Auctions should be advertised (or marketed) sufficiently. As well, auctions should not be advertised insufficiently. So, what’s sufficiently? What’s insufficiently? Most auctioneers would likely conclude that an auction was advertised sufficiently if the subject property demanded market value. However, if the subject property doesn’t demand market value, does that mean it was advertised insufficiently?
We could ask, “What’s a sufficient amount of suntan lotion on a hot sunny day?” or “What’s a sufficient amount of money in order to retire comfortably?” or “What’s a sufficient number of logs on the fire to keep it burning through the night?” In these questions — and countless others — past experience helps people answer such queries every day.
Auctioneers (should) use the same methodology.
An auctioneer advertises an auction in the local newspaper and puts a sign in the yard, and doesn’t secure a good crowd. Maybe that’s insufficient marketing? Next auction he places a larger newspaper ad, orders a larger sign, and also sends out postcards to the local market, and still doesn’t feel he had enough registered bidders. So, next auction he does all he did for the second auction, plus runs a Facebook ad and does get (in his opinion) enough bidders, and the property sells for [what he believes] is market value.
It would appear here this auctioneer tried various marketing methods, augmenting prior efforts each time until he found what he would consider “sufficient marketing.” “Sufficient” for that matter means adequate, enough, ample … and further he then might have noticed that his final marketing budget ended up being about 2% of the property value, potentially using this as a guide for future auctions.
Some auctioneers somewhat short-cut this entire process by checking with other, more experienced auctioneers, to see what they use (consider) as “sufficient marketing.” In other words, if another auctioneer in a similar market places newspaper ads, signs, and runs Facebook marketing with good results, then this less experienced auctioneer might replicate that plan.
If you are an auctioneer who doesn’t know what “sufficient marketing” is for any particular project, then maybe you aren’t “sufficiently” experienced to market such property — and should refer that project or partner with someone who does have such expertise. Insufficient marketing injures sellers and hurts the entire auction industry with less than optimum results.
We’ve testified in more than one auction litigation engagement involving auctioneers not advertising/marketing sufficiently. For example, if you’re selling $100 Million in equipment with a worldwide market, is a 3-week regional newspaper advertisement in the legal section sufficient? It’s not, as judged by both the low final selling price as well as how other auctioneers (would) market like-property.
We have also analyzed and written several times about the number of bidders needed to secure “alpha” and “beta” (the highest bidder and the second-highest bidder.) For one lot, auctioneers only need 6 bidders to have a 50% chance of alpha and beta present (8 bidders for 60%, 12 bidders for 70%, 18 bidders for 80%, 38 bidders for 90%, etc.:) https://mikebrandlyauctioneer.wordpress.com/2019/04/22/auctions-and-the-chances-of-alpha-and-beta-etc/.
Auction advertising/marketing is always changing. What worked in the 1950s and 1960s was likely insufficient in the 1970s and 1980s — which was likely insufficient in the 1990s and so forth. Today, what was sufficient six months ago might (or might not) be sufficient now given the speed of technology changes. Auctioneers should continually evaluate their own results and those of other auctioneers, and make any needed adjustments.
Lastly, auctioneers should discuss advertising/marketing with their sellers or consignees in order to come to an agreement on what specific marketing will be performed and by whom. Generally, auctioneers should market enough (sufficiently) but not necessarily market or advertise more than sufficiently. Any additional monies used to market that don’t produce more in value than they cost are wasteful. For that matter, any advertising budget “severable components” not producing should be avoided.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.