Price as a powerful motivator and winning auctions
I was over at Ikea (the furniture store) over the last weekend, and just as I exited the store, I noticed that there were a lot of people gathered, just as if there was a performance going on.
On investigating further, I found out that Ikea was actually auctioning off their old items! So people were gathering around to bid for furniture - the prices all start from SDG$2! Yes even things like 4 nice wooden chairs, or very pretty coffee tables - all starting at $2!
Being the “busybody Singaporean” 
, I stayed to watch for a while. I noticed that many of the people standing around bidded not only for one item, but almost every item that came out from the warehouse! It seems to me like these people do not even give a second thought to whether they actually need the item at home, whether how much it takes to get the item transported back home, or whether there would actually be space at home to put the new furniture!
The just bidded and bidded… and bidded.
Naturally, most of the things sold pretty well.
What I got to realise is really how powerful a low price is in motivating people to buy. If you have been to any classes on eBay, they would always recommend that you put your starting price at $0.01, and do not set a reserve price. Why is that so?
Even though people might know that they will almost never get the item at $0.01, it is just human nature to be greedy, to “not let this deal pass by”… and so the bidding begins!
The magic is that once the bidding starts, it seems that people’s attention would be focused on “winning the auction” rather than “getting the item for a reasonable price”! In fact, I’ve heard (I don’t know how true this is!) that many of the items in eBay are transacted at a price higher than what is sold in retail stores!
Frankly, to me, it sounds really downright dumb to spend both more time and more money to acquire the same item you could get for less and with better service elsewhere, but the truth is that these business models work - its hard to believe how powerful auctions can be, and how auction companies like eBay can play around with economics and human nature to build a marketplace.
Tags: auctions, ebay, human_nature, ikea
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Tan Kian Ann is blog marketer based in Singapore. He now works with individuals and small businesses reach out to the world using blogs. 
March 8th, 2007 at 3:45 am
Visit Shay Frendt
You make a great point here Kian. Not only has eBay succeeded in creating a virtual standalone economy, but an almost perfectly competitive one.
The reference to the ProBlogger post goes to show the real power of the marketplace eBay has created, in that smaller, spinoff (such as auction ads) services have been able to capitalize on this auction giant.
March 8th, 2007 at 4:04 am
Visit Kian Ann
Thanks Shay, another thing that really impresses me is that we all have heard that people go online to “search for information” and have no information to take out their credit cards.
That is why there is so much talk about web copywriting… its all about converting people from the “surfing” mindset to a “buying” mindset.
What eBay has created is a place where people will automatically be converted into a “buying” mindset, without a single line of copy! Man, how powerful is that?
March 8th, 2007 at 2:07 pm
Visit Internet Marketing Strategy and Development Analysis - IntuitionFuel.com
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