Episode 50: Psychology of Bidding, Part 1

Jeff: All right. Well, welcome back to the latest episode of Elevate Your Event, where we talk about all the various ways you can make your next fundraising event and auction better. And we have a special guest today. We have Marissa Walters from Wild Hair Auctions. And it has nothing to do with the hair, by the way.

Marissa: Yeah. No. Wild Hair Auctions and Events.

Jeff: Marissa is a benefit auctioneer and she has a passion for raising money for nonprofits and for schools. We've worked with Marissa in the past and we absolutely love working with her. She's got a lot of energy and she has a lot of experience. She's raised a lot of money for charities. Half a million dollars or more, I would say.

Marissa: Not personally, but I've assisted and or done myself over half a million dollars.

Jeff: I think that's awesome. And you have a background in restaurant management and event planning. I think you also are in the oil and gas field.

Marissa: That I am.

Jeff: As are we. So we love that. If you can tell me what a royalty-free interest right is, then you can come to our next auction and whisper in Elise's ear about it.

Marissa: I can actually. We can discuss royalties all day. Why in the heck is this thing going for six million versus the other one that went for one?

Jeff: Anyway, lots of fun stuff. We're not here to talk about oil and gas. She's also an event expert for Handbid. She's worked a number of Handbid events on the Handbid side running the software and doing check-in and all that amazing stuff. And when she is not auctioneering or talking about royalty-free interest rights, she is a mom of two. How old are they?

Marissa: 15 and 13. Oh, no, just turned 14. So 14 and 15.

Jeff: Oh, my goodness. You are in the thick of it.

Marissa: We are. Coleman gets his license in March, and I couldn't be more excited.

Jeff: Okay, so we're talking boys, girls?

Marissa: My oldest is a boy, my daughter's the 14-year-old.

Jeff: Okay, so we should do a podcast episode on who's harder to raise, boys or girls, because I have my opinion on that, having three daughters and one son, as you probably do too.

Marissa: Fair enough.

Jeff: We all live in Colorado, so that means we love the outdoors, as do you, and keeping up with your kids.

Marissa: Yep. Soccer. My daughter does MMA.

Jeff: So that's a fun one. She doesn't wait until she gets angry with those female hormones. Stay out of the way. Anyone that dates Coleman should watch out because she's going to come after them if they break his heart.

Marissa: Oh my gosh.

Jeff: I love it. I love kids and siblings that stick up for each other for sure. We love that. Anyway, okay, what are we here to talk about today? Oh, Elise Druckenmiller is joining us as well.

Elise: We're not really here to talk about me. We could. She's just happy the headphones haven't messed up her hair yet.

Jeff: We are going to employ all of our experience into this particular podcast episode. And, of course, where we needed to fill in, we asked ChatGPT a few questions, I'm sure. So anyway, behavior and psychology definitely plays a role in how people participate in auctions. And auctions are obviously a common part of a lot of fundraisers. But I think some of the things that we're going to talk about and the concepts that have kind of defined how auctions work have been perfected over time. So people who are building out these auctions and have designed the rules around them really do understand the psychology behind it. But it's still fun to watch.

Marissa: Yeah. That it is.

Jeff: Okay, so let's talk about some of the common psychological factors that influence bidders during an auction. So what comes to mind for you? First one.

Marissa: Competition. Well, you know what it's about. Yeah. I mean, it's not really an auction if one person wants the item. Like, unless they really hate themselves and want to bid against themselves.

Jeff: Totally. I've actually done that.

Marissa: Well, Handbid won't let you bid against yourself, so you must have been using somebody else's software. Or that live auction where the auctioneer will take you up yourself.

Jeff: Oh, competitive bidding against spouses. You're a live auctioneer, so let me ask you this question. Are you doing that on purpose, or can you be really vulnerable here and tell me that you just got lost on who the current winner was?

Marissa: Well, both have applied. If I'm being honest, I've had some where you have that momentary blackout, and I'm like, oh, yes, I'll take that bid again. And you're like, where was I? And I have to look at my husband and he gives me the signal, okay, I got you. But then there are those times I don't like to take someone's additional bid if I know it for sure. Like I'll say, well, ma'am, you can't outbid yourself, but I'll take you at that original bid. Let's go back to this one, because it feels a little disingenuous, right, to have someone up their own bid. If they are serious, there's those people that are like, I want that item, and they're just holding their hand up until it's theirs. I'll take that bid all day, but I'll make sure they know I'm taking that bid. I'm not just accidentally doing it.

Jeff: Yes. So competition against yourself, right? We should love ourselves, people. And when we love ourselves, we probably shouldn't compete against ourselves. Totally. Okay, so another one would be...

Marissa: I think the other one is that loss aversion that we talk about, that FOMO. Like, it was mine. Once you've been on it, you own it. Right. It's your item. That fear of losing.

Jeff: Yes. I mean, the world is definitely riddled with people that are fearful. But in this case here, this actually can work into the charity's favor. People don't want to lose. And we see this. And we're going to talk about some other things that kind of factor into this and how you get that going. We used to call it the snowball effect, right? It's like you have one bid, you have two bids, you have three bids, but once somebody's kind of bid two or three or four times and all of a sudden it's now kind of competition, then this loss aversion kicks in, right? Where it's like, heck, it's not about how much I'm spending now. It's about I'm winning this. It is mine. I do not want to lose.

Marissa: I love that.

Jeff: So I don't know who came up with it, but at some point early on when we were running our first auctions, we did this event out in South Carolina, and they had just moved from paper, obviously. And after the event, they said, well, we just didn't really see the activity we expected to see with mobile bidding. And then we looked down at their items and we're like, well, we see why. Like, you started everything at 50%, 60% fair market value. And let's set aside for a moment whether fair market value is even accurate. And then these bid increments were outrageously large. So if you had an item that was worth a thousand dollars, they would start it at $500 and then they would put a $100, $150 bid increment on it. And it's like, well, so now someone bids $500, maybe you get that bid, but does someone really want to bid $600 or $650?

Marissa: You're done. I mean, you sell it. You're probably done if you see that.

Jeff: But honestly, yeah, maybe $525 I'd bid, $550. Right. Watch what happens, though. You'll see this happen, where somebody bids $525, and then $550 comes in, then $575, and then $600. And by the time you're done, you probably see this with live auctions too, you're way past that original bid increment. I think it's that psychology of it's just $25 instead of, gosh, that's $150.

Marissa: Absolutely. When I think you see that too, especially with the silent auctions. One of the things is when you can lower your opening bids when you see no movement and you lower it and you tell people, hey, go check out that section that doesn't have bids. And all of a sudden that item that no one was looking at goes boom, boom, boom, boom, boom, and it's passed what the original opening bid was.

Jeff: Yeah. And look, we all go through, as Handbid experts, we'll go through that list and we'll be like, oh yeah, that makes sense. Oh, yeah, that makes sense. And then you scratch your head and go, why is this one have no bids? Oh, because it's, wow, let's fix that bid increment or let's fix that opening bid and see what happens. And I did this once at an event in Nashville. And I remember the item perfectly. It was the Ben Hogan one iron shot. It's a framed photo. And if you're a golf fan, you've seen this photo before. But I think they had it going for like $400 framed. No one was bidding on it. And I remember the guy saying to me, like, all right, I got to go upstairs. You're in charge. I'm like, okay, so does in charge mean that I have free rein to fix some of the... He goes, I don't care what you do. I don't want to take anything home tonight. So I lowered it to $200, and I put a $10 bid increment on it, and this thing went for $450 by the end of the night. So there you go.

Marissa: Yep.

Jeff: Okay. You just got to get people going. Okay. Oh, this one. This one is right up your alley. Social influence. Who knew?

Marissa: Oh, man. So, when I see people having a ton of fun bidding, I'm like, ooh, I'm going to get involved in that. Let me see what I can do here. Or, I mean, the same thing goes for when, I guess it's just people conforming and wanting to participate when they see other people participating.

Jeff: Yeah, we were talking about this the other day. And it's interesting because I go back to the days, this is few and far between now, but back in those days when somebody would walk into the auction and be like, ah, you're using technology. Oh, this is going to be the worst. I mean, they just were like the Debbie Downers, right? I mean, they were just bad. And then they'd get into the auction area and they would scowl and wear the bedsheets and then they'd see everybody having fun on their phones and they'd be like, maybe this isn't so bad. How do I get this on my phone? Like, oh, come on around. We can help you out. So there is definitely, it's contagious.

Marissa: Yes. And you see this in live auction. You see this in the paddle raise. And we talk about it all the time. When you're planning your paddle raise, it doesn't matter the increment. What tends to work really well is having a lead gift at every increment so that someone is raising their paddle at every level, to include $100, because it's infectious, right? If I have two people at a thousand, hopefully I get two more.

Elise: If I have won it, it's your turn. Yeah, exactly.

Jeff: Yes, it's true. It's true, you guys. And we were talking about this the other day as it relates to, so I'm on Noom, okay? And trust me, I'm liking it. My wife thinks I'm nuts, okay? She's like, you know how to lose weight, just go lose weight. Like, I don't know why you feel like you need to have somebody tell you how. I'm like, I don't know. I'm going to try it out. Because there's a lot of stuff in there about the psychology of not just food and eating and everything else. And obviously with a Prader-Willi kid, we understand metabolism probably better than most. But anyway, one of the things they said in there that was news to me was that there's a social aspect to eating and you're socially influenced by what other people at the table with you are doing, what they order, when they start eating, when they stop eating, right? And so their big advice is be the first to order because then it's too late. Unless you're my wife, who'd be like, oh, I want to change my order because Elise got this. But other than that, if you're thinking, really honestly, I should have the fish on top of cauliflower rice and it looks boring, but it's got a side of broccoli and that'd be my best choice. But you wait to go last and everybody else is having a burger and fries. You're going to order the burger and fries is basically what Noom is saying. That's the social influence we're talking about. So anyway, be the first to order at a restaurant if you get anything out of this podcast. And be the first to drop your fork. Be the first to be done.

Marissa: I love it.

Jeff: Anyway, the social influence. We've beat that one to death. Okay, so what's next? What's another psychology of bidding factor?

Marissa: I think we talked about it as part of that whole FOMO piece, but it is that idea of perceived scarcity. So this is a once in a lifetime opportunity. This is an exclusive event. So now all of a sudden when you see that, you're going after that item because you're not losing it.

Jeff: Right. No, I agree with that one, right? For sure. A couple others that we mentioned that I thought were interesting was the, I don't know who calls this the endowment effect. It sounds like we're in a college class.

Marissa: I've emotionally bought this before I bid on it. Okay? Like, I'm going, and guess what? I'm probably worse about this than my wife is. But we're driving to an event, to the auction. And I'm like, oh yeah, I am going on this trip right here. Like, it is mine.

Jeff: You see yourself on the beach? You already have that cocktail in your hand, you're there.

Marissa: Yes. And so that helps. And we'll talk about this a little bit later. But to do that, obviously, that auction has to be open in advance or you have to be promoting items in advance. And all of those things are good advice.

Jeff: So anyway, the next one I wanted to jump into quickly because it's got the poker kind of connotation to it is this kind of what they call escalation of commitment. I mean, in poker, you call it being pot committed. At some point, you feel like I've got enough invested in this item, whether it's emotionally, probably not financially because unless it's like a run-around or something, you're probably not going to pay anything if you lose. But at least emotionally invested in, I'm in. I'm not going to lose now.

Marissa: When you hear so many live auctioneers say, you've come this far. You've come this far. And in their minds, well, I have. You're right. Like, I got us to this point.

Jeff: Yeah. I own this. That's right.

Elise: That's a good thing. Totally.

Jeff: You have another one to share?

Elise: Merchandising. Yes.

Jeff: How you present the items. Yes. That plays a big piece.

Marissa: Yes. I remember one of the first events I did and it was up in Boulder and we show up there and they had maybe 20 items or so. It was in a dark hall. And so they had not many bids going on. They're like, I don't know about this mobile bidding thing. Like no one's bidding on anything. So I walk in there and I look and there's a cardboard box, and it's long and rectangular and it's leaning up against the wall. And then on the table was a very small, I'd say four-by-six photo of a tent and they had a thing that said "Tent" with the item code like 202 or something.

Jeff: And I said, so is that what's in that box? And like, yeah. I said, like, no one's bidding on it. I go, because no one can see it. Like, you've got to open it up, stand it up, put this puppy together. Like, we don't have room to do that. And it's dark in here. I can't even see the photo. And so you take that, right, and then you look at some of the events we go to now, and it's unbelievable. I mean, we went to one event, and Marissa, you would love this, because this was part of the live auction.

Marissa: Oh, wow.

Jeff: And so the live auction was in a room and the stage was in the middle. So the auctioneer is on a square stage in the middle, and it was a trip to the Canadian Rockies, flights, skiing, everything. And all of a sudden, as they're describing it, there's four video screens on every wall, showing the video presentation of the item with Air Canada sponsoring it. And then it starts to snow.

Marissa: No way.

Jeff: So they start dropping fake snow in the room. And I was like, okay, I'm there.

Marissa: Yes. That's amazing.

Jeff: Yeah. And they did another one. There was a huge one that was a trip to Africa and they bring out this African drum band core all in their tribal gear and are roaming through the entire auction area playing this tune and then lining up in front of the stage for this auction to go off on this African safari trip.

Marissa: Oh, my gosh. At least they didn't bring out the lions.

Jeff: Right. In the middle. A little much. A little bit of tigers. That's amazing. You could possibly get eaten in the crowd. But this was really neat. The whole point there is you don't have to go that far.

Marissa: No.

Jeff: But really do show the items well, light it well. We say, no offense to Walmart, Apple Store over Walmart. I mean, Apple stores are incredibly well lit, and they're not cluttered, right? Things look well.

Elise: It's clean. It's clean looking.

Jeff: Yes. And so we've done tons of articles and blogs on this kind of stuff. And you notice it, right?

Marissa: Yeah. And it's the beforehand piece too, right? The marketing of your items ahead of time. Absolutely. Getting people excited about that before they get there so they're in the car already on that trip. It helps to make it part of their experience. I was thinking the other day because I'm such a techie nerd about certain things and now Apple's got those new goggles and I'm thinking how cool would it be at an event to have them put them on and then get to see themselves there.

Jeff: That would be cool. Really neat. And this bid, right there. There you go. Right with our goggles on. We're going to bring the top two bidders up to stage.

Marissa: And you're like, there you go. That's easy. They just keep doing this. And you're just like, I'm the auctioneer. This is so amazing. I don't have to do anything. Doing my job for me.

Jeff: I like it. Okay. So we've talked about a lot of psychology aspects. Let's dive into some of the ways that these could be used to inspire bidding. So we just talked about one. Which was?

Marissa: Appeal to personal aspirations. And she just said that could be you on the beach. Totally. That could be you with that cocktail in your hand, the sun on your face, living your best life.

Jeff: Right. Or even, Lori had mentioned earlier when we were talking about this, that it's a professional aspiration, right? So it's something that you can be a part of that will better you, your professional or your monetary gain, whatever. You're giving somebody that vision of what they see themselves in the future that they can get. We see that a lot at conferences. And so let's take this to the fundraising side as well. I know we're talking about auctions. In a lot of cases in auctions, especially live auctions, you're auctioning off things that are going to be kind of tied to people's discretionary incomes. Those are personal aspirations for them with the side effect of supporting a charity. But you could go paddle raise side and say, do you want to be seen as somebody who's generous, somebody who's providing clean water, somebody who's giving this kid a chance, somebody who's protecting this woman at a battered women's shelter? That kind of stuff, you can start to give people a perception of the vision of what they're doing.

Marissa: Yeah. And kind of what the feel-good side of that could look like.

Elise: We had a really great event in December that was just that. They did a great job with their presentations beforehand, the story, the person. The gal was there who was a member who was part of that video, that as you gave your $5,000 and you understood that it could help someone like this young lady, you had that feeling. You walked away going, look what I did.

Jeff: Yeah. This transformation is what your dollars can do. Or even when they put donors in the video and they say, I went to Africa or I went on this trip and I personally witnessed these things. And here's how I felt about it. And it's like, I want to be that person.

Marissa: Totally. Oh, we had an event in October where they, the gala was, they go to Thailand. And she had people that had won the auction item the year before. But they went on the experience with her to build the school, to meet the young ladies. And they came up, the two participants, and it was that emotional pull. Everyone saw that these people, yeah, they might have paid a pretty penny for it, but they came back changed.

Jeff: Yeah. Right. Thank you for joining us for this first part of Psychology of Bidding and a special thank you to Marissa Walters from Wild Hair Auctions. Be sure to join us next week as we conclude this conversation. If you enjoyed our show, please take a moment to leave us a review. You can find us on Apple, Google, and Spotify. Don't forget to subscribe for more great content. And if you're a fan of video, check us out on YouTube. Until next time, happy fundraising.