Auctions are designed to turn selling an item into an instantaneously competitive process, pushing buyers to drive up the price in real-time rather than carefully assessing what an item is worth and paying for it accordingly. A seller can get a much better price this way than they would by negotiating with an individual buyer.
Auctions capitalize on two psychological tendencies: a habit of fixating on things we can potentially own and a hatred of losing things we possess. In effect, auctions create these two feelings several times over. A person places a bid and begins to picture themselves owning the item. Then, as soon as another bidder tops their price, they feel the sting of losing that same item and bid higher. This cycle tempts people to pay more than they normally would because losing feels intolerable at the moment.
Key Takeaways:
- The most popular marketing channels—especially Facebook, Google, and Amazon—leverage auction-based pricing that makes it easy to get caught up in a bidding war
- The auction-based pricing model benefits bigger brands with higher budgets, specialized consultants, and other financial advantages
- Partnership marketing is relationship-driven and outcome-based, avoiding real-time auctions
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