Auctions can seem pretty simple at first. The seller may set a reserve, an agent may give you price suggestions, or the price may be said by simple gut instinct. However, the pricing is one of the biggest challenges you’ll have. Let’s look at some of the ways that you can get the correct prices on items for your auction.
Before We Begin
One of the key concepts for setting auction prices is an understanding of fair market value. Because many nonprofit industries rely on donors for their raffles in auctions, it’s important for the host to know or learn the fair market value of the items donated in order to set the opening bids. With that in mind, let’s begin.
Research Is Key
Many items can be incredibly obvious. For example, gift cards speak for themselves. Other tangible items, such as computers or home goods have what is called MSRP, or manufacturer’s suggested retail price. Other items may not be so easy, such as sports memorabilia, coins and stamps, and antiques. These items will require you to do a little bit more digging. A way that may be helpful in determining the value of these items is to crack open the phone book and make some phone calls to shops that specialize in those items. You may even find collectors were willing to donate items to your auction.
Know Your Audience
Setting your opening bids can also be very dependent on a few other factors. One of the largest of those factors will be your bidders. Knowing the demographics of who’s going to be bidding can play a huge role in the size of the bids coming in. Conversely, if this is a charity auction, knowing how much the donors believe in your cause can make a big impact as well. To both the donors and the bidders, the emotion behind the items can certainly elevate the final bids on your items.
No Need To Sacrifice
One temptation to move items quickly is to lower the cost below the fair market value. This inherently is in a bad thing, but if the temptation is too much, items can go for far too little. Try not to go any lower than 40 to 50% below fair market value. This helps build enthusiasm with the bidders, and may stoke a little competitive bidding.
Some Things Are Just Special
Some items are simply beyond the normal youth see donated for an auction. Chances are, your bidder may not see them nearly often enough, where they may have never seen the item before and decide that they have to have it. For these items, don’t be afraid to start a minimum bid at a higher rate. It’s common knowledge that people want things that are hard to get, and more often than not, they’ll pay extra to get them.
After The Opening Bid
Once you have the opening bid set up, plan to increase the bid by 10% increments. This sets up a realistic expectation for bidders to help them decide how high they’re willing to go for that item. You can also help keep the numbers even, which only helps keep a smooth pace for bidding. If you see more or less enthusiasm from your bidders, this general formula can be adjusted as needed. For example, if you set the opening bid to 50% lower than fair market value, but you see some competitive bidding, don’t be afraid to adjust the increase by a higher percentage.
Skipping The Bid Altogether
Some people don’t have the time or patience to deal with competitive bidding. These people just want the item, and they want it now. For those people, you’ll want to have a “buy it now” option. As a rule of thumb, you want to offer this option at 150% of the item’s fair market value. Sure, perhaps they could have spent less money, and patience is a virtue, but the heart wants what the heart wants. As a host, you’re there to give your bidders exactly that.
Now that you have some simple strategies to help you set your opening bids for your items, perhaps the hard work of hosting your auction will be just a bit easier. Knowing your audience, understanding the fair market value of your items, talking with hobbyists, and understanding the right percentages of your opening bids, bid increases, and ”buy it now” pricing makes your job done and done.