Sunday, March 28, 2010

Influence: Chapter 7


The scarcity principle makes us desire items that are short in supply. Humans show tendencies towards this principle from as early as the age of two, as experiments have shown that young boys will go after toys that are fewer in number or that are blocked off over toys that are available.

Marketers will often feign scarcity in order to get customers to purchase a product. By pretending that an item is the last one in stock, or by intimating that another buyer is interested (e.g. a common tactic of real estate agents), a human emotion is triggered that often overrides sound analysis. This principle may even be a contributor to asset price bubbles (for tulips, real estate, and even stocks), as individuals fear that they must buy or they will not get any, even if reasoned thinking would suggest they don't need any!

Cialdini believes scarcity plays such a large role because humans tend to fight against restrictions, even if they wouldn't consume the object in question were it available. This fight against restriction is not limited to tangible objects, but ideas and speech as well. When censorship is employed to prevent the consumption of certain political or sexually explicit materials, psychologists show that the fact that these are forbidden actually increases interest in them, ironically leading to the opposite effect of what those who make the rules were intending.

Psychologists find that two additional factors can make our tendency to desire scarce items even more intense. First, if the availability of a scarce item is reduced to a level (rather than having been at that level the whole time), desire goes up. Secondly, if individuals are in competition for the scarce items, desire goes up as well.

This is a difficult tendency from which to defend ourselves. Cialdini advises readers to be on alert for the feeling of emotion that accompanies the thought that an item is scarce. When that feeling is recognized, individuals should be cognizant of what is taking place and try to calm themselves so that they may analyze the situation soundly.

1 comment:

Penny Stock Trading Tips said...

You do have a point about Mr. Market. Really careful beginners will go with whatever he throws their way. Myself on the other hand, have studied Mr. Market for years and see the perfect opportunities to take advantage. Thanks for the great post.

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