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Scarcity breeds demand

Negotiation touches every part of our lives. Relationships in business and in our personal lives are negotiated. And the skills to do it effectively can often mean the difference between getting what you want or losing out. You don’t get what you deserve, you get what you negotiate!

In the first section of the book, How to be a Great Negotiator, written by property economist, investor and developer Neville Berkowitz, the characteristic traits of a great negotiator are explored in short, bite-sized nuggets of advice.

Over the next few months, we will bring you the traits needed to succeed at the art of negotiating.

(Courtesy of PersonalEmpowerment.co)

103 Scarcity creates demand

The law of supply and demand determines the price of most things. The principle that “the scarcer the item, the greater the perceived value” can be, and often is, artfully and artificially manipulated. A well-known example is the diamond industry. The diamond magnates who preside over the industry keep massive amounts of diamonds in their possession off the market. If they were to release them all, it would flood the market and the value of diamonds would plummet. So, in this sense, there is more money to be made in not selling diamonds. And so the price of diamonds is artificially manipulated. This points to the scarcity principle which states that by reducing the supply of something you can make the existing stock of goods and services more desirable and more valuable to the purchaser.

This principle plays on the basic human desire to possess what is precious. When we learn that our ability to obtain or possess something is curtailed, even that which we may not have as yet wanted or been interested in suddenly increases in its desirability. The mere knowledge that we cannot have it triggers the idea that “I must have it now”. People are often motivated more by the desire to obtain what they are told that they cannot have, or that which is unavailable than by the actual pleasure of possession when supply is plentiful. This is one meaning of the story of the “forbidden fruit” in the Garden of Eden.

As a result, this has become one of the most common sales techniques and marketing strategies. If you restrict someone’s access to something or even take it “off the shelf,” the desire to possess it increases significantly. Then people may crawl over broken glass to possess it!

Public auctions play on this strong human desire to possess what is scarce by snatching it from the competition at almost any cost. Auctions create an atmosphere that could be called “scarcity fever”. In a way it is a version of the fevered atmosphere of possibility created in gambling casinos.

The age-old need to feel good through possessions has been heightened in our materialistic age; it fuels modern capitalism. The status of exclusive possession – owning things others can’t have or afford – grants a feeling of being unique, special, and more important than others. Exclusive possession somehow translates into a feeling of well-being; the value of the object possessed alchemises into increased self-worth and status. It has always been so.

The canny negotiator or salesperson knows how to plant the ideas of scarcity or exclusivity and their corresponding value in the mind of the potential purchaser. If you can articulate how special something is and why, and therefore how valuable and prestigious it is, you will often create in the other party a strong craving for the object that will simmer and intensify in them on its own. The shadow side of the specialness bestowed through possession is the lack of specialness implied in not possessing or not being permitted to acquire the desirable object.

When the above ideas of scarcity and specialness have been planted, the fear of loss, of not having something, or of not participating in its exclusive magic becomes an urgent, irrational motivator. At this point, silence on the part of the negotiator allows the idea and craving for possession to grow in the potential purchaser’s mind.

People do make rational choices from a logical standpoint. But there is almost always an emotional and irrational component, a kind of X-factor, in most purchases and important choices. Great negotiators use this emotional/irrational component as leverage to tip the balance in the direction of a mutual interest endpoint that the other party might be resisting for various reasons.

Negotiating, in this sense, is about persuading the other party to choose to do something that they really would like to do but may not have the clarity or confidence to choose now. Your job is to stimulate the desire that brought them into the negotiation to the point where they finally choose it. The idea of the scarcity of goods or services, coupled with the implied promise of being special or feeling satisfied by having such a thing, can often generate a decisive tipping point in the process.

Scarcity fever can be created by time pressure such as approaching deadlines when all availability ends; or by limitations on access, numbers, or available space; or by evoking the images or feelings of loss or failure that could result by not acting now. This method of influence and persuasion can take countless subtle and obvious forms. While it is not an approach that suits every negotiation, every negotiator should be well-versed and competent in its use.


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