Scarcity Strategy in Crowdfunding: An Empirical Exploration of Reward Limits

Abstract

Scarcity-based marketing strategy has been prevalently implemented in reward-based crowdfunding in the form of reward limits, whereby campaign creators restrict the number of backers for each reward tier. This study uncovers the effect of reward limits on eventual and concurrent funding performance. Specifically, we performed campaign-level and campaign day–level analyses on a unique data set from a dominant crowdfunding platform. At the campaign level, we determined that setting reward limits at the beginning of a campaign is beneficial, with the number of limited reward tiers exerting an inverted-U-shaped relationship with campaign performance. Further exploration of different forms of reward limits suggests that the scarcity effects largely originate from limited edition and price discount rewards. At the campaign day level, we determined that incorporating new limited edition rewards is helpful for attracting new contributions, whereas depleted price discount rewards will demotivate subsequent contributions. In addition, the goal-directed mechanism in crowdfunding plays an influential role in shaping scarcity effects. Our findings highlight the importance of considering backer-as-consumer needs in crowdfunding campaign design and the dynamics of campaign attribute changes in the fundraising process. Our findings also provide important practical implications for platform operators, campaign creators, and marketers.