Business Model Development in IT Startups - The Role of Scarcity and Personalization in Generating User Feedback

Despite the widely recognized importance of continuous business model development for achieving product market fit, very little remains understood about efficient methods that may support this process in the context of nascent IT ventures. Contributions for supporting value proposition development, especially in the popular field of open innovation, have largely focused on well established firms and more traditional approaches such as the lead user method. More recent findings suggest novel ways of virtual user integration, like the collection of user feedback via promotional campaigns, which is particularly prevalent among IT startups. However, these contributions have remained conspicuously theoretical. Therefore, by drawing on an experimental study in the context of the online fashion startup StyleCrowd, we investigate the role of scarcity and personalization, two classical promotional cues that have become ubiquitous on the web yet have been overlooked by research, in enhancing the virality of nascent ventures’ online promotional campaigns to enhance user feedback. Our analysis reveals that while scarcity cues affect social sharing regardless of whether a campaign is personalized or not, personalization cues are particularly effective when scarcity is absent, yet are cancelled out when scarcity is prevalent. We discuss implications for research and practice.