The science behind limited edition

I have written before about the importance of limited editions being produced in limited numbers, appealing to the cognitive bias known as the “scarcity effect”.?

The “scarcity effect” is a cognitive bias that causes people, or in this case consumers, to place a higher value on an object that is in short supply and a lower value on one that is in abundance. This type of product piques our interest and therefore immediately becomes more desirable than a product that is abundant. For luxury brands, however, price is often a necessary attribute to signal their uniqueness.

The Scotch whiskey brand Glenfiddich not only understood this, but doubled down. Their latest limited edition is only available through the BlockBar NFT platform, where only 15 bottles are available through the purchase of an NFT. The buyer then decides whether to exchange or "burn" this NFT for a physical bottle, or whether to keep it as an investment.

In this way, they have used another very effective resource called "social currency." This concept was developed by Pierre Bourdieu in his theory of "social capital" and then so called by Jonah Berger in his book Contagious, anchoring it with more current examples. Social currency is the power people gain from having information that few others have, or from being part of communities to which few others have access. It gives them a sense of recognition and status. That's basically what NFTs provide. People tend to confuse them and think that they are digital art and that you are just buying the authorship of the work, but in reality you are paying for the access and the benefits that you get from owning one of these works. And that's one of the characteristics that they have, which is that they are limited and only a few have access to them.

Study

In 2017, Hyunju Shin, Jacqueline K. Eastman, and David Mothersbaugh published a study called "The effect of a limited-edition offer following brand dilution on consumer attitudes toward a luxury brand".

The study was conducted in two groups. Group 1: college-age Millennials (18 - 25 years old) and Group 2: post-college-age Millennials (22 - 39 years old). Both groups were introduced to a fictional luxury watch brand called "Suisse Preción." The brand was described as the preeminent symbol of performance and prestige for more than a century, with its regular product typically priced at around $10,000 each.

In the no brand dilution condition, Suisse Preción was described as continuously maintaining its prestigious status among luxury watch brands, while in the brand dilution condition, Suisse Preción introduced two consecutively lower-priced watch lines in the $1000–$5000 price range, with some products priced as low as $400 to appeal to price-sensitive consumers.

Two products were presented to the participants in these scenarios, a regular edition of this watch and a limited edition called "Geneva", which celebrated the brand's centennial. This watch has the peculiarity of being decorated with a rare stone (transparent sapphire found only in a few places in Tanzania) and was released in a limited quantity (100 watches worldwide). Its value was $25,000, while the value of the regular watch was $10,000. Three main variables were measured: brand satisfaction, repurchase intention and WOM (word of mouth).?

In all scenarios, the limited edition performed better than the regular edition. In Group 1 (college-age Millennials), WOM intention was even significantly higher, indicating a greater need to gain more status and recognition (social currency).

The study shows that a well developed limited edition increases the value and makes the brand more incomparable due to its characteristics such as scarcity, uniqueness, high price and high status. However, for this to happen, it is important and necessary that there is a credible and interesting story behind the limited edition that supports it.