A new study says consumers will pay anything if they think a product is scarce

It’s been a major problem all over the world during this pandemic. Crazed, frightened shoppers hoarding essential goods like toilet paper, non-perishables, and cleaning supplies. It’s understandable on a visceral level; these are uncertain times and it’s only natural that people want to stock up on what they need. On the other hand, though, panic buying has caused a whole lot of unnecessary problems. 

When people see others snatching up everything on store shelves it only encourages more fear and panic. Moreover, there wasn’t a real toilet paper or meat shortage in the US, or anywhere else for that matter, until people started buying ridiculous amounts in bulk. There are still many stores all over the country today with barren aisles. Even when shoppers can find some of the goods they’re looking for, the only options left are usually cheaper, generic brands, or lower-priced products.

Surprisingly, a new study from Indiana University suggests that pandemic shoppers aren’t reaching for top brands due to perceived higher quality. Instead, people are just grabbing whatever they see first, and top brands are usually displayed more prominently than bargain options. The research team behind the study concluded that during times of real or perceived scarcity, price is among the last factors in most people’s minds.

“Scarcity is aversive and triggers the desire to compensate for the shortage, and to seek abundance,” says paper co-author Ashok Lalwani, associate professor of marketing at the Indiana University Kelley School of Business, in a university release. “People who face scarcity are less likely to view less vs. more expensive options as belonging to different categories, and thus are open to differences at either or both ends of the price continuum.”

During normal times (remember those?), the typical shopper equates a higher price with better quality. Sometimes that notion doesn’t always turn out to be true, but it’s a pretty universal phenomenon in the free market; from BMWs to Grey Goose Vodka, if it costs more, people feel better about buying it. That all goes out the window during emergencies. The intensity and urgency that comes with product scarcity cause consumers to prioritize abundance over price. If all that’s left is a lower-end, cheaper product, so be it. Conversely, if the most expensive option comes in a larger quantity per pack, that’s the ideal choice.

This is the first study ever to examine the effect of scarcity on price-quality purchasing decisions. Of course, scarcity doesn’t have to necessarily be caused by a pandemic. The study’s authors believe their findings can be applied to natural disasters, times of social upheaval, and economic depressions.

“We suggest that people may not only differ in terms of how they categorize purchases, but also in terms of the extent to which they categorize, and scarcity reduces the tendency,” Lalwani adds.

Some may look down on others for buying generic brand options, but the researchers say that during scarce times, any brand is going to be attractive to even the most snooty customers.

While they probably aren’t the first group of people we all consider when thinking about the hardest hit among us during this pandemic, this study and its subsequent implications represent a major problem for stores and businesses that promote particularly high-end, luxury items. For example, a niche hand-made soap business. Usually, consumers wouldn’t mind forking over an extra $5 or $10 for some special soap, but today everyone is loading up on industrial soap products in bulk.

For these businesses, the study’s authors suggest finding ways to “re-activate” the belief among consumers that higher price equals higher quality. One possible way to do this would be through a contest or sweepstakes.

“The same objective could also be attained by reducing consumers’ desire for abundance,” Lalwani comments. “For example, inside the store, managers could have portraits, displays, or ads highlighting the harmful effects of gluttony or hoarding behavior. Doing so may increase customers’ price-quality inferences and shift them from purchasing lower-priced to higher-priced goods.

“Our findings also suggest that when stronger price-quality inferences are desired, retailers are advised to avoid utilizing scarcity messages, such as ‘sale ends this week’ or ‘while supplies last,’ especially for product categories in which the proportion of high-priced items is high, as priming scarcity among consumers may decrease their price-quality inferences,” he concludes.

Ironically, most of the empty shelves we’re still seeing in stores all over the United States are only a reality because of panic buying caused by a fear of scarcity. There’s a lot of psychology at play when it comes to shopping habits and choices, and this work is yet another example of that.

The full study can be found here, published in the Journal of Consumer Research.

John Anderer is a frequent contributor to Ladders News.