55-03.
AUCTION
Pattern description
Auctioning means selling a product or service to the highest bidder. The final price is achieved when a particular end time of the auction is reached or when no higher offers are received. This allows the company to sell at the highest price acceptable to the customer. The customer benefits from the opportunity to influence the price of a product.
Inventive problems
The product price should be as high as possible in order to get the maximum revenue.
The product price should be low in order to attract more customers.
The company should constantly keep in touch with customers to attract them and to encourage customers to re-purchase.
The company should minimize communication with customers in order to reduce costs.
Application examples
WineBid, based in Napa, California, is an online wine auction site where both private individuals and wine dealers can auction off their wines to connoisseurs all over the world. The vendor sets a reservation price per bottle to prevent the wine being auctioned off for less than it is worth. Since its establishment in 1996, WineBid has had very successful growth, now counting more than 60,000 registered users, making it the largest auction site of its kind.
The Auction business model has also been used in the brokerage of intellectualproperty-based transactions. Ocean Tomo, since 2009 a division of ICAP patent brokerage, has matched buyers and vendors for the sale of patents and other intellectual property assets through private brokerage platforms and live auction. With hundreds of transactions to its credit and over US $150 million in sales Ocean Tomo is the world market leader in the difficult business of patent trading.
Another company that has applied the Auction business model successfully is MyHammer. The company was established in 2005 and specialises in reverse auctions for tradesmen and related service contracts. As with Priceline, MyHammer customers state the kind of services they require, which may include anything from small repairs through relocation to entire construction projects. The Auction business model enabled MyHammer to become one of the leading marketplaces for tradesmen and service contracts within a very few years. It is estimated that over €100 million worth of contracts have been auctioned off on MyHammer.