Marketers are trained to match supply
to demand. Everything that consumers need should be available at the right time
in the right place at the right price. Coca-Cola's mantra always has been to be
within an arm's reach of desire. To be out of stock is to lose a sale or,
worse, to lose a sale to a competitor.

But marketers also understand that, by using the illusion of scarcity, they
can accelerate demand. This false scarcity encourages us to buy sooner and
perhaps to buy more than normal.

We saw two excellent examples of this effect this summer with the launches
of the iPhone and the seventh Harry Potter book. In both cases, the pre-launch
publicity was designed not only to fuel demand but also to create the illusion
that supplies would be limited. In fact, there were very few supply shortages.
In both cases, the marketers anticipated demand levels pretty well.

As the mountains of press coverage and strong opening day sales attest, the
scarcity illusion strategy paid off for Apple and Potter's publishing company.
It wasn't just direct sales of these two products that benefited from the
scarcity illusion, however: The heavy crowds drove sales of related products in
Apple stores and bookstores during a relatively slow sales month.

But there are risks to using false scarcity as a strategy. First, hype
invites heightened scrutiny: Common first-version shortcomings of the iPhone
fueled negative reviews that were then amplified by the blogosphere. Second,
some consumers, frustrated by waiting in line, may have given up or switched to
other alternatives.

Creating the illusion of scarcity can be a smart marketing
strategy.

Creating the illusion of scarcity is a far different situation than
marketers genuinely underestimating demand for a new product. One well-known
example of this misstep occurred in 1998, when Volkswagen under-forecast demand
for the New Beetle in its launch year. Of course, ramping up production of a
car is more challenging than printing an extra run of a book. But after its
initial error, VW made some smart decisions to mitigate the damage.

First, the company rewarded their best dealers by making the scarce New
Beetles available to them first on preferential terms.

Second, VW factories "fully loaded" the New Beetles with options
to maximize the unit margin that VW and the dealers extracted on each vehicle.

Third, VW incented its dealers to stock up on non-scarce cars such as Golfs
and Jettas as a quid pro quo for receiving scarce New Beetles. Consumers drawn
to VW dealers to look at the New Beetle often ended up buying other VW models
more suited to their specific needs. In this way, the scarce product acted as a
brand magnet for the entire product line.

As the examples above illustrate, scarcity can be a blessing or a curse.
Creating the illusion of scarcity can be a smart marketing strategy. And even
if you're in the unfortunate position of experiencing very real scarcity, there
are tactics you can employ to minimize the brand damage and even profit from
the error.

What's your scarcity story? Has your company been caught flatfooted in a
scarcity situation or has it successfully manufactured the illusion of scarcity
to accelerate demand?