Online Auctions Paradigm Shift: a Matter of Psychology
Have you ever thought what pursues a person to take part in the auction? What attracts most: the idea to pick up a bargain or the excitement from the process itself that can affect like a drug?
There is a proven fact that about half of eBay auctions results in higher prices than “buy it now” price. If people participate in the auction to get the item why don’t they buy it for less paying the “buy it now” price?
Researches note that “participating in an auction is likely to require a greater involvement of the consumer than a purchase of the same item in a fixed price market.” There are a couple of psychological effects that can tell us more details about why people behave this or that way at the auctions. According to BBC research auctions push a number of our psychological buttons, and one of the most well-known ones is called the phenomenon of “auction fever”. Under auction fever, the bidders’ “adrenaline starts to rush, their emotions block their ability to think clearly, and they end up bidding much more than they ever envisioned”. Despite its popularity, little is known about the causes and mechanisms of auction fever.
Why does the auction fever arise?
Generally speaking auction fever is an emotional arousal in the context of an auction (or any other competitive situation). When this happens, bidders may want not only to purchase the item, but also to beat the competition. In other words, competitive arousal can lead to a “win at any cost” mentality. There are a number of factors that might increase arousal in an auction:
- Rivalry (when it’s down to just you and one other party).
- Social facilitation (when others are watching).
- Time pressure.
- Hype (when the auction has received a lot of press or attention).
By the way, very rich people often send delegates to auctions in order to escape over-excitement. And only this way they can bid without emotions involvement.
One more psychological effect is called the endowment effect. It means that people tend to over-value things they already have and underestimate things that they don’t possess. Auction encourages participants to link the bid with the item, make them imagine how they can own it. This fact shows us how important is to make a vivid auction catalogue or attach bright pictures to auction lots. This attracts you to the road the seller wants you to follow on to imagine owning this item in advance, so you’ll place a higher value on it, and so pay more to turn imagination into reality.
Taking into account mentioned above psychological buttons, online auction owners have recently begun to compete in “emotions”, rather than focusing on simple economic and price wars. Even economists say that in the future emotionless and unexciting electronic market models will hardly have the potential to draw the attention of customers and may eventually be foreclosed from this highly competitive business segment.
Moreover nowadays marketing departments of Internet auction platforms systematically apply the terminology of winning and losing. Even in 2007 eBay launched advertising campaign titled “shop victoriously” stating that “it’s better when you win it”.
All these facts show the paradigm shift from simple auction or online trading models to “entertainment shopping” or “auctainment”. At this point auction owners need to understand how electronic auctions can trigger emotions and which auction features are most effective in achieving an exciting auctainment platform. Second, it is even more important to wisely figure out how the triggered emotions affect the auction outcome and thus online business.