Scarcity Strategy Under Social Learning

With the development of Mobile-Internet industry, especially the popularity of smart phones, Apple Inc. and Millets have achieved remarkable results. There is evidence that both the two companies have applied a well-known marketing strategy named Scarcity Strategy. However, research about Scarcity Strategy is still incomplete at present both at home and abroad. On the basis of previous researches, this paper discusses the definition of Scarcity Strategy, studies its function and applicable conditions. Furthermore, from the perspective of consumer behavior, we propose a theory based on Social Learning and the so-called Self-selection Bias, and express our theory in a two cycle model. This paper mainly argues that in new experiential product sales, manufacturers usually limit their production and sales quantity to use Self-selection Bias among consumers. Using this method, they would select out the consumers with higher evaluation on their product. Consumers who actually buy the product in the launching period will report their experience, influencing the quality concept on the product among other potential consumers in the normal sales period. Thus they would affect the total demand on the product.In this paper, we study the research history and content of Consumer Behavior at first, thus leading to the study of consumer behavior in Scarcity Strategy. Then we explore the studies available and on the basis of these studies, we define what "Scarcity Strategy" is and discuss the potential role of Scarcity Strategy. After that, we propose our view about how and on what conditions the Scarcity Strategy can be used, which may be beneficial for the application. Most importantly, we study the mechanism of Scarcity Strategy, and come out with a two-cycle model under Social Learning and Self-selection Bias for experiential products. After that, we discuss the price and sales quantity decision over our assumption. Finally, the results predict that with the increase of customers, the products under Scarcity Strategy will meet a tighter supply. The results also suggests that as long as the price is closely related to customers’preference ratio but has little relationship with the number of customers or the number of products produced at the beginning, the firm should pay great attention to the customers at the beginning, who we may call them "fans".