Tips on Reserve Prices in Online Fundraising Auctions
On every item listed on BiddingForGood, there is an option to add a reserve price. Oftentimes, clients will ask what that means and how should it be used. I’d like to clarify starting with a definition and a few examples.
If you have a reserve price on an item, the bidder can place a bid below the reserve price, but they can't win the item unless they bid at least the Reserve amount.
For example, an item could have a reserve price of $2,000 but an opening bid of $1,600. If a bidder bid $1,700, their bid would be accepted, but they would get a message that they had not met the Reserve yet and need to keep bidding to meet it.
Why would you set a Reserve rather than just making the opening bid $2,000?
In most cases, you should just set your opening bid at $2,000. It’s simpler for you and the bidder to do it that way. However, let’s say this is a consignment item that has a cost of $1,500, and you’d like to make at least $500 from it. Your best judgment tells you bidders probably won’t bid if they see an opening bid of $2,000. You can get around this by making $2,000 the reserve price instead of the opening bid.
So what happens if a bidder bids over the Reserve?
Let's say that there is an item with a reserve price of $2,000 and it has a current bid of $1,700. If a bidder were to then place a bid of $2,500, it would automatically place that bid at the reserve price of $2,000. The bidder would receive a message that the reserve has been met, and they are now the lead bidder. The bidder will now be able to win this item if even no one else bids.
What else do you need to know about setting a Reserve?
When you are setting a reserve price, you have to keep in mind how many bids a bidder must place to reach the reserve. Let’s say you have an item with an opening bid of $50 with a bid increment of $5. If you set the Reserve at $200, that’s 10 bids that must be placed before the bidder can win. A bidder is likely to stop bidding, if it takes that many bids to reach the reserve price.
What happens if the reserve isn’t met?
You can contact the lead bidder to find out if they would still like to buy the item, even though it is below the reserve price. If they agree, you can award the item to them and charge them.
When is it best to use a reserve?
It is best to only use reserves on consignment items with a high cost. They should be used strategically as well. When in doubt, it is best to set an opening bid for the minimum amount you want to sell the item for.
If you have further questions about Reserves, you can contact the Client Service Team at support@biddingforgood.com or 866-621-0394.