The Bidding Behavior of Buyers in Internet AuctionsKnowledge@Wharton recently released an article which I found interesting. The article offers not only information but also strategy for sellers to make higher profits in online auctions.
The following information might helps to refine your selling strategy:
- Bidding timing: Bidding activity is concentrated at the end of each auction, the research suggests. Approximately 75% of final bids are submitted after 97% of the auction duration has passed.
- Buy It Now (BIN) feature: The BIN feature is a price set by the seller that, if bid, ends the auction immediately and the item is sold at the BIN price. When a seller uses the BIN feature, it is successful approximately 40% of the time. And more than half of these auctions end at the first bid.
- Latent Bidders: Not all the bidders are participating from the beginning. "They may wait on the sidelines of the bidding process for an opportune moment to enter," the authors write. "There are various reasons for this waiting behavior; for example, such bidders may enter later in the auction so as not to reveal their preferences or set off a bidding frenzy."
- Keep it short: The minimum bid and the auction duration have counterbalancing effects on the buyers' willingness to bid. "This suggests that sellers should shorten their auctions and raise the minimum price," the authors write. They add a recommendation that "empirical experimentation be used to determine the exact choices."
- Play it straight: A seller's reputation influences a buyer's willingness to bid. "Sellers should be concerned not only with the product but also, as in bricks-and-mortar selling, with the entire buying experience from beginning through delivery."
- Target the newbies: Auction participants with less search experience -- who are not actively comparing prices at other sites -- have a greater willingness to buy. "This suggests that there is an opportunity for auction sellers to target these participants rather than use an overall blanket attraction strategy."
- Appeal to the losers: Because the authors could analyze the bidders' activity, they discovered that a buyer whose bid falls short has a greater willingness to bid more in the next auction. This new finding seems reasonable, given human nature, Bradlow says, but it became obvious only through the rich data made available to the authors. "If sellers were able to identify and target the participants who are recent 'losers' (and, in particular, those losers who nearly won), they might be able to drive up bid prices," the authors suggest.
- Set BIN higher: Buy It Now proved to be a double-edged feature, Park and Bradlow discovered. The data suggests that the existence of the BIN feature lowers the buyers' willingness to bid. Rather than lure in leisurely surfers of the Internet auction sites (potential buyers who are "just looking"), BIN actually turns them off. Of course, some do stop window-shopping and actually join the bidding. And the higher the BIN price, the greater is their willingness to bid.