Marketing Essentials 2012
Online Reverse Auctions
In online reverse auctions the seller bids based on the criteria set up by the buyer. In essence the buyer is requesting a quote from the seller. Once all the quotes are in from various sellers, the buyer can decide which seller is offering the best price and deal. The lowest bidder may not always be offering the best deal because there may be other considerations, such as delivery time, the company's reputation, and production capabilities. Online reverse auctions are used for e-procurement by large companies. Special software for reverse auctions help buyers compare vendor offerings by showing the bids side by side in a chart format, which makes comparisons easy. One of the most popular Web sites that sell products using reverse auction pricing is eBay.
Innovate and Create
Ask students to compare a regular auction with a reverse auction by conducting two auctions; a regular auction and a reverse auction for a truckload of peaches. Let half of the class act as buyers and the other half as sellers. Conduct a regular auction with the buyers quoting prices for the truckload of peaches with the bidding set to begin at $150 and watch as the price goes up in a regular auction. Then conduct a reverse auction where a company that makes jams is looking to purchase a truckload of peaches. Now the sellers are the ones bidding. Note how the bids go down in price. Ask students: If you were the farmer selling peaches, which auction method would you prefer and if you were the company making jams, which auction method would you prefer?