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“How much?” Why auctions can help pitch pricing perfectly

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For any business, pricing your goods or services correctly is incredibly important. It can define your success or failure; too high and you’ll alienate customers who won’t be prepared to pay, too low and you will lose potential profit.

But how do you set your prices? Fixed pricing has become our norm – based on the competition and the marketplace, a figure is created, leaving little or no room for negotiation. Since pitching your price is so important, why does the predominant way of doing this allow no contribution from the buyer?

With the current climate so unstable for many, it is vital that businesses identify the true market value of their product. The question we need to ask ourselves when setting up a business is, ‘what is the consumer prepared to pay?’ What if there was a better way to judge market value and the real price people were prepared to pay?

Finding the true market value no longer has to rely on fixed pricing. Bartering is one of the oldest human traditions, and now in many business situations, helped by new forms of technology, we are moving back to the notion of paying what we believe something is worth, rather than simply what the seller asks us to pay.

Businesses are beginning to successfully explore alternative pricing mechanisms. We’ve seen this to an extent with airlines. When it comes to buying a cheap seat on a flight, get in early, and you’ll most likely get the best deal. As supply goes down and demand up, you’ll have to pay more. Known as dynamic pricing, this is a pricing model that consumers understand and many businesses now use this mechanism to maximise the value of their sales.

Enterprise auctions take this one step further, allowing businesses to sell for the maximum value to the buyer prepared to pay the most. In the current climate, where businesses are under increased pressure to deliver more and generate better value, auction technology is emerging as the ideal mechanism for pricing goods or services appropriately. Sellers can be assured they are getting the best price, and generate valuable market intelligence while buyers have the opportunity to contribute and pay what they believe something is worth.

The live online auction market is already exceeding $1trn worldwide. Auction technology can be applied across a broad range of businesses and for different uses, from selling off depreciating assets, such as used cars or mobile phones, to rebalancing an insurance client’s underwriting capacity or helping to open up markets around the world for the sale of artworks. 

Auction design has come a long way since eBay, and new innovations in this area are delivering exciting new auction formats which can be combined with big data analytics for business intelligence. Not only can auctions help business sell for the best price, the data and intelligence they create can also be used to help the wider business strategy. 

Ultimately, technology is playing its part in what we have been doing for years – bartering – but it also provides businesses with new benefits such as offering goods to a wider marketplace, and generating market intelligence. Something is only worth what someone is willing to pay for it, and nowhere is this better demonstrated, than in the world of enterprise auctions.

Phil Bird is CEO of Perfect Channel

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