Champagne and Scarcity

The Champagne wine region is a historic province in the northeast of France, approximately 100 miles east of Paris. As the name suggests, it is the region that produces champagne, and according to European Union law, the term “champagne” is reserved exclusively for wines that come from this region. Since 1927 there have been 319 villages in France that were sanctioned to produce champagne.

Early in 2008, with the global demand for bubbly on the rise, the vineyard production zone needed to be increased. As a result, French authorities announced a list of 40 villages that were to be included in an expansion of the Champagne appellation boundaries. Prior to 2008, the price per acre for these 40 villages averaged $5,000. Since 2008, the price per acre has soared to more than $600,000. The geography, geology and climate of the land – what the French call “terroir” – are identical to those of surrounding areas. The difference is that these 40 villages are now part of an exclusive club. Welcome to the law of scarcity.

Robert Cialdini, a professor of psychology at the University of Arizona, wrote about this phenomenon in his book Influence: The Psychology of Persuasion.As one of the six basic principles behind the science of persuasion, scarcity can be leveraged to convince people to buy into our suggestions, heed our advice or accept our business proposals. “Whatever is rare, uncommon or dwindling in availability – this idea of scarcity – confers value on objects, or even relationships,” says Cialdini.

But the real power behind scarcity is not in convincing people of what they stand to gain but of what they stand to lose. It may seem to be a minor distinction, but “loss language” holds extraordinary power, making it a key facet of the scarcity principle. Simply put, humans are more motivated to act by the idea of potential loss than by the prospect of potential gain.

We see scarcity around us every day. Free tickets to the first 10 customers who call the radio station create a frenzy of activity and word-of-mouth advertising; limited availability of a new iPhone creates long lines; collectibles having little intrinsic value other than being rare sell at record prices; a jury told to disregard a piece of evidence will give it greater weight. Insider (rare) information is seen as being of greater importance than of what is widely known.

Your vendors also rely on scarcity in their selling strategy. It usually comes in the form of deadlines by which a deal must be completed; limited-time, special programs that deal with price, terms, bundled services or free upgrades are all designed to persuade you to act now rather than later. There are some forms of scarcity that are indeed real. A closeout of a hardware device that will no longer be manufactured and the availability of a true industry expert with very unique skills both merit serious consideration. But a generic software proposal with 10 days of bundled “free” training that expires December 31? How many of you think that same proposal would not be available on January 1?

Knowing the inner workings of scarcity is helpful not only so you will not be a victim but also so that you may become an implementer. “Two of our three executives are out of town next week, so if we want to get this done, it has to be this week.” “We usually get four vendors to bid on this, but in this case it’s you and one other company – just make sure you have your best bid on the table at all times.” “We have time to consider only two or three proposals at year-end – the ones that yield the highest ROI will get priority.” “The only thing preventing you from being a Category 1 supplier and having visibility to more opportunities within our organization is your price per MIP. If this can improve, we have something to talk about.”

What is good for the goose is good for the gander.

ICN has been in the business of helping technology users do better and safer deals with vendors for more than forty two years.