Online Auction Bidding Strategy: Exact Bid vs. Proxy Bid

Online charity auctions have become increasingly popular due to their convenience, accessibility, and affordability. There are two main online bidding strategies: exact bid and proxy bid. DoJiggy offers both of these bidding options for organizations to choose from. In this article, we’ll review the key differences between these two strategies, so you can choose the best bidding option that meets your fundraising needs. 

How Does Exact Bid (Also Called English Bidding) Work?

An exact bid is a straightforward bidding strategy where bidders enter the amount they are willing to pay for an item. This type of auction is the simplest to run and generally allows your charity to make the most money. 

Here’s How Exact Bidding Works:

1. A starting price is set before bidding starts.
2. Each item has a bid increment that dictates the minimum amount that must be bid above the current bid to become the new high bid. For example, if the bid increment is $10 and the current bid is $60, the following bid must be at least $70. 
3. Bidders place bids on items until the auction time expires.
4. The item is sold to the bidder with the highest bid when the auction ends.

The advantage of an exact bid is that it allows supporters to control precisely how much they are willing to pay for an item. Donors don’t have to worry about overspending or getting caught up in the excitement of a bidding war. However, the downside is that if someone else enters a higher bid, bidders must keep manually entering higher bids to stay in the game.

How Does Proxy Bidding (Also Called Max Bidding) Work?

Proxy bidding is a feature given by online auction platforms that allows bidders to submit their maximum bid for an item and have the auction system automatically bid on their behalf up to the maximum amount if they are outbid. 

Here’s How Proxy Bidding Works:

• Donors enter a secret maximum bid amount for each item they are interested in.
• The auction platform automatically bids for the donor who entered the maximum bid amount whenever they are outbid.
• The system bids the minimum amount necessary to keep the donor in the top-bidder position, but only until their maximum proxy bid is reached.

This method is how eBay works and is sometimes called Max bidding.

Example of Proxy Bidding in Action:

Imagine our auction item has a starting bid of $100 and a bid increment of $10. Here’s how the proxy bidding process might work:

1. Bidder 1 places a bid of $100 for the item and enters a maximum bid of $170.
2. The current bid on the auction page will show as $110 ($100 current bid + $10 increment).
3. Bidder 2 visits the auction and sees the current bid price as $110. If bidder 2 decides to place a bid for $120, he will be outbid immediately by bidder 1.
4. The new current bid that shows on the auction page changes to $130 (what bidder 2 was willing to pay plus the $10 increment).
5. Bidder 2 would have to place a bid of $180 ($170 (Bidder 1’s max bid) + $10 (bid increment) to be the winning bidder on the item.
6. If the auction ended right then, Bidder 1 would win the prize for $130. Note: Bidder 1 was willing to pay $170 but only paid $130 for the item.

Which Online Bidding Strategy is Better?

English bidding encourages real-time donor engagement and competition, thus driving up the price of the item. This bidding strategy allows your charity to receive the maximum donors are willing to pay since they are committed to the full bid when it is placed. This bidding strategy is also easier for donors to understand, so auction administrators won’t need to spend time explaining the process. Bearing all of this in mind, we recommend exact bidding (English-bidding) over proxy bidding.

Why Choose Proxy Bidding for Your Charity Auction? 

Proxy bidding makes the bidding process easier and less time-consuming for donors. It’s also great when your audience wants to participate but can’t be as engaged to bid often. Allowing your donors to set a maximum bid permits them to participate at their own pace, which is often a big appeal. Donors will typically set their maximum bid at the highest amount they’re willing to pay for the item, and if they’re outbid at this maximum price, they can still decide to place a new maximum bid. 

Final Tips for Effective Online Auction Bidding Strategy

• Know the value of the item you’re bidding on to avoid overpaying.
• Set a maximum bid amount and stick to it.
• Place bids earlier rather than later to establish a lead.
• Consider the bidding history of the item and other bidders.
• Be mindful of the auction time, as placing a bid too close to the end can result in a bidding war that drives the price up.
• Understand the bidding increments and adjust your bidding strategy accordingly.
• Don’t get caught up in the heat of the moment and bid beyond your means.

Wrapping It Up

While we recommend exact bid, choosing between exact bid and proxy bid depends on an organization’s preferences and situation. Either way, to achieve a successful bid, it’s critical for your supporters to grasp the bidding strategy and follow effective bidding procedures. Bidders who follow these tips can avoid overpaying and boost their chances of winning the item at a reasonable price.

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