Auction Bidders Are Affluent And Female

January 15, 2007       Mark Hrywna      

Competitive arousal is what makes online charitable auctions one of the most pleasurable ways to give to a favorite charity. The entertaining, gaming aspect draws participants. And the most likely participant in an online auction is a 41-year-old woman with an annual household income of $108,000, according to preliminary results of a recent study.

The study by Cambridge,Mass.-based cMarket examined more than 25,000 online charitable auction bidders from nearly 1,600 auctions. The firm aims "to help organizations understand the psychographics and demographics of online bidders and ultimately use that knowledge to maximize the potential of online giving," said cMarket CEO Jon Carson.

A "relatively unprofessionalized activity" run primarily by volunteers at most nonprofit organizations, online auctions are treated as an art, not a science, even though they’re fairly predictable, according to Carson. "Where they’ve been flying without instruments," he said of nonprofits, that data about bidders is like a pilot using an instrument panel.

Carson and cMarket developed a system called SmarterAuction which is driven by about 150 algorithms, with 30 to 40 variables, and will get more accurate as more auction data is completed. "As we get more granular, we can compare organizations more specifically," Carson said; for instance, healthcare organizations in New Jersey running a $50,000 auction.

Almost three-quarters of the 25,000 bidders were female while the largest concentration of bidders was from New England (25 percent) and from the Pacific region (19 percent). More than 90 percent of respondents access the Internet once a day or more, according to the study, and on average spend 49 minutes each time they go online.

The first 48 hours of an online auction are critical and will tell you how it will conclude if no course corrections are taken, Carson said. The average auction runs two to four weeks, but can be as long as two or three months.

More than half of those studied preferred to support their favorite charity through online auctions, with the average person giving to about four charities a year. Respondents visited online auctions about four to five times a year and, on average, spent about 17 minutes each time.

The top reasons given for participating in online charitable auctions are to lend support to the causes they believe are important, purchasing products and services, and ease of use. Electronics (17 percent) and home items (16 percent) are categories that appealed most to bidders, according to the study.

Respondents were most aware of eBay, as well as "education affiliated, public broadcasting and health-related auctions on an unaided basis."

Carson said there are four particular groups that have shown the best outcomes in auctions, mirroring the greater response rates found with affinity credit cards: schools and alumni groups, health care organizations, art institutes and pet causes.

The Chelsea/Gerald and Darlene Jordan Club of the Boys & Girls Club of Boston has conducted four online auctions during the past three years. Executive Director Joshua Kraft said the first auction raised more than $30,000 with the help of sponsorships and viral marketing. The number of sponsorships has grown each year, totaling $12,500, at $2,500 each for this year’s full auction.

This year, the Chelsea, Mass.-based club has five sponsors that gave cash and a sixth, a marketing company, that blasted emails to constituents. In addition, members of the local club’s advisory board blasted emails promoting the auction.

In cMarket’s study, 54 percent of respondents who didn’t win a bid were interested in being contacted about a similar item. And, 52 percent received an email about a similar item and of those, 63 percent read at least some of the message.

Kraft suggested sporadically adding new items to an auction and alerting participants through email. He also employed the "Buy Now" option (where participants can purchase the item immediately, eliminating the auction process altogether). cMarket’s study indicated that 55 percent of respondents were "at least somewhat interested" in a "Buy Now" option.

But the "Buy Now" option can suppress the competitive arousal at the heart of online auctions. Rivalry, time pressure, social factors and hype all fall into the category of that competitive arousal that can transform people from wanting to get the best deal into wanting to win at any cost, according to Deepak Mahlotra, an associate professor at Harvard Business School and member of cMarket’s advisory committee.

Even rejection messages can stimulate more activity. If a participant gets outbid, a notice can be generic ("You’ve been outbid for this item"), appeal to their sense of charity, or be a competitive message, which is most likely to bring them back to bid again.

"People naturally have a competitive streak to them," Mahlotra said. "It doesn’t always happen, but we’re talking about most likely. The mindset is possible in most situations where they’re up against other people."

Other methods of increasing interest are closing items at different times as well as extending the auction time on an item, which proves the notion of escalated commitment, Carson said.

An auction doesn’t "cannibalize existing giving," Carson said, as it taps discretionary consumer spending, such as vacation spending and not charitable giving. It’s another reason why travel or trips can be popular – donors figure if they’re going to spend money on a vacation, for instance, why not spend it to benefit a favorite charity. NPT