What you will learn from this post:
- The consumer psychology behind abundance and scarcity when it comes to decision making
- How abundance can negatively impact decision making in grocery stores
- Why scarcity works effectively in farmers’ markets
- Why artificial scarcity can be detrimental in the grocery category
- What effective scarcity marketing tactics learned from farmers’ markets can be used by major grocery chains and brands
We live in a world where scarcity is no longer forced upon us. If we want strawberries in Calgary in February, no problem; they’re available at every grocery store in several fresh or frozen varieties. If our hearts desire Pacific salmon on the Atlantic coast, or Atlantic salmon on the Pacific coast, that’s totally doable.
But it’s a well studied phenomenon that too much abundance and too many choices lead to anxiety and often a reluctance to purchase. To counter this, retailers and brands build an impression of scarcity through limited time offers and exclusive availability. Too much of a sense of scarcity, however, can also lead to distrust, risk-aversion and decision paralysis.
So, what’s the right balance? Marketing for scarcity is a natural approach of farmers’ markets and they have naturally built-in best practices.
The Scarcity Conundrum
The grocery industry is facing intense disruption, with heavy competition and high consumer expectations. CPG businesses are under constant pressure to garner shelf space and perform well on it. If you compare the grocery store experience to that of the farmers' market, there are some rational disconnects:
GROCERY STORES: While 39% of Canadians consider grocery shopping a “chore that they try to spend as little time on as possible," 75% say that their main grocery retailer carries what they want, which 60% say is critical to their decision of where to shop.
MARKETS: A study done for Farmers Markets Ontario (agreed, this isn’t exactly an unbiased researcher) found that 96% of shoppers at Ontario farmers’ markets have said their experiences meet or exceed their expectations and that only 16% say they need more variety of products.
Think about that for a moment. Some grocery stores have upwards of 60,000 items. Farmers' markets often have only a handful of vendors selling seasonal or speciality items. Why are those shoppers so happy? And what can major retailers take away from that?
Studies and general practice have repeatedly shown that while having options is desirable, there is such a condition as too much of a good thing.
Consider these real world and academic examples on traditional CPG items:
Haircare: When Proctor & Gamble reduced its line of Head & Shoulders shampoos from 26 to 15, sales increased by 10% (Iyengar, The Art of Choosing).
Jam: Two stands were set up at a grocery store. One had an assortment of 24 jams, the other had only 6 jams. More people stopped to look at the large assortment, but customers were 10 times more likely to actually purchase from the smaller selection (Journal of Personality & Social Psychology, 2000).
Toothpaste: When people have the choice of one brand of toothpaste with different product extensions, they are likely to consider a switch to a brand with only one option (Journal of Consumer Research, 2003).
When there’s too much to choose from, there’s a paralysis of choice and either a less-than-perfect decision is made (“satisficers”) or no decision gets made at all.
To counteract this, there is a move towards a consolidation of brands and smaller format stores, making regular, every-day decisions more straightforward for the consumer in the hopes of growing revenue.
Brands and retailers also often build an impression of scarcity to entice sales and encourage people to try something new. They market for scarcity in a world of abundance using some of the following tactics:
- limited time offers (“Act now…”)
- a sense of exclusivity (“Members only…”)
- limited quantities (“While supplies last”)
These three approaches rely upon shoppers’ desire to not overspend or a fear of missing out. Artificial scarcity can make people feel an urgency to purchase. However, with too frequent scarcity, people become immune or distrustful of the “deals," and often stop focusing on the positive and begin to fixate on negative consequences of a bad choice. This leads to cognitive dissonance and a diminished impression of a positive experience.
Farmers’ Markets – The Original Scarcity Marketers
At farmers' markets, even in the harvest season of abundance, there are only a couple types of each vegetable. There’s a willingness to pay more money, change patterns of behaviour, deal with less convenient hours & locations and manage with reduced variety or quantities. And yet farmers' markets are active and their customers are happy. Farmers’ markets are natural scarcity marketers with some of the following tactics:
Limited Time Offers: “Strawberries and peaches are only available at one time of the year”
Sense of Exclusivity: “You can only get these farm-direct items here, within these reduced hours”
Limited Quantities: “We only have what the truck could carry and what we could grow this week”
These LTOs are simple & well-understood, built on a sense of nostalgia and memories of gorging on certain items at certain types of the year and are not artificial. The average farmers’ market shopper (skewing female & over 40) buys into it. They walk away with their box of gleaming June strawberries and feel like they’ve won the lottery.
What can brands and grocery retailers take from this?
Grocery retailers need to provide their consumers with their favourite brands and product alternatives. It’s the standard to which consumers have grown accustomed and it’s the most important feature of a good grocery store. When considering LTOs, some of the best examples take advantage of the same approaches as farmers’ markets.
- Tie them to familiar natural seasonal offerings: Think Pumpkin flavoured items in October, ideally, using actual pumpkins… and draw the line at the absurd.
- If seasonality isn’t a natural fit for your brand, use innovation to extend the product into the lifestyle of your target in that season, like Coke’s summer-time offering of music connected to the purchase of a bottle.
- Use product extensions and truly limited quantities to drive repetitive demand annually like Doritos’ ketchup chips award winning campaign.
- Avoid arbitrary price cuts as they can de-value brand over the long term
People don’t like to be sold. Give them what they want and need. Help them feel like they’re winning, rather than avoiding loss. Brands, retailers and consumers will all be better off.