Last Updated Jun 9, 2010 6:31 AM EDT
While it's long been known that scarcity can boost demand -- consider the pre-launch, limited-quantity hype surrounding the iPhone -- Khan says her research breaks ground regarding the downstream consequences of out-of-stock situations, whether strategic or inadvertent. She says that, as a manager, you must consider your long-term goals should you choose to create a false scarcity. If you're looking to boost short-term sales, an inventory reduction may do the trick. But if you seek long-term customer satisfaction, that strategy may backfire.
In the case of an unintentional stockout -- perhaps due to production or distribution problems -- Khan says managers must also be aware of the impact on customers likely to feel jilted. "You may need to put more effort into post-sales customer service," she says.
She also notes that inventory management is crucial when it comes to keeping your retail channels happy. "If Walmart is out of Pantene, the customer will go to Target," Khan says. Any possible short-term benefit created by the scarcity at Walmart will adhere to manufacturer P&G, and not to the store.