The question always comes up as we start working with a new client;

“In the catalogue should we list value or opening bid?”

In fact the choice is broader than that.  I have used the following options over the years, each has it’s own advantages and disadvantages.

1. Value.  The advantage is that it is straight forward.  We are not trying to trick the bidders into over bidding through ignorance.  The main disadvantage is that it acts as a barrier telling the bidder to bid this high and no higher.  There is a minor secondary problem.  Sometimes the donor includes a totally unrealistic valuation.  In that case what value do you list?
2. Opening Bid.  The advantage is that there is one less decision for auctioneer, making his or her life easier. The disadvantage is that it removes one of the best tools in the auctioneers toolbox.
3. Estimate .  I use a simple formula to determine an estimate based on the value.  I list a estimate of 10% down and 50% up.  For example, if a lot is valued at $1000, I would put the estimate at $900 - $1,500.  The advantage of this method is that does set the relative value of all the lots and it also starts the bidders thinking about the higher price.  The disadvantage is that the upper price level sets an impenetrable barrier.
4. Priceless or equivalent. I understand having to list the occasional  lot as priceless.  Literally no one knows the price.  The advantage is that while the term priceless just means no known price, big or small, the tendency is to assume a high price If you list  more than a few lots this way it becomes precious.
5. Leave it blank.  The advantage is that it is really easy.  In many ways the whole purpose of auctions is to determine a price and whatever a lot sells for is the true value of the item on that day.  The disadvantage is that it can be confusing for the bidders.  The Central Coast Wine Auction has never list any prices or values and it has worked well for years. The reason is that Archie McLaren, the founder and executive director, writes the most complete, detailed and best promoting catalogue in the business.

Unfortunately there is no one correct answer to this except to stay with whatever system you are currently using, as any change may confuse your audience.  If you are hosting a first year event I would recommend choosing from options one, two or three.  If you are as lucky as a couple of our events you would label the value as “Opening Bid” and just go from there.

Colleen and I have spent the last few days in the wine country.  We have had meetings in Napa, Mendocino and Sonoma.  It has given us a chance to talk to several vintners.  They are all complaining about wine sales generally but the bright spot is that direct sales and their wine club sales are as strong as ever. In fact several wineries reported that wine club members actually increased the size of their orders.

My interpretation of this is that in hard times, people value the relationships they have more than ever and are prepared to spend money to protect those they care about. If they are prepared to do that for wineries, how much greater is their commitment to a charity?

This should give non-profits a psychic boost.  All the time and effort you have invested into building relationships with your supporters will be returned, and then some.  Do not underestimate your supporters.

As a result of the downturn in the economy, many events are finding it more difficult to get auction donations. In many cases the number of donations has declined, or the quality of some of the donations has declined. Still wanting to fill their auction with good lots, many events turn to consigned auction items as a way to round out their auction.

Do your research before adding consigned auction lots to your auction. In many cases you can get better deals on your own, if you are simply willing to do the legwork. In other cases, a lot that makes sense for an East-coast auction may not be well-suited to a West-coast event. These days many hotel properties are struggling to stay at capacity, and are willing to make deals if you deal direct. But in many cases, you don’t have to look very far to find ways to do better than the consignment companies.

One such example is Winspire’s “America’s Cup Stars & Stripes Experience in San Diego 4-Night Package with Airfare for Two” which they value at $5,618.00 and sell to events for $1,750.00.

The package includes round-trip coach airfare from anywhere in the U.S. on American Airlines, four nights at Hyatt Regency Mission Bay Spa & Marina, and a 150-minute sailing experience on Dennis Conner’s Stars and Stripes. The first time I encountered this lot, I thought the value must really be in the sailing experience. Not so.

Anyone can sign up to sail on the Stars and Stripes for $99 per person. You need to be willing to do your research and book your trip yourself. Given that Stars and Stripes offers gift certificates, it means you can secure the package without having to book the date for your winning bidder.

The Mission Bay Hyatt? I managed to find suites available at $239 per night at the height of the season. So far, this $5,618.00 package has an actual cost of $1,156.00 before taxes. Actual cost is probably closer to $1,260.00 after California takes its cut.

So the difference in value that Winspire brings to the table on this particular lot is in the airfare. Two round-trip tickets on American to San Diego for $500 is a bargain if you are coming from New York city. Cross-country flights on American to San Diego cost an average of $500 per person. If you are a New York school putting together an auction package, this lot makes sense for you.

However, Bay Area auctions would be remiss to purchase this lot based on airfare, for myriad reasons. Foremost is the fact that American doesn’t fly direct to San Diego from San Francisco. Any flight on American to San Diego would require a trip to Seattle, Chicago, or Dallas first - resulting in a 9-hour flight. The other major factor is Southwest, which flies non-stop between SF and San Diego multiple times a day, for an average of $120/person, round-trip.

Furthermore, a surprisingly large number of auction lot winners never actually redeem their lots. One event we asked to track the data reported that 45% of their winning bidders did not redeem their getaways purchased in the live auction.

The vast majority of consignment houses require that you purchase the certificate as soon as the auction is over. If your bidder doesn’t redeem the trip before the expiration date, the consignment company keeps the money and your event is out the cash. We discussed this with the Gavel Group at their inception, and they refuse to budge: A buyer’s lack of redemption is their pure-profit.

Over at Winspire, Jeff Cova is more understanding and will often work with winning bidders to extend the deadline. He’s not out to sell vapor, and is more interested in people actually redeeming their trips since he has to buy them from the various airlines, hotels, etc.

The major issue with this is that when one of your donors doesn’t redeem a trip the consignment houses make a profit. A profit that your bidder assumed was going straight to your cause when they made the bid and then opted not to take the trip. When you consign an item to your auction there is no viable way around this, and it is a risk you have to be willing to take. Some auctions opt to include the actual costs of the items they are paying for in the description. It certainly sheds a new light upon a lot when donors know how much of the money is actually going to the charity - I’m not 100% certain that light is favorable.

One other big package being offered at the original writing of this post was a trip to the  2009 Super Bowl XLIII in Tampa. It included a 3-Night Stay and First/Business Airfare for Two at a cost of $19,000.00 to the buyer. Included in the package were round-trip, first class airfare on American, three nights at the Ginn Reunion Resort, and two tickets to SuperBowl XLIII.

The Ginn Resort was, as of the original writing, offering villas for $279 per night, with many still available. SuperBowl Tickets had hit a 15-year low at that point, and were currently reselling for as low as $1,500.00 per ticket. The same section the consignment houses was offering were currently at $1,800.00 per ticket. Total cost to this point if you wanted to put it together yourself was: $4,437.00, not counting airfare (anyone want to hit the SuperBowl next weekend?). If you were to simply sell this package on your own, without airfare, you’d immediately save $15,000.00 off of what the consignment houses wanted to charge you.

To be ultimately fair to the consignment houses, I opted to research first-class flights, less than one week from the date of flight. American Airlines wouldn’t quote a fee, but I found unrestricted first-class on United for $1,600.00 per person. Meaning that you could put that package together for $7,637.00 on your own - at a savings of more than $11,000.00 off of the consignment house’s price.

Jeff Cova will point out that one of the main benefits of working with Winspire is the fact that they are experienced concierges: they will take care of your buyers, period stop. And the last thing you want are unhappy bidders, especially unhappy bidders who have spent significant amounts of money on prime auction packages.

To make matters worse, there are auction companies out there that purchase lots from consignment houses and then resell them to auctions for a significant profit. One auction house offers the Stars and Stripes package to events they work with for a cost of $3,000.00. I know because one of my clients hired them to do a silent auction, and this other firm “offered” to consign a Stars and Stripes package for $3,000.00 into the live auction. My client agreed before doing any research on the lot (or turning me loose to look it up). When I compared the write-up the firm provided me to the .pdf available on Winspire’s web site, they were exactly the same, word for word.

I understand the need to make your auction better, and encourage you to follow our guideline of 1 to 3 when spending money on an auction lot. In today’s economic environment there may be even better deals to be found out there than the above examples, which were researched solely online. A quick phone call to the Hyatt in Mission Bay, for example, may yield significant discounts, and nothing trumps interpersonal relationships.

The point being, if you have to pay for auction lots do your research. Make an honest evaluation of your crowd and the lots available. If an auction lot being offered for consignment seems over-priced or too good to be true, it probably is. But if an offering and price-point map well to your crowd and fill a much-needed gap in your auction, no-one will blame you for bringing in some professional help.

Disappointing News.

I just saw a depressing report from the Spectrem Group of Chicago. They spend their time tracking trends among the wealthy. This is the first feed-back that I have seen on the effects of the economy specifically on the wealthy. The first question answered is whether the rich have, through access to some secret club, remained unscathed by the current downturn. The Spectrem Group reports that households with assets over $1 million have lost an average of 30% of their assets and nearly 20% have lost over 40%.

Most of the wealthy (90%), expect a prolonged economic downturn. There is no reason to expect the wealthy to be any better interpreting the tea leaves than anyone else (if they were, they would not have lost 30% of their investments), but it will affect their behavior.

The statistic that I find most threatening for fundraising is that a majority of the wealthy (55%), are worried that they may not have sufficient assets to maintain their lifestyles. It is tough enough to raise money from individuals who have lost a significant part of their wealth, it’s really tough if that donation requires the donor to give up something significant.

(Reflections on the eve of the Inauguration)

We are hired by Democrats to raise money from Republicans.  Ok, I admit that’s a gross generalization, but we do have our feet firmly in both camps.  Colleen is at times surprised by the comfort with which I move between the two.  I find it relatively easy.  Except for the kooks on both sides of the spectrum, I believe that the vast majority in this country agree on our goals, we just disagree on the policies that are going to get us there.  I can get excited discussing policy differences, I just don’t get mad.   No one is evil because they believe in Monetary .v. Fiscal Policy.

Which brings me to Jack.  We have been friends since 1978.  He was the first, closest and best friend I made on emigrating to the US.  We were even in business together for a time.  That didn’t work well because we spent so much time laughing that any project we worked on took twice as long as necessary. During this 30 year period we have never agreed politically, and for most of it, it couldn’t have mattered less.  We knew that we were never going to change each others opinion but enjoyed defending our views.  Even though I believed that he was consistently wrong on his political choices I also knew that he was incapable of encountering anyone in pain or suffering or need without offering to help.

This situation continued through Carter, Reagan, Bush One, Clinton and the beginning of Bush Two.  The change occurred sometime after 9/11.  It was not 9/11 itself because there was never a time when the country, if not the entire world, was more cohesive in their beliefs.

It was the sometime during the war in Iraq.  Not right at the start, but sometime near the beginning of the campaign, two trends began.  Firstly it became obvious that there were no WMD’s and the campaign was not being run competently. Concurrently the administration began assuming that any criticism revealed a lack of patriotism.  If you supported the administration you were no longer able to tolerate opposing viewpoints.  Your opponents were not just wrong, but were unpatriotic and endangering the country by enabling foreign terrorists.  Political discourse came to a grinding halt.   For even truly great friends like Jack and I.

One of my greatest hopes for this new administration is this acrimony will evaporate.  We have far more in common than than that which separates us. Everyone wants children to be safe, nourished and educated.  We all want the sick to receive care and to discover cures for the diseases that decimate us.  We want the Arts to flourish, the air to be clean, the elderly to be cared for, our friends and families to be safe, and the list goes on.

Our differences are in our priorities and choice of policy. We should be able to discuss these with passion but not anger.  The country is faced with serious problems.  We stand no chance of solving them if we unable to discuss them without getting mad.  The first step is to recognize the good intentions of your opponents.  It’s hard to get mad at someone who is trying to do good.

One of the events I had the privlege of working with last year was Web 2.0 Summit, put on by O’Reilly Media and techweb in the first week of November.  2008 marked the fifth Web 2.0 Summit, and the first time that they opted to do any sort of fundraising in conjunction with the conference.

The decision to hold an auction benefiting technology-related charities was made just a few months before the event. And while the connection between the conference and philanthropy seemed straight forward, no one was sure how it would fly with attendees–especially given the economic turmoil at that time.

We held an auction on the first night of the conference, at the end of a dinner which followed the keynote address. There were a number of logistical challenges: we had to move the entire crowd from one room to another between the entree and the dessert course; we started the auction immediately after a 45-minute onstage interview of Lance Armstrong; the number of lots was limited; and the fund a need was being split amongst all three charities.

When the dust settled, we’d raised over $75,000 on just eight lots and a fund a need. Not a record-setting auction but definitely life changing for any of the individuals served by those charities. And definitely a success given the lead-time we had to plan and implement the auction.

I was surprised in our follow-up meeting when I found out that they were debating whether or not to hold the auction again. Some said that the amount of time it took to plan and implement was simply too great. Others felt like it had been a success worth doing better. I had one simple question: other than staff time, what did the auction cost the conference? In other words, did attendees spend less money elsewhere at the conference because of their involvement in the auction?

Answer: no. Other than the planning and implementation, the auction cost the conference nothing. It cost Tim O’Reilly some money because of his personal support of the fund a need, but beyond that it didn’t affect the conference.

To which my response was hold that auction! Do it! Not because I want the work, but because it is incumbent upon them to continue to make the world a better place, now that they know they can.

There are many ways that Web 2.0 Summit, O’Reilly and techweb could get better mileage out of the auction and, in turn, make the staff time expenditure on their end more worth it. They could have had Al Gore present the check from the auction to the CEO of one of the charities at his speech on Friday. They could use video-blog updates to show how Web 2.0 Summit’s auction continues to impact people’s lives throughout the year. And while all of that is important, it’s not the point.

The potential of any given crowd of people has a finite lifespan: If you do not capitalize upon it at that very moment, it dissipates. Completely. The Web 2.0 Summit auction proved that they have a roomful of attendees who are capable of changing many lives, and readily willing to do so. If they forgo their auction in 2009, they effectively send all of that philanthropic potential away with no guarantee that anyone else will ever be able to make good use of it.

If the question you are wrestling with in 2009 is whether or not to hold your auction, answer me this: what lives does your event change, and who will change them if you don’t?