encourages us to buy sooner and perhaps to buy more than normal… two excellent examples of this effect this summer [were] the launches of the iPhone and the seventh Harry Potter book…

pre-launch publicity was designed not only to fuel demand but also to create the illusion that supplies would be limited. In fact, there were very few supply shortages…

It wasn’t just direct sales of these two products that benefited from the scarcity illusion, however: The heavy crowds drove sales of related products in Apple stores and bookstores during a relatively slow sales month.”

The professor doesn’t reveal specific tactics for how to generate such publicity, but we think this is one area where your expensive PR firm can earn their keep. Their job is not only to tell reporters that you’re launching “a great product,” but that management doesn’t have time for interviews (!) because they are “working ‘round the clock” to “do everything they can to meet pre-order demand,” etc.

There are Risks with a “Scarcity Illusion Strategy”:
1) Hype invites heightened scrutiny. Make sure your product is ready. (Bad reviews + shortage = bad business!)
2) Consumers can get frustrated by forced-waiting. They may give up, or opt for an alternative product/service.

Prof. Quelch does offer tips on how to recover from a Scarcity Illusion-play gone wrong (or a real product shortfall), using the example of VW’s botched launch of the new Beetle in 1998.

Read the whole piece “here”:http://hbswk.hbs.edu/item/5776.html, and other resources listed at the end.

And if you don’t yet subscribe to “Harvard Working Knowledge”:http://hbswk.hbs.edu/aboutus/ you should. It’s free. You can register “here”:http://hbswk.hbs.edu/forms/newsletter.html. We’ll be linking to another great HBS piece on how founders can learn to delegate more effectively on Monday.Tune in.

About Carleen Hawn
Carleen Hawn is a business journalist based in San Francisco. Prior to editing Found|READ, she was an Associate Editor with Forbes, and the West Coast Bureau Chief and a Senior Writer for Fast Company magazine. Today you can find Carleen's articles in the pages of Financial Week, Business2.0, and Outside magazines, among others.