Fear of Missing Out
With the current COVID-19 created toilet paper panic, we can see a basic human reaction, a Fear of Missing Out (FOMO).
Because of a relative few who bulk bought, whether through genuine fear, or by opportunists who thought they could profit from panic, and the latter certainly exist, the rest of the population felt they had no choice but to join they buying spree, because they really were missing out. In the case of toilet paper, supply is not limited, it’s excess demand. Woollies have said the demand is for 7 weeks of supply EVERY day. This is the madness of the crowds and not something manufactured by retailers.
In more normal times when marketing a product, FOMO can result in a buyer taking action when they might not have otherwise. It could be due to a limited supply or it could be due to a time limit.
Limited supply could be as a result of an end of season sale of seasonal products or a run out of last year’s model before stocks for the next year’s ‘improved’ model arrive. People regard these as genuinely limited offers. Less genuine are those stores which have closing down sales that seem to last for years.
A time limit may be a hard limit like the end of financial year or it could be a limited promotional offer with a clear end date.
In some circumstances this could be a customer created time limit, for example when an express service is demanded as in the case of same day dry cleaning services.
The effect on the buyer of such offers is to incentivise them to take action rather than to go away to think about it, possibly never to return, for FOMO. If by creating scarcity the demand increases sufficiently it may also be an opportunity to increase prices. This is particularly the case with customer created time limits.
Using FOMO to increase demand really only works when the scarcity is genuine, but people can easily tell the difference.
In the case of toilet paper manufacturers, it’s boom time now, but when the panic subsides, when people’s cupboards are full, I fully expect a major production slump as people work through their stocks, and for those who filled their garage hoping to sell each roll for $10, that may be a very long time.
However for most businesses, just the introduction of a new product may be a way of increasing demand on an old one, even if there is not a lot of difference.
May Your Business Be – As You Plan It.
Dr Greg Chapman – The Profit Whisperer
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