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Auction Bidding 101: The Complete Guide

Author: Adie M.
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auction bidding

Auctions are a popular nonprofit tool that can offer your charity organization a host of benefits. You can build awareness and educate attendees on your cause while engaging donors. They’re also an exceptional revenue tool with online auctions alone contributing 24% of digital donations

This makes understanding how to manage auctions and the auction bidding process a must for your NPO. This guide will explain the bidding process and key terminologies involved in auction bidding.

Understanding the Bidding Process

Once you’ve sourced bid items for your auction, the first step in the bidding process is to determine the minimum bid. This is the lowest price or bid you are willing to accept for an item as an auctioneer and is often the amount at which bidding starts. 

This should not be confused with the starting bid – the suggested amount that bidding can start at. Bidders can choose to reject the starting bid and open bidding at a lower amount, while the minimum bid is the lowest acceptable amount.

Not all auctions or items have minimum bids, however, as a fundraising event, this is a great way to encourage higher bids.

You can include further information alongside the minimum price on a bidding sheet so participants can learn more about the product and its worth. You can also include the item’s retail value, indicating how much less the minimum bid is placed at. 

With all this information listed alongside the item on a bidding sheet (or an online page for virtual auctions), bidders can place their bids. The person with the highest or max bid when the auction closes, wins the item.

What If Two Bidders Have The Same Max Bid?

If two bidders place the same amount and it is the max bid at closing, the person who placed the bid first wins. This is because the first bidder has the highest bid and the later bidder doesn’t increase the amount.

Auction Bidding Terms You Should Know

There are a few phrases that can come in handy when planning and managing your auction. Below, we explain these terms and how they factor into your auction bidding management.

What Are Bid Increments?

To further encourage profits from your auction, you can have bid increments in addition to a minimum bid. Bid increments are the minimum amount by which each bidder must raise the previous bid. 

For example, if you set the bid increment at $10 and the previous bid was $20, the next bidder must place their bid at $30 or more. Their amount must be a minimum of $10 more than the previous bid.

Holding cash

What Is Proxy Bidding?

With proxy bidding, a bidder can set the maximum amount they’re willing to pay for an item and have the auctioneer or auction software bid on their behalf. This is in the event that the bidder cannot attend the auction in person or isn’t available to track the auction online. 

The auctioneer or auction software acts as a proxy, placing bids on the bidder’s behalf until someone outbids their maximum. Typically, if their set maximum is outbid, you can notify the bidder and ask if they’d like to raise their max amount.

For example, if the proxy bidder sets their max amount at $100 and the next highest bid is $80, they automatically win. If someone else has a higher bid of $110 (depending on bid increments), they can choose to bid more or lose the item.

What Is A Reserve Price?

A reserve price or bid is the minimum amount that you, as the auctioneer, are willing to accept as the winning bid. This means any bid placed below the reserve price cannot win the bid item. It is another term for the minimum bid amount.

As a nonprofit auction bidding tool, it protects your fundraising revenue by preventing a winning bid that is lower than what you’re willing to accept. If the winning bid is lower than your reserve, you can choose to negotiate with the bidder or walk away.

Although you’re not required to disclose the reserve amount to bidders, it can be a great way to drive higher bids.

What Is The Opening Bid?

Although reserve price and opening bid are often used interchangeably, they have different meanings. The reserve price is the minimum bid you’re willing to accept as a winning bid. The opening bid or starting bid is the suggested amount to start bids at. 

However, bidders can choose to start bidding at an amount lower than the suggested opening price. If bidders don’t place a bid, you can set a lower opening price. To encourage bidding, set your starting price at a lower amount to pull interest.

What Is Extended Bidding?

Sometimes, a bidder may place a late bid in the last few minutes of the auction. In this case, you can add more time to your bidding window to give other participants a chance to outbid the last bid. This is known as extended bidding. 

On average, you may extend bidding by five to ten minutes to give other bidders a chance to counter the highest bid.

What Is An Auction Bidding Sheet?

A bidding sheet is a document that tracks bids placed on individual bid items. It’s also a way to share vital auction information with bidders including the reserve price, bid increments, minimum bid, retail value, opening bid, etc. 

For your administrative and data collection, the bid sheet can also be a means of gathering contact details and important data. It can give you a sense of the popularity of bid items so you can choose great items for future auctions. You can choose to have a bid sheet to track any auction, although they are commonly used for silent auctions.

Use our silent auction bidding sheet template to compile a concise and clear document for your auctions.

Bidding in a silent auction

Conclusion

Planning an auction can be a complex and demanding process but managing the bidding experience doesn’t have to be. When you understand how bidding works, you can better manage it and make auction events successful and enjoyable. Knowing the terms above can also offer you strategies for how to drive involvement and get higher bids for your items.

Keep this auction bidding guide in your back pocket as a reminder of the basics for seamless auction events and better fundraising efforts!

And if you’re looking for the best way to host an auction, check out BiddingOwl! Our free auction software is perfect for both live and virtual auctions so that you can easily host the perfect auction fundraiser.