4 Steps for Setting Item Prices in Nonprofit Silent Auctions
For nonprofits like yours, silent auctions tend to be lucrative fundraisers. Their broad appeal boosts attendance numbers, and they pair well with a variety of other fundraising activities, from your organization’s GivingTuesday campaign to its annual golf tournament. Plus, they have a high return on investment (ROI) when planned strategically.
Naturally, a large portion of your silent auction’s fundraising revenue will come from item sales. However, the challenge is not only in procuring high-value prizes that appeal to your supporter base but also in properly pricing each item to maximize its earning potential.
If pricing isn’t something you deal with on a regular basis, it can be difficult to know where to start. Even so, figuring out how to fundraise effectively as a development director or other nonprofit staff member is a valuable endeavor. Fortunately, there is a simple four-step process for pricing individual silent auction items, which this guide will explore in detail. We’ll explain how to:
- Determine the Item’s Fair Market Value
- Set a Starting Bid Amount
- Decide on a Minimum Bid Increase
- Add a “Buy Now” Option for Certain Items
Once you’ve followed these steps, make sure to display pricing information prominently on each of your silent auction bid sheets. Because participants will likely look at dozens of bid sheets throughout the auction, they need to be able to skim each one and quickly decide whether to place a bid, and clear prices will help them do just that. Let’s get started!
Fair market value (FMV) refers to the amount a supporter would pay for a particular item if they purchased it on the open market rather than at your nonprofit’s silent auction. It’s the base number for all of your pricing calculations for that item, so making an accurate estimate is critical.
However, finding the FMV of certain silent auction items is easier than others. For instance, a $25 gift card clearly has an FMV of $25, and you can often find out the value of a designer bag or a high-end gadget by going to the brand’s website. But a painting by a local artist or the opportunity to have dinner with a celebrity can be much trickier to value.
Here are some strategies to determine the FMV of your various silent auction items:
- Look up the value of comparable goods. Even if one of your prizes seems to be one of a kind, you can sometimes find similar items online if you search strategically. For instance, you may discover that an artist who donated one of their unique paintings to your auction has an Etsy shop where they sell their artwork at fixed prices. Or, you might check whether any signed sports memorabilia similar to a piece you’ve acquired is currently being sold on eBay and if so, what it’s going for.
- Ask the item’s provider what it’s worth. If you ask about items like artwork or signed goods, you should take the provider’s estimate with a grain of salt—owners of unique items often overvalue them. However, this strategy is especially helpful if you’re looking for the FMV of tickets to a concert or sporting event. While different ticketing websites might sell them for different amounts, the event venue will often have a definitive price.
- Review your nonprofit’s past event data. Look through any item sale information from previous auctions that you may have stored in your nonprofit’s database. Even if you can’t find the FMV directly, you can work backwards to figure out the FMV if you know the starting bid amount (more on this to come!)
Besides supporting a good cause, one of the reasons why some participants choose to purchase items at silent auctions is because they’re hoping for a discount they couldn’t get elsewhere. To take this giving trend into account while still maximizing your fundraising revenue, the industry standard is to set an auction item’s starting bid amount at 30-50% of its FMV.
Within this range, the amount you choose should be a round number to make it easy for supporters to do quick calculations as they bid. For example, let’s say your organization secures two floor seats at a popular concert that have a total FMV of $3,200. A good starting bid amount for these tickets would be $1,300—40% of $3,200 is $1,280, and you could then round to the nearest $100.
Although competitive bidding can drive auction item prices back up, it’s still likely that several of your winning bidders will pay less than their prize’s FMV. This is why it’s so important for your nonprofit to procure items at the lowest possible cost. Tap into your network of corporate sponsors, look for nonprofit discounts, and partner with dedicated auction item providers to save money up front. That way, you can put more of your event revenue toward your mission.
Once you’ve determined the starting bid amount for a silent auction item, you can calculate your minimum bid increase. It’s best to set this number at no more than 10% of the starting bid amount, and it should also be a round number to make the math easy for participants.
In the concert ticket example above, the minimum bid increase could be $100—10% of $1,300 is $130, and it’s almost always better to round down than up with this calculation.
According to Double the Donation, a distinguishing characteristic of auctions among nonprofit fundraising events is their inherently interactive supporter engagement. Setting a reasonable minimum bid increase for each item is essential to accomplish this goal. When the increase is too high, it deters supporters from bidding and disengages them. But if it’s too low, participants will quickly get frustrated as they’re constantly outbid for their favorite items.
Including a “Buy Now” option on a few of your bid sheets gives participants who are especially excited about a certain item the opportunity to purchase it outright. Winspire’s silent auction pricing guide recommends only doing this for a few high-value prizes to increase your earning potential on them. The downside of a “Buy Now” option is that the bidding process stops when it’s taken, which can disengage other participants if it happens too often.
The concert tickets in our previous example may be a good candidate for this option—in addition to their fairly high FMV of $3,200, you might have a supporter who really wants to see that artist perform live, no matter the cost. Your “Buy Now” prices should be approximately 150-200% of an item’s FMV. So, you could set the tickets’ “Buy Now” option somewhere between $4,800-$6,400.
More often than not, properly pricing your nonprofit’s silent auction items is the deciding factor in whether you reach your event fundraising goal. Make sure to keep a thorough record of each item’s FMV, starting bid amount, and winning bid to aid in your data collection and follow-up for this event. Then, you can use these data points to inform your pricing strategy for future auctions.
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