An empirical study of scarcity marketing strategies: Limited-time products with umbrella branding in the beer market

We analyze empirical aspects of the limited-time product strategy—introduction of a new product that is available only for a limited time—that involves the use of umbrella branding. Despite the popularity of such a marketing strategy in many consumer packaged goods categories, little empirical work has studied how consumers react to this scarcity marketing in their actual choices. We use individual-level transaction data from the beer market and model consumers’ beer purchases using a multiple discrete-continuous choice model. The proposed model captures the patterns of consumer choices in response to the limited-time product and the asymmetric sales spillover effects between a parent product and a limited-time subproduct. Using the model estimates, we quantify the effects of incorporating a product’s limited-time nature and adopting an umbrella brand for a limited-time product. Our analyses indicate that (1) the product’s limited-time nature is associated with a rapid jump in demand in the launching period; (2) the return from store coverage for limited-time products decreases over time; and (3) umbrella branding for limited-time products increases the brand-level demand despite the cannibalization of the sales of a parent product. Managerial implications about the nature of perceived scarcity associated with the limited-time product and the effective targeting and distribution strategy are discussed.