The 5 Best Reverse Auction Bidding Strategies

Top Bidding Tips Feature ImageBidding in an Online Reverse Auction can feel a lot like casino gambling, and just like playing at gaming tables the situation can quickly spiral out of control.  Here are the Top 5 Bidding Strategies to help you stay on track and win the auction while still preserving margins.

#1: Start High

Many organizations we have supported always opened with a very low starting bids, hoping to intimidate their competition. While this strategy does have a certain intuitive appeal, "hope" is not a strategy, and in reality starting low hurts much more often than it helps. Proffering an extremely low bid before seeing how low your competitors are willing to go is only competing against yourself and giving up margin dollars unnecessarily.

" 'Hope' is not a strategy

Additionally, in some cases the auction ends at a price point HIGHER than the buyer's current pricing, particularly when the products in question have been put out to auction more than once.  We sometimes recommend opening bids at 15% higher than current pricing, but the exact amount varies based on the current supply position and competitive situation.

#2: Fast Match

The "intimidation method" that DOES deliver powerful results is what we call the "Fast Match," in which the bidder IMMEDIATELY retakes the leading bid position whenever they are outbid.  Fast Matches send a strong signal to your competition that you intend to win at any price, and will sometimes result in a complete bidding stoppage after only 2-3 Fast Matches.

#3: Learn Your Competitor's Bidding Pattern

Accurately predicting your competitor's next bid amount is a key step in managing the overall process and determining your next bid amount.  A few key points to help you on your way:

  • Bidders tend to work in round numbers
  • As the Auction moves closer to the close, bidding typically moves in smaller and smaller increments
  • Bidders tend to bid using exactly the minimum bid decrement when bidding during time extensions

Using these data points will help you better predict the difference in your current bid vs. the competition, which will be CRITICAL to........

#4: Know When to Stop....Strategically

If the reverse auction pricing is quickly spiraling downwards, someone has to stop the madness.  Let it be you.....strategically.  If you've learned your competitor's bidding pattern, you should have a very close estimate of the leading bid and be able to finish less than one percent above the winning price.  A close second place finish will almost always earn you a place in the post-auction negotiation process.

#5: Never Bid to Your Price Floor

If you completed the proper pre-bid preparations, you have determined the minimum acceptable price to profitably support the business.  Never bid to that price during the live event.  If you bid to your floor during the bid and lose, you have zero remaining negotiating room during the post-auction negotiating process.

Conclusion

Understanding how and when to use these 5 strategies will have you better prepared for 95% of the live-auction scenarios you encounter, help you win more often, and improve the pricing on the auctions you do win.

If you have any questions or comments, don’t hesitate to ask using out Contact page.  We are always happy to help!

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