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In 2005, Ben Fischman was CEO of SmartBargains. It was a discount website selling everything from bedding to luggage.
The deals were fantastic. Visitors flocked to the site for prices up to 75% off. It was an overnight success.
But by 2007, the buzz was gone.
Competitors had cropped up. Dozens of newer sites were offering better deals and cheaper prices.
SmartBargins lost its market share, and visitors left in droves.
So Fischman tried again — except this time, he eventually sold his comparable website for $350 million.
Here’s how he did it, and what it means for marketers.
The Power of Scarcity
In 2008, Fischman launched an entirely new website: Rue La La.
Rue La La sold the same products. Same dresses. Same shoes. The entire stock inventory was the same.
And yet, Rue La La exploded in popularity. It quickly generated demand and landed Fischman a considerable payday when he sold the site for $350 million just one year later.
The secret? Fischman understood the power of scarcity.
Rue La La was entirely exclusive. Visitors needed a login to even browse the site. Access was by invitation only. Buyers couldn’t simply sign up — they needed to be invited.
The site tapped into urgency for its members: sales lasted just 24 hours, and stock sold out in minutes.
Suddenly, shoppers weren’t just browsing. They were rushing. They were excited.
The results are impressive, but the psychology behind it is relatively simple:
• If it’s hard to get into, it must be good.
• If it’s limited, it must be worth having.
Scarcity Examples in Marketing
There is an incredible wealth of evidence that proves how Rue La La’s success wasn’t a one-off. Sure, copying the execution exactly might not work for you, but the principles behind their model are tried and tested.
Take these three studies:
1. Researcher Iyengar found that jam sales increased when the number of options was reduced from 24 to six. It turns out that consumers prefer fewer choices, even if it limits their decisions.
2. Cookies from a jar with two cookies are tastier than those from a full jar (and willingness to buy goes up by 43%). Our brains are wired to prefer scarce resources.
3. Limiting the amount of soup consumers can buy (e.g. “only 12 cans of soup per person”) increases sales by 112%. Capping the amount a consumer can buy encourages more sales.
Fischman intuitively knew what scientists had proven: People don’t just want great deals. They want exclusivity.
Rue La La didn’t sell shoes. It sold scarcity.
How Marketers Can Leverage the Scarcity Principle
Let’s finish with three tips you can apply today.
- Limit the amount a customer can buy. KFC Australia tested 90 different Facebook ads. The winner was “Chips for $1, limited to four per customer”.
- Shorter deadlines drive quicker action. In Happy Money, authors share how a promo with a two-month expiration date was only redeemed by 6%. However, the same offer with a three-week deadline was redeemed by 31%.
- Reduce product variations to boost sales. Proctor & Gamble reduced Head and Shoulders shampoo variations from 26 to 15, resulting in a 10% increase in sales.
This blog is part of Phill Agnew’s Marketing Cheat Sheet series where he reveals scientifically proven tips to help you improve your marketing. To learn more, listen to his podcast, Nudge, a proud HubSpot Podcast Network member.
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