From Tokyo, Japan and Changsha, China – this is Down to Business English. With your hosts Skip Montreux and Dez Morgan. Hello Dez and hello to all of our listeners. Welcome back to Down to Business English. Greetings Skip, and greetings to everyone listening today. I hope everyone is well and how are you, Skip? Lots of projects going on. Like what? Oh, don’t get me started. I’m in the middle of yet another textbook project with deadlines looming next month.
That’s the thing about writing textbooks. There always seems to be a deadline just around the corner. That there is. On top of that you have Down to Business English episodes to keep up with, and your own clients to prepare classes for. I have to say Skip, you’re one of the busiest people I know. I don’t think so. I know for a fact that you too are knee deep in your own projects. Well, let’s not talk about that. Keep calm and carry on is my motto.
You are the perfect example of grace under pressure, Dez. Thank you. But speaking of my students, a big story among many of them this month has been the release of the Nintendo Switch 2. The video game platform? That’s right. And that is big news because? Because the Switch 2 is the first upgrade since the original Switch was launched eight years ago. Sorry Skip, I’m not really into video games that much. What exactly is the Nintendo Switch?
Well, the Nintendo Switch is a hybrid video game console. You can use it as both a traditional home console connected to your television, or as a portable handheld device. Ah, it ‘switches’. Thus the name. I see. So, the release of this Switch 2 has been widely anticipated by its fans. Mm. It has been. But here’s the thing — the new Switch is in short supply worldwide which makes it very, very tricky to get your hands on one. It's just been released and it’s already difficult to get. Really?
That’s right. Stores in the US opened just after midnight on June 5th to allow excited fans in. Here in Japan, gamers had to enter a lottery just for the possible chance to be able to purchase one. That really built the hype then. It did. But apparently, Nintendo sold a record 3.5 million units worldwide in the first four days after the launch. Incredible. Do you think there is an actual shortage of devices or do you think Nintendo is holding back supply to create some additional demand?
Are asking if Nintendo is utilizing a marketing practice known as scarcity marketing? I am. Great lead in question Dez because as you know, that is our business topic today. And we are going to get into all of that. That we are. Today on Down to Business English, Skip is going to report on the factors that go into scarcity marketing, and I have a great example from China of the practice in action. So let’s do it. Let’s get D2B … Down to Business with Scarcity Marketing.
What Is It, How Does It Work, and Why Scarcity Sells. So Skip, how would you define scarcity marketing? Scarcity marketing, or artificial scarcity marketing as it is sometimes referred to, is a strategy used by marketers to drive demand and encourage immediate purchases. And they do this by limiting the availability of their product — by quantity, time, or exclusivity.
You walk into a store, see a product on the shelf, and because you know supplies are limited in some way, you feel you should buy it while you can — even though you’re not actually sure you even wanted to buy it in the first place. That is pretty much the psychology behind it, yes. The term for the feeling you just described is FOMO. The Fear of Missing Out. FOMO is a strong purchase motivator. That it is.
Now, artificial scarcity marketing assumes that there is indeed enough supply of the product, but that supply is being artificially held back from consumers. So returning to my earlier question, is there a real shortage of Nintendo Switch 2s. Or are they holding them back? In Nintendo’s case — I’m not sure. After all, there is a worldwide shortage of semiconductor chips at the moment, so more than likely there aren’t any warehouses full of Switch 2s.
However, I do think that Nintendo is leaning into the scarcity of those chips to drum up demand for their device. What makes you say that? When Nintendo delivered retailers with their allocated number of Switch 2s, the delivery came with a professionally laminated sign that read ‘Out of Stock’. Something the retailer could use once their Switch stock had all sold out. That’s right.
But it also resulted in consumers in some stores assuming it was a marketing ploy and that there more Switches were hidden in the stockroom in the back. Which almost certainly was not the case. But of course fans wouldn’t know that, so they’d keep coming back to the store. I feel that strategy didn’t go down very well with retail staff. You know, it didn’t go down very well with Switch fans either.
There have been many reports of gamers in the US getting quite angry and demanding to see what was behind the stockroom doors. Which again adds to the hype. Marketing is a brutal art it seems. I’m not sure if it’s an art, but it may be a science. There is a lot of psychology behind scarcity marketing. One concept is known as loss aversion. Loss aversion? Yeah, it is a term that was coined in 1979 by two psychologists, Daniel Kahneman and Amos Tversky.
The idea behind the concept is that people prefer not to lose something of value over gaining something of value. In other words, we tend to feel worse about losing a hundred dollars than we would feel good about gaining a hundred dollars. That is a simple way to put it, yes. But wait — in terms of marketing, you haven't bought anything yet. So technically, you haven’t lost anything. True. But let’s say you walk into a store and there is a big sign that says “Only 3
left in stock.” Loss aversion kicks in. Because I fear I might lose out if I don’t buy it right now. Exactly. That is loss aversion in action. An interesting marketing approach. Another concept of scarcity marketing that comes from psychology is social proof. Essentially, if others are buying something, then I should be buying it too. Right. And if you link social proof to loss aversion, the two concepts strengthen each other.
Like when you’re on an airline or hotel booking site, and you get a pop-up message saying, ‘14 other customers have viewed this room or this flight in the last 24 hours’. That is a perfect example. When you see a message like that, how does it make you feel? It makes me feel like I had better make that purchase right now. Because if I don’t, someone else will get it and I’ll miss my chance.
That feeling you are describing right there is a result of both concepts, loss aversion and social proof, working in tandem. I suddenly feel like I’m not the one making my purchasing decisions. You and I both. A further scarcity marketing concept is ‘winner's privilege’. Imagine you were lucky enough to get your hands on a Switch 2 but none of your friends were. You would now be a member of the exclusive club of Switch 2 owners. I’m a winner!! Not like all my loser friends.
And that is a privilege. High-end brands take this ‘winner’s privilege’ concept one step further by releasing limited edition products. Of course. From my time in Japan, I remember Louis Vuitton marketing a limited edition bag with a cherry blossom design on it. Do you remember that? I do. That collection was a collaboration between Louis Vuitton and Japanese pop artist Takashi Murakami and it was released in 2003. A double whammy — a limited edition and only available in Japan.
Double the exclusivity. Well, that is not completely accurate. Yes, it was a limited edition, but the main collection was in fact available internationally. However you are right, there were some parts of the collection, I think some scarves and some … some hair accessories that were exclusive to the Japanese market. Is that right? I always thought that it was only available in Japan. In any case, it is a good example of scarcity marketing and it was a very successful campaign.
So successful in fact, that Louis Vuitton just reintroduced a new limited edition Cherry Blossom collection this past spring. That, I didn’t know. Now that everyone has a good understanding of what scarcity marketing is, why don’t you tell us about this Chinese business that uses some of these strategies. Absolutely. Pop Mart is the name of a toy company founded in Beijing in 2010. They sell a variety of plush toys that can be used to accessorize your bag — like a backpack or shoulder bag.
Hm. I don’t think I have ever heard of them. Well, I think that is going to change very soon. Oh really? What makes you say that? Even though they have been around for a while, they recently went viral across Asia when a member of the girls K-pop group, BlackPink, started decorating her bags with Pop Mart’s Labubu monster elf figures. Ah, Pop Mart got a celebrity endorsement — another good marketing strategy. It is.
And just before we sat down to record today, I saw a headline on the BBC that a human-sized Labubu doll sold at auction in Beijing this week for a record £110,000. Wow. That’s like USD 150,000. For a doll? Apparently it is now the most expensive toy of its kind in the world. I think you are right Dez, we all might be hearing more and more about Pop Mart and their … what did you say they are … Labubu dolls? That’s right. But let’s look at how Pop Mart markets these toys.
Their first strategy is to sell them in blind boxes. A blind box? So, you don’t know which monster elf you are going to get until you pay for it and take the box home. Which increases your anticipation of the unboxing while at the same time encourages you to buy again if you don’t get the character you wanted. Kind of like playing a scratch and win lottery ticket. You could win a dollar, or you could win $100,000. It just comes down to luck. Plus, there is a super rare Labubu model in the mix.
Super rare? The latest super rare character is Rainbow and only 1 out of 72 shoppers will be able to get it — that really juices up the anticipation. I can imagine. Also, Pop Mart has opened shops all over China. But if the two shops in Changsha are anything to go by, they are likely to be almost always sold out of the most in demand products. Step one — celebrity endorsement. Step two — limited edition products. And step three — artificial scarcity. I see all the strategies at work here.
And there's one more step at play. Step four — drop culture. Drop culture? That’s when a limited number of toys are suddenly delivered, or ‘dropped’ into a store but they sell out immediately. And Pop Mart does this? Oh, you bet they do. That is some genius marketing strategies on their part. And it doesn’t stop there. Pop Mart has limited edition models on the international market. There is Labubu Thailand-only, Singapore-only models, and so on. So this is mainly a trend in Asia.
Actually, Labubu dolls are now available in selected countries worldwide. And as they expand globally, Pop Mart returned to step one of their marketing strategy. Step one — celebrity endorsement? When they opened stores in the US, Canada and the UK, British singer Dua Lipa and none other than the world famous Rihanna started to be seen in public with Labubu dolls on their bags. And I’m guessing these newly opened US and UK Pop Mart stores don’t actually have any inventory of these monster elves.
Only when there is a limited drop. I imagine fans line up outside all night if they hear there is going to be a drop. There have been reports of long queues in the US and the UK. In fact, I recently read about a product drop in the UK where tensions rose to the point where some fans got into physical fights. Over a doll? And that is a good thing? In the world of scarcity marketing, I guess it is.
But in all fairness, in response to the violence, Pop Mart did take the Labubus off the shelves for the safety of their customers. While at the same time increasing the scarcity value even more. All of this for a bag accessory. Hard to believe, but true. I’m not sure I would ever go that crazy over a consumer item. What are you talking about, Skip?
Are you telling me that an Apple fan boy like you has never stood in line in front of an Apple store overnight, waiting for the release of the latest iPhone. You know, as much as I love my Apple products, I can proudly say I have never done anything like that. If you say so. But I am skeptical. Well on that note, I think it’s time for us to get D2V … Down to Vocabulary. Our first item on D2V today is the expression ‘to lean into something’.
When you lean into something, you fully accept or embrace a situation — especially in order to make the most of it. Or take advantage of the situation to gain some benefit. In the story, I said that Nintendo was leaning into the scarcity of computer chips to increase demand for the Switch 2. Meaning that Nintendo accepted the chip shortage and used it to their advantage. They turned the situation into a marketing strategy to boost interest in the Switch 2. Exactly.
Can you give us another example using to lean into? Sure. Do you know that Volvo cars perform very well in crash testing? Yes, I did know that. Volvo has a great reputation for being a safe car. Well, Volvo leans into that reputation in their advertising, marketing their automobiles to families who want to keep their children safe. You do see a lot of Volvo ads that focus on safety.
But some studies show that drivers of Volvos take more risks because they feel so safe — and that can lead to more accidents. Hm. Which of course Volvo chooses not to feature in their marketing. What’s our next word? Our next phrase is to coin a term, or coin an expression. This means to invent a new word or phrase. The word coin in this expression comes from the idea of coining money — like making new coins at a mint.
So, when you coin a term, you're creating something new, just like making a brand-new coin. In the story, Skip mentioned the term ‘loss aversion’ was coined in 1979 by two psychologists — Kahneman and Tversky. In other words, they invented the term ‘loss aversion’. Do you know any other terms that have been coined, Skip? There’s a lot of debate about who exactly coined the word ‘selfie’, but most people agree it became popular on Australian social media around 2002.
I have never been a fan of selfies. I personally never take them. I don’t believe that for a second, Dez. I bet there’s at least one selfie hidden on your smartphone. Trust me, there isn’t. What’s next on our list? Our final D2V item today is the phrasal verb, to juice up. When you juice something up, or when something is juiced up you are making something more exciting, powerful, or intense. Imagine yourself in the morning just after getting out of bed.
You’re still half asleep, but then you drink a big glass of orange juice, full of vitamin C, and suddenly you’re full of energy and ready to meet the day. Very nice mental image, Dez! It should be. I go through that routine every morning. In today’s report, Dez noted that the super rare models in the Labubu product line juice up the expectations of fans. In other words, the possibility of getting one of those rare dolls creates a lot of excitement for the fans.
You also hear this expression in the office. For example, if you're giving a presentation, you can juice it up by adding visuals or telling a story to make your point more interesting for your audience. A great way to juice up your English progress is by becoming a member of D2B English. Another fine example. Would you like to help Down to Business English reach more people wanting to improve their Business English skills?
Follow Down to Business English on Apple Podcasts, YouTube Music, Spotify, or any place podcasts are found. Leave a rating and a review and tell everyone how much you enjoy the show. And that wraps up our look at scarcity marketing. Dez, that Pop Mart example was a perfect case study — I really learned a lot. And I didn’t realize just how much psychology goes into making people feel like they need to buy something right away. A lot goes into scarcity marketing strategies — but it clearly works.
Er, there’s no doubt about that. Before we go, a quick heads-up to all our D2B Members and Apple Podcast Subscribers — we have got a Bonus Down to Vocabulary episode coming your way very soon. That we do. In that D2V episode, we’ll be looking at five more key words and phrases that came up in today’s report — all of them especially useful when talking about marketing, branding, and consumer behavior.
Those expressions are: to be knee deep in something, hype, exclusivity, an allocated number of something, and in tandem. If you’re a D2B Member, you will find the bonus episode in your private podcast feed, so make sure you are subscribed to that. If you’re not already subscribed, just copy the podcast feed link from your member account page on the D2B website and paste it into your preferred podcast app. And Apple Podcast Subscribers — for you there is no need to lift a finger.
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