Sunday, May 31, 2009

Scarcity

Back in March I talked about Montreal's Taverne Crescent, one of the latest to join the pay-what -you-want dining trend. The idea demonstrated by truly allowing people to give you what you are worth. A direct experience/reward strategy.

On the other side of the spectrum, there is Charlie's Burgers in Toronto. This restaurant does not have a fixed location. Customers must apply to eat there. If you happen to be one of the 30 of 250 applicants selected for the culinary experience, you don't actually find out where or what you will be eating until the day of your reservation (invited guests are sent to a public spot - like a phone booth or newspaper stand - to receive the address).

The whole setup leverages our own emotions and social behavior to build the brand. It plays with our heads and our internal sense of ownership over what we consume.
  • I can't go even if I want to - I have to be invited
  • The name of the restaurant has little to know reflection of the food it serves - so what am I getting into?
  • The restaurant is really only an idea (it doesn't physically exist) up until the point I actually get to eat.
All this plays on another sweet strategy to gain brand fans - scarcity.

Incorporate scarcity into your business/brand
When I say scarcity, most peole jump to the luxury brand market, but it can be an awesome tool to turn satisfied customers into fans for almost any brand. One way is to limit your immediate growth by defining criteria. An example of this is Seth Godin's Triiibes. When you pre-purchased the book, you were invited to a closed (and still closed) social network. This group of people became a tightly knit community and idea of triiibes beyond the footprint of a regular book launch truly driving word-of-mouth and future growth of the Seth Godin brand.

Another way to incorporate scarcity is to take a segment of customers and give them a privilege that no other customer gets - they'll immediately talk about it. I'm talking a remarkable perk - not movies passes to the local theatre (although those too have value for some customer service strategies). You may even have regular customers complain (which will scare your executive team, and you will have to be prepared to deal with both sides of the complaint). That's not really the point though.

Adding a sense of scarcity to your brand experience changes the game.
  • It usually eliminates most of the direct competition. Why? Because of the two points below.
  • It automatically pulls on peoples ego's (rather than rational thought). Irrational fans are every brands best differentiator.
  • Makes price secondary in the promise
So what's the problem?
The biggest problem brands have managing scarcity - they want to include everyone. If you have a high revenue customer segment who happens to be Mom's from 30-35, the impact to this segment diminishes for each additional age you stretch the criteria to meet. If I am one of 250 people I probably feel differently than if I am one of 250 million. Marketing scarcity is probably the most difficult tactic to undertake. Usually corporate self control and brand self-esteem, sabotage its implementation. The temptations to lower your standards or change your criteria, to second guess yourself, to think of all the reasons against it, or to gain the quick buck over building long-term immeasurable demand is always there. The minute you fall for this temptation, the investment into your customers is burned.

A final point on scarcity.
Regardless of the economic situation, a brands ability to market scarcity (either as the whole brand, a sub-brand, or segment of customers) provides a sense of control. You define who you want to be part of your club, and you make people work (emotionally, financially, or otherwise) to become a part of that club. In a recession, this usually means that your reputation and market stay relatively stable (remember irrational purchase behavior) - another benefit to this strategy.