I was listening to a news story recently about a famous French chef (Chef Ludo Lefebvre) who loved to create, to cook, to push culinary limits – but hated the stress, hours and financial overhead of a traditional restaurant. So Chef Lefebvre decided to turn his entire business model upside down and create Ludo Bites – pop-up restaurants that show up at limited locations in the Los Angeles area, for a limited time, and with a limited menu.
The results have been transformative for Chef Lefebvre. He works fewer hours, makes a greater profit (even with lower prices due to the low overhead), and is able to channel unfettered creativity into gastronomic works of arts. Customers become groupies and post photos of these intimate dining experiences throughout Social Media sites.
The broader lesson for all of us is that scarcity as a strategy has its benefits:
- Scarcity grabs attention. The buyer does not want to miss out on an opportunity. The purchase itself becomes an experience to be coveted.
- Scarcity forces action. The usual “let me think about it” option is the same as a “no”, nudging the potential customer to complete the buying cycle.
- Scarcity takes the emphasis off price. Instead buyers are focused on the deal and the increased value, due to the fact that the offer will soon be gone.
- Scarcity allows the freedom to innovate. For both owner and client a limited offer allows products and services to be introduced and tested with limited risk.
Another great example of the power of scarcity is the success of Groupon, both as a company and as touted by local owners who have used this channel to get out limited time offers and thereby grow their base.
Your Next Best Three Steps?:
- What type of new customer do you want to attract to your business? If you just offer a popular product to existing clients at a discount, you will only lower your margins. Instead think of the type of new clients you most want to attract.
- Decide on the product, price and timing that will attract this new customer. What products have higher margins (like digital products) where you can safely offer great deals? What products/services are especially attractive to the group above?
- Get the word out and remind them of deadlines. Channels like Groupon are a good means as well as limited time radio offers, street handouts and mobile listings. Make sure you remind potential clients just before expiration. You’ll be surprised how many procrastinators are out there!