Lessons from Luxury #4: Scarcity Creates Value
'Elegant Insights: Luxury Lessons for Life and Business', uncovering invaluable lessons from looking deeply beyond the glitz and glamour. For better margins, stronger loyalty, and elevated leadership - personally and professionally. It's my hope this lifts you positively!
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In a world where abundance often dilutes the perception of value, scarcity stands out as a principle that luxury brands have long embraced and mastered. Yet, this principle isn't exclusive to the realm of luxury; it's a potent strategy that any business can leverage to enhance demand, price points, margins and loyalty.
Nothing creates cool like scarcity
Neil Blumenthal (Warby Parker)
Real vs. Perceived Scarcity
The allure of scarcity is twofold, encompassing both real and perceived scarcity. Real scarcity might stem from the use of rare materials or limited production, such as Richard Mille 's innovative use of graphene for example, creating tangible rarity. On the flip side, perceived scarcity is often a strategic choice, where brands limit availability to boost exclusivity and desirability, a tactic seen with limited edition releases across industries from fashion to technology. For example, Pagani Automobili limited its Huayra model to just 100 cars. Luxury whisky brands such as Laphroaig Distillery make 'travel retail exclusive' bottles, which can only be bought in selected duty-free shops. For a more in-depth understanding of these principles, read my full article here.
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Scarcity in Practice
The principle of scarcity is applied across industries. From fast fashion to retail, gaming, automotive, technology, B2B and services. For example, H&M often collaborates with high-end designers for limited-edition collections. These collaborations create a sense of exclusivity and scarcity, as the special collections are only available for a short time, attracting a rush of shoppers early in the morning before the store opens. 耐克 limits the production of certain iconic sneakers (often in collaboration with a superstar) and has marketed its vintage designs so well that they have become collectible items that are in high demand.
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Scarcity can be a catalyst for growth
John C. Maxwell (Leadership Author)
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In gaming, players are incentivised with points, tokens or fictional currencies that are in limited supply. 苹果 is another great example: Millions of people aspire to the next iPhone and will wait impatiently for it to arrive – often camping overnight outside Apple’s stores. Want to get ChatGPT Pro for $20 a month? Join the waiting list. So remember: immediate availability is generally an antidote to desirability.
But it's not just about limiting supply for products. Skilled professionals can also be in short supply. For example, there are very few vintage car restoration specialists, jet purchase lawyers, SAP automotive warranty leads and so on. These experts command pricing power - and much more.
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Scarcity creates value
Kevin Harrington (Enterpreneur)
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If you look closely, there are many non-luxury businesses across a wide range of industries that effectively use the scarcity principle to generate interest, increase demand, drive sales, maintain (or even increase) full margins and create sticky loyalty. The equivalent from an employer branding or EVP (Employer Value Proposition) point of view is the introduction of fringe benefits, multi-year stock option plans, etc. Not for everyone, but attractive - and hard to give up once you get used to it.
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The key to making scarcity work is communication. There is a reason why luxury brands shout their products, dreams and aspirations from the rooftops to the masses. The more people who hear your message, and the fewer who can have/access it, the better for scarcity to work in your favour.
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Three ideas for integrating scarcity
No matter what industry you are in, there are very practical ways you can tap into to start applying the principle of scarcity. Here are three. Read all seven in my in depth article on this topic.
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1. Limit Your Supply and/or Availability
2. Be Time-Sensitive
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3. Communicate Value
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By strategically incorporating scarcity into your business and marketing tactics, you can generate interest, increase sales, achieve higher price points, better margins, stronger customer loyalty and create a perception of exclusivity.
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But beware: Luxury brands teach us that scarcity alone has very little power. Whether it is because something is literally scarce or because the brand uses scarcity as part of its strategy, it only works if the rest of the work is done with a culture of excellence. Scarcity is not a shortcut and should never come at the expense of the quality of what you offer.
What can you make scarce? And how can you incorporate it with integrity within your business?
Onwards and Upwards ??
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About: Markus Kramer is the MD at specialist consultancy Brand Affairs, advising Boards, Executives and Operational Teams on all aspects of Strategic Positioning, Reputation and Brand Management. He is a senior visiting Fellow in Strategic Brand Management at Bayes Business School and holds degrees from the Sa?d Business School, University of Oxford, University of California, Berkeley Extension and Massachusetts Institute of Technology. He is the author of The Guiding Purpose Strategy? and Co-Author of the Responsible Investment Brand Index RIBI?.