How Product Scarcity Impacts on Choice: Snob and Bandwagon Effects

E. van Herpen, F.G.M. Pieters, M. Zeelenberg

Research output: Contribution to journalAbstractAcademic

Abstract

The value of products is not only determined by the utility that consumersderive from the products¿ attributes and their functional consequences, but has animportant social component as well. Specifically, scarce products are generally deemedvaluable, independent of the utility that their intrinsic attributes deliver. This effecthas been found in several studies and appears robust (Lynn 1991). This paper identifiestwo distinct routes through which scarcity can increase product choice. These routes areexpected to have distinct effects in the product valuation process, which have until nownot been examined in detail.The first route examines scarcity due to excess demand. Consumers see thatothers have bought the product, and this may induce them to follow that behavior. Thiseffect can occur out of conformity with others. Consumers may also extract informationabout the value of a product from the buying behavior of others. When consumers are unsureabout the value of products, information on the valuation of others can help refine theirown valuations. Hence, scarcity due to excess demand increases inferences of productpopularity and quality. This is related to the bandwagon effect described in economicliterature. The second route concerns scarcity due to insufficient supply, whereproduct exclusiveness leads to inferences of product quality (snob-effect). Consumersvalue the exclusivity of possessing rare products, and may see these products as a mean toemphasize their uniqueness. Being one of the few who own a particular product may increasethe product utility. We examine how scarcity operates in both routes, which theoreticallyexclude each other. By separating the two routes, we hope to gain new insights into thecommon situation where product scarcity influences consumer choice, and where less of aproduct increases sales. To gain more insight into the two routes, and the dual forces of followingothers (bandwagon) versus being different from others (snob), our study relates theseroutes to consumers¿ need-for-uniqueness (NFU). The ability of scarce products tocreate a sense of uniqueness has been proposed as a reason for scarcity effects (Fromkin1970). We propose that NFU only moderates the relation between scarcity and quality whenscarcity is due to supply limitations, not when it is due to excess demand. After all,excess demand implies that the product is popular rather than exclusive. As an application area, this paper examines the influence of productscarcity as communicated by empty shelf space in stores. The visible (lack of) supply of aproduct is powerful signal of product scarcity (Stiff, Johnson & Tourk 1975). When aproduct is almost out of stock, this may act as a scarcity cue, and it is a situation thatconsumers commonly experience during shopping trips. In fact, if our research indeed showsthat product scarcity, as expressed through empty shelf space, increases preference andchoice of scarce products, this implies, somewhat counter intuitively, that reduced stockspromote increased sales. Two experiments test our framework. The first experiment examines bothscarcity caused by excess demand, and scarcity caused by limited supply in a virtualshopping environment for a sample of the Dutch population. This study confirms thatscarcity due to excess demand leads to inferences of product popularity and quality, andthereby increases product choice. In a second experiment, we used a different setting(liquor store). To gain more insights into the processes underlying the scarcity effectson choice, we also examined the influence of NFU. In this second experiment, the reasonfor empty shelf space and the degree of empty shelf space were manipulatedbetween-participants. Each participant viewed a shelf with two different wine bottles onthe computer screen. One of the wines was scarce, and product evaluations were asked forboth products, within-participants. Results show that both scarcity routes exist andincrease product choice, while NFU only enhances quality inferences when scarcity is dueto limited supply. Theoretical implications concern the identification of two scarcityroutes. While previous scarcity studies have mostly focused on limited supply, we showthat excess demand and limited supply promote distinct inference processes. Although bothroutes lead to increased product choice, the process and moderating variables aredifferent. Practical implications of our study concern sales forecasting, inventorymanagement and the influencing of product preference. The accelerating effect of emptyshelf space implies that stock-outs may occur sooner than one expects. Using empty shelfspace as an efficient management tool would only be feasible in stores that sell arelatively small amount of products. Especially in combination with a sales pitch,scarcity can increase sales here. The insight that our study provides into the response ofconsumers to demand versus supply reasons for scarcity has important implications for sucha sales pitch. In one case, emphasizing product uniqueness can be advantageous while inthe other case it may be detrimental.
Original languageEnglish
Pages (from-to)623-624
JournalAdvances in Consumer Research
Volume32
Publication statusPublished - 2005

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