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Silent Auctions for Charity Rapidly Migrating to the Internet

Online Charity Auctions Prove to be Fun and Result in More and Higher Bids

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Silent Auctions for Charity Rapidly Migrating to the Internet
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Computing is going to the cloud, donors are flocking to mobile, and silent auctions are migrating to the web.

Silent auctions have been around for, it seems, a jillion years. They have become a staple of fundraising. Throw a party, silently auction off a stack of donated items, and voilà...cultivation and fundraising all in one.

The only problem is that silent auctions have a whole bunch of disadvantages, such as:

  • distracted bidders...with a cocktail in hand and conversation on the lips, how likely are bidders to revisit their bids at the ubiquitous clipboards?
  • uncertain results. How many people will show? Will the donated items be attractive? Will people get into the mood and compete with their friends with higher and higher bids?
  • a passel of exhausted volunteers who spent weeks recruiting auction items, stayed up late the night before arranging everything, and then threw a party.

Enter the age of the Internet, plus millions of eBay-experienced online bidders, and we have the online charitable auction.

BiddingForGood, one of the premier charitable auction services, recently reported some pretty incredible stats:

  • it has exceeded $80 million raised through online auctions that support nonprofits and schools in the U.S.
  • More than $24 million (30%) of that amount has been raised just over about the past year, despite the recession.
  • the number of charities running online auctions increased by 23% over the past year.
  • BiddingForGood's own records show that its typical client gets a 4:1 return from using its auction system.

What accounts for such a rapid increase in online auctions? It is likely that nonprofits are starting to understand the psychological and logistical advantages of the online auction, either as a substitute to the silent auction (now a bit like the horse-and-buggy) or as a supplement to their silent auction events.

Deepak Malhotra, professor of negotiation at the Harvard Business School, studies the psychology of bidding behavior, especially the phenomenon of "competitive arousal," and has noted some interesting characteristics of auctions. Factors that encourage people to bid more for items include "intense rivalry, especially in the form of one-on-one competitions; time pressure, found in auctions and other bidding situations, for example; and being in the spotlight—that is, working in the presence of an audience."*

None of those factors apply to a silent auction. But a couple of them do apply to online auctions, especially time pressure. When bidding in an online auction, the bidder is messaged when another, higher bid takes place, and when the auction is about to close. Thus, the "rivalry" is intensified in a way that just does not happen at a silent auction. That alone could help account for the fact that online auctions seem to result in higher bids and more bids.

Not only does the online auction seem to increase bidding, it overcomes several disadvantages of the traditional silent auction. Jon Carson, CEO of BiddingForGood, told me, in an interview, about those disadvantages, which include:

  • Limited attendance. Requiring both a time a place, auction events typically exclude 70% of the charity's audience.
  • Silent auction events suppress competition. "Those clipboards don't follow you around the room and tip you off when you've been outbid," says Carson.
  • The general politeness and non-aggressiveness of the audience. No one wants to spoil a nice party by being too aggressive by bidding against their friends.
  • The socializing distracts donors from the bidding process.
  • Many attendees don't like to "fight the crowd" to place bids. Women are particularly put off by this element of silent auctions, according to focus groups.
  • Item performance data are not tracked and stored for use the following year. What items drew the most donors, went for the higher amounts?
  • Donors of items don't get much marketing bang out of a silent auction, thus making it harder to solicit them in the future.

The advantages of an online auction are persuasive:

  • All donors can bid from anywhere 24x7.
  • The online environment is encouraging to bidders that might be shy at a live event.
  • Donors of items can get much more marketing exposure, leading them to want to donate again.
  • Online sponsorships can be offered to companies in lieu of or in addition to donating items. This represents an additional source of revenue for the charity.
  • All bidding data can be organized and stored.
  • Auction participants can email the auction to friends and family, expanding the bidding pool.
  • Email addresses of winning and losing bidders can be captured for use the following year.
  • Email bid alerts trigger competitive arousal.

BiddingForGood provides its own pool of bidders in addition to the charities' own constituencies. The company currently has a pool of more than 160,000 bidders that check into the site frequently. There they can shop by type of item, category of cause, individual charity, and even location, The company also offers each charity an auction specialist that they can call upon for help and support. This is besides the trove of tips and how-to information that exist at the online site.

It is really a no brainer that the old fashioned silent auction is going virtual. The advantages of more bidders, higher bids, and easier tracking are very attractive.

To test the system, I went online at BiddingForGood and very quickly got serious about buying something. I registered so I could browse first. I monkeyed around with the various search paths and then decided to look for "art," since I'm in the market for some nice things to put on my bare walls and empty shelves. I quickly located a vase, which I instantly purchased at the "buy now" price, and then put a bid on a small painting that appealed to me. I had to register my credit card in order to place my bids.

I quickly heard from the thrift store auctioning the vase, but I'll have to wait for the painting since the auction has a week or so to run. I really want that item so, if someone tries to outbid me, I think my "competitive arousal" will be in full sway. I'll let you know if I get it!

Resources:
*When Winning Is Everything, Deepak Malhotra, et al.
How to Harness Auction Fever, Q & A with Deepak Malhotra.

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