ProSpeak: The Advantages of Moving Silent Auctions Online

Much as iTunes is making the traditional music store obsolete, the Internet and e-commerce wave is a catalyst for the death of the silent fundraising auction and its inevitable migration to the Web.

The 100-year-old silent-auction model suffers from seven inefficiencies that cumulatively result in a less effective outcome. This is the primary reason that thousands of silent auctions are moving online. Nonprofit fundraisers, who have traditionally raised billions of dollars annually through silent auctions at live events and galas, increasingly are moving to or supplementing them with online auctions to reach more bidders, have a stronger value proposition to item donors, and to create a more competitive bidding environment. This is eliminating inherent inefficiencies and inviting a new audience of cause-minded consumers to participate and continue growing this $16 billion marketplace.

The seven core inefficiencies of silent auctions are:

1. Non-attendees, typically 70 percent of a constituency, can't (and don’t) bid.
2. Suppressed competition — clipboards don’t exactly follow you around a room when you have been outbid.
3. The ending of the auction can be awkward. Many bidders are reluctant to be aggressive enough to fight it to the bitter end, thus, leaving money on the table.
4. Social distractions suppress bidding. Would a professional auctioneer hold an auction in the middle of a party? Most galas effectively stop the party for the “live” auction. Why? Because they know a non-distracted bidder equals more bidding equals more dollars.
5. Many attendees are put off by being forced to “fight the crowd,” which suppresses bidding. In focus groups, women are especially vocal on this topic.
6. Item performance data are not tracked and stored so that next year’s committee has a solid handle on what items to obtain. Losing bidders' contact information is not kept.
7. The minimal (unmeasured) marketing value to item donors may mean fewer items in a increasingly competitive item-acquisition environment.

One of the key behavioral drivers of auctions is “competitive arousal.” This win-at-all-costs attitude is alive and well in a live auction, but suppressed in the silent-auction format. Fighting the crowd, the awkward ending, social distractions — these all serve to suppress bidding competition.

In addition, item-performance data is not tracked and kept. Many organizations put last year’s results in a shoebox or a summary of winning bids in a file. It is difficult to track bidding intensity by item, the number of losing bidders, total bidders, timing of bids, etc. However, this information is valuable in developing a strategy for next year's auction catalog.

Logistical issues inherent to the silent-auction model can be overwhelming.

"Try managing 15 silent-auction volunteers, lugging 150 items into a room, setting them up, taking unsold items back to the office late at night, and dealing with long checkout lines — it isn't easy," I was told by Judi Elkin, a seasoned fundraiser and former executive director of the New England chapter of the American Liver Foundation.

The Power of the Internet
In contrast, an online silent auction offers the following efficiencies:

1. One-hundred percent of donors can bid from anywhere 24/7 (more bids equals more money).
2. No fighting the crowd, and no awkward ending (more competition equals more money).
3. Item donors obtain added and measureable marketing exposure in a competitive economy, giving them one more reason to donate (more items equal more money).
4. Online sponsorships offer existing sponsors more marketing value, or an upgrade opportunity for more/better items (which equals more money).
5. All bidding data are organized into reports, compared with other like organizations, and stored for next time.
6. Constituents can e-mail the auction to friends and family, which expands the bidding pool.
7. E-mail addresses of both winning and losing bidders can be stored for next year.

Online auctions successfully trigger competitive arousal in ways that silent auctions can't. E-mail bid alerts are an important lever. Deepak Malhotra, a professor of negotiation who studies the psychology of bidding behavior at the Harvard Business School, has noted, "The online environment has a number of attributes that can stimulate competitive arousal (e.g., instant bid alerts) that in-room silent auctions simply don't have."

In addition, online auctions, with their inherent measurability, are tailor-made for sponsorships. One nonprofit organization recently enabled more than 70 online sponsorship positions, which it monetized for more than $50,000.

In the years ahead, nonprofit fundraisers will need the very best fundraising toolbox possible, and an online auction fundraiser will increasingly be a standard tool in that toolbox. Over time, most silent auctions, in whole or in part, are going to be held online.

Jon Carson is CEO of BiddingForGood (formerly cMarket).