What is a Reverse Auction And How is It Different from a Traditional Auction?
Author:Jim Anderson
There's a new fad that's changing how companies everywhere buy products and services from their vendors. It's called a 'Reverse Auction'.
[caption id="attachment_862" align="aligncenter" width="395"]
What is a Reverse Auction?[/caption]In a traditional auction, you know like the ones that you've seen on TV, somebody with something to sell stands in the front of the room and everyone who wants to buy the thing yells out a price that they are willing to pay. The price keeps going up until someone agrees to pay a price that nobody else in the room is willing to top.
A reverse auction works in a similar fashion, but it's just a little bit different. In a reverse auction, the company that you'd like to sell your product or service to stands in the front of the (virtual) room and you and all of your competitors get to yell out how much you'd charge them for what they are willing to buy. The company that is willing to go to the lowest price wins -- most of the time.
Reverse auctions are often conducted online. The company that is trying to purchase the product or service can purchase specialized software that allows them to run the reverse auction. On a given date, at a given time, each of the vendors who want to participate in the reverse auction will be instructed to log on to a web site. Once on the web site, the auction will start. The vendors will enter the price that they are willing to sell their product to the buyer for. They may also enter other parameters including delivery date, quantity, etc.
The software will evaluate each of the entered bids and each bid will be ranked against all of the other bids. Each of the vendors will be able to see where they stand in relation to all of the other bids that have been submitted. As each of the parameters that are part of a bid is changed, a vendor will see their ranking change relative to the other bidders. This process will continue until the price drops so low that no other vendor is willing to submit a bit with a lower price. At this point in time, the company that is running the reverse auction will declare that the auction is over and the company that submitted the lowest bid will have won.
Are you going to be ready when your best and biggest customer comes to you and tells you that that deal that you thought that you had locked up is now going to be awarded based on a reverse auction?
Article Source: http://www.articlesbase.com/negotiation-articles/what-is-a-reverse-auction-and-how-is-it-different-from-a-traditional-auction-6174106.html
About the Author
Click here to learn more about reverse auctions:
http://www.blueelephantconsulting.com/store/receipt/secrets-to-winning-reverse-auctions
I am pleased to present my latest negotiation training video:
'Reverse Auctions: Secrets To Winning'. This new video contains
all of the information that a company or individual needs in order
to prepare for, participate in, and (hopefully) win the next
reverse auction that you are a part of.
Click here to learn more about reverse auctions:
http://www.blueelephantconsulting.com/store/receipt/secrets-to-winning-reverse-auctions
