• global selling
• scarcity
• selling
• value

The COVID-19 outbreak led to tight lockdowns around the globe. As sourcing of raw materials were put on hold and factories were in a standstill mode, this led to electronic component scarcity that has never been seen before (Voas & Kshetri, 2021). In scarcity theory, it is said that scarcity enhances value (Lynn, 1991) and this is especially true for the tangible items that can be possessed and traded. But scarcity has also an impact on the value that can be found in services and relationships.

When value is offered to the customer, it needs to be co-created with the customer. The seller can propose a value, but the customer has to accept and perceive the proposed property as a value. Value can be proposed around many properties and it is, for example, personal, time dependent and it can also be relationship based. To be of true value to the customer, it has to help the customer achieve their goals.

In a study for a thesis, with 225 participants, the effects of component scarcity on value in the industrial automation sector were researched. This study made claim to customers with 19 properties that could possibly have value for the customer. Respondents then valued these properties on a scale from one to five. The questionnaire was carried out as an anonymous web based quantitative questionnaire.

Scarcity has no or little effect to intangible services

There was no statistically significant change in the valuation of services like webshop, global availability, and reliable and personal salesperson. The result can be seen to be more or less obvious because the component scarcity seemed to have no or little effect on these intangible services. However, personal customer care and local technical support, together with reliable and personal salesperson had their valuation grown during scarcity. The change was not statistically significant though. Still, this may imply that as a customer seeks better availability and new products, they need help to create new solutions to their issues to reach their goals.

Scarcity has a big impact on price and availability

During a scarcity situation, price has less meaning for the customer. In the study, the drop for this claimed value property (price) was the biggest. At the same time, properties like delivery time and stocking, or in other words, availability, were much more highly valued. So, during scarcity, customers are willing to pay more for the same product if it is immediately available. The change in the valuation was statistically significant. This correlates very well with the scarcity theory.

In scarcity, the valuation of easy deployment together with technical specification (performance) was lowered. The change was statistically significant. Together with the valuation of price and availability, this finding implies two things. A product can be complex to install and taken into use if it is available. Also, the performance can be worse than compared to the usually used product if it is available.

One property that was claimed to have value was reliable delivery confirmation. The valuation of this property changed statistically significantly to a higher level. The delivery information is seen crucial for the customer during scarcity. This may be related to lean manufacturing or just in time manufacturing where the customer relies purely on the supplier’s capability to stock and delivery on demand. During scarcity, this is, of course, a big problem for the supplier.

Customer loyalty lowers during scarcity

Interestingly, the second biggest drop in valuation was for the property long relationship between the buyer and the seller. The change was statistically significant. There was also a drop in the valuation of the property of the possibility to buy many products from the same vendor. The change for this property in valuation being statistically significant was inconclusive as the result for the significance was just above the limit. These findings imply that loyalty drops during scarcity. As customers are getting into trouble with availability, they seek other solutions from different providers. So, the valuation of the availability overrides the valuation of long relationships and the possibility to buy many products from the same vendor (large portfolio).

During scarcity, the suppliers need to adjust operations accordingly

The findings in the study imply that during scarcity the suppliers should keep close contact with their customers in order to maintain trust since the level of loyalty has lowered. The supplier should also aim to provide accurate delivery data to the customer to create value. Lastly, the supplier needs to actively propose different solutions to solve the customers’ issues, even with a (much) higher price and with lower or higher product performance, assuming that the solution is better available.

References
Anderson, J.C. Narus, J.A., & van Rossum, W. (2006). Customer Value Propositions in Business Markets. Harward Business review, 84(3), 90-9. https://hbr.org/2006/03/customer-value-propositions-in-business-markets
Barnes, C., Blake, H., & Pinder, D. (2009). Creating and delivering your value proposition: Managing customer experience for profit. Kogan Page Publishers.
Baumann, J. Le Meunier-FitzHugh, K., & Wilson, H.N. (2017). The challenge of communicating reciprocal value promises: Buyer-seller value proposition disparity in professional services. Industrial marketing management, 64, 107-121. https://doi.org/10.1016/j.indmarman.2017.02.002
Lindic, J., & da Silva, C.M. (2011). Value proposition as a catalyst for a customer focused innovation, Management decision, 49 (10), 1694 – 1708. https://doi.org/10.1108/00251741111183834
Lynn, M. (1991). Scarcity effects on value: A quantitative review of the commodity theory literature. Psychology & marketing, 8(1), 43-57. https://doi.org/10.1002/mar.4220080105
Voas, J., & Kshetri, N. (2021). Scarcity. Computer, 54(1), 26-28. https://doi.org/10.1109/MC.2020.3033611