June 2nd, 2008

Scarcity rocks

in: Communicate, Create, Standing out

I wrote an article a while back about Linkedin and Notchup. The short version: With a particularly viral offer, Notchup used Linkedin to harvest and enrol 900,000 users in around 3 weeks.

Many of the blog comments that came back concerned scarcity. The whole premise of Notchup was to help recruiters find the hottest candidates–the ones who weren’t looking. They figured that it was worth paying to talk to this talent, and with a decent paycheck at the end of it, even the most tight-mouthed candidate would be willing to part with some personal details.

But with popularity, the cachet of “reach the people who are hard to reach and not looking” goes away.I call this the Krispy Kreme problem. A friend of mine handled operations for the donut maker years ago (sort of the opposite of high tech), and he wondered to me one day whether the fact that you could get their donuts pretty much anywhere was a bad thing. He was right.

Unfortunately, scarcity doesn’t scale.

There was a time when Krispy Kreme was precious. Kids stuck their noses against the glass, watching the oozing, fried carbs scroll slowly by as they were drizzled with still more opaque white carbs.

The company found success, a combination or word-of-mouth cachet and decadent simplicity. Buoyed by investors, Krispy Kreme ventured into new markets.

At first this looked like a great idea. Even their choice of partners made sense. Astonishingly, this is a shot of the elevators at Harrods in England, with Krispy Kreme right next to the Parisian Tea Room. Wilde would have found the enthusiasm terribly earnest.

But then the company set up shop in airports and movie theatre lobbies. What was once 48-donut sports-team purchases became one-offs, and soon people realized it was just fried dough.

I’m convinced that scarcity drives popularity online. I have little evidence of this which I can publicly share. But many of the startups I talk to get better adoption when they have a “beta” screen and a “click here to get on our waiting list.”

In several cases I know of, a company that launches a product with an open beta fails to get the excitement they anticipated. This is because surfers are asking themselves whether they really need the service.But as soon as they have a “closed beta” where you need a password to get in, people flock to them. The decision is no longer about whether they need the service, but about whether they can get access to it before the passes run out. By introducing a false scarcity, the sites get enrollment up.

This is a dangerous, but necessary, game to play. Startups need users in order to learn what works and improve the process; but if those users sign up and never use the application, they won’t get the feedback that’s so essential as part of the beta process.

Then again, it’s always the cool clubs that have a lineup. And the lineup makes them cool.

Tags: closed beta, Krispy Kreme, open beta, scarcity, web launch

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