When do auctions work, and when do they not? If an auctioneer has a small crowd, questions abound as to why? Or, if there is an unusually large crowd, some auctioneers might still ask why? What makes a great auction, and what makes a not-so great auction?
First, a theory: If there is a large, motivated, interested, ready, willing and able attendance at the auction because they want to buy whatever is being offered — that’s probably pretty much all that will be needed for a successful auction. So, given that premise, the question becomes when do those buyers come out to play, and when do they not? And, let’s assume that our auction is, at least, sufficiently advertised.
Some auctioneers believe (just talked with one today) that there are many reasons why auction attendance is less than desired given certain circumstances. With his comments, and others I’ve gathered over the years, here’s a summary of theories why many auctioneers believe auction buyers resist participating, even if there is something being offered that those buyers want to buy:
- Bad weather
- Good weather (rather be fishing)
- Bad time of year (holidays, big game, etc.)
- Held outside
- Hard to find
- Too late in the day
- Too early in the day
… and there are other reasons, but these seem to be the ones I hear most often.
Yet, I believe none of these reasons are valid. I believe there is basically one reason an interested buyer would not attend an auction — the auction lacks the “prospect of a deal.”
In 1989, a great movie was released and a voice was heard saying, “If you build it, he will come.” Nothing more aptly describes auction marketing than “if we build the right auction” those buyers “will come.”
Maybe an example is in order? Two sellers, Alex and Bobby have an inventory of crisp, new $100 bills and each hires an auctioneer to market those bills for them at auction.
- Alex wants to sell these bills absolute (no minimum bid, no reserve) and he is content with whatever the market dictates.
- Bobby believes selling these bills is a bit risky, so he wishes to reserve the right to accept or reject the highest bids.
Let me ask you a few questions: Which auction do you go to? Which auction do you believe more people would go to? Will Alex, or Bobby, have the larger crowd?
If buyers see an auction of $100 bills, and think that they will probably have to pay $100 for each one because of a minimum bid or seller’s confirmation, why attend? Banks sell $100 bills all the time for $100. But, if buyers have a chance to buy a $100 bill for $20 or $30, or even $90, then they will come — regardless of the weather, time of year, time of day …
The phrase we use to measure if buyers react to an auction is the amount of the “prospect of a deal” the auction presents. The less restrictions on the ability for a buyer to purchase at their price empowers buyers to react, and participate. Maximize the “prospect of a deal” and you maximize participation, and therefore maximize price.
Said another way, $100 bills selling for a minimum bid of $95 will sell for less than $100 bills selling for a minimum bid of $25. It’s not where you start, but where you finish.
In our 1989 movie, an Iowa corn farmer, hearing voices, interprets them as a command to build a baseball diamond in his field; he does, and the Chicago Black Sox come. Want people at your auction? Build the prospect of a deal stadium, and they’ll come.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.face book.com/mbauctioneer. He is Executive Director of The Ohio Auction School.