On Consignments and Buy-ins

Consortiums and Buy-ins
Consortium and buy-in lots have been increasing in recent years. I had just assumed that this was a good trend. A group can presumably afford to out-bid an individual! This should lead to the event raising more money.
Recently, though, I worked an auction where there were a large number of both dining and travel lots that were designed for consortiums as well as several buy-in opportunities. There were over fifty lots in the auction and these lots made up a sufficiently large proportion of the total that several trends became apparent. This started me thinking.
The first thing I noticed was that the bidding on many of the travel lots kept coming to an abrupt stop, usually at an obvious round number. Normally, if you have two bidders that have independently decided to bid an item up to $10,000, in about 50% of the time I can persuade one of them to make one more bid. That, after all, is our job. Not at this auction. These round numbers were like brick walls. Once someone had stopped bidding that was it.
Secondly, prior to reaching these abrupt stops the bidding was really fast.
Finally there was very little bottom feeding for these lots. In other words if there was no opening bid for an item no one step up to buy it simply because it was a great deal.
All of this makes sense in a consortium rich atmosphere. If I am the bidder representing four couples joining together to split the cost of an expensive house in Hawaii or Wine Country or wherever, we have already agreed how much we will each chip in and thus our maximum bid. The chances are that that amount will be a round number. As the bidder for that group I have explicit instructions. We have agreed on $10,000. I cannot commit the rest of the group to any more.
Bidding to reach the 10K is fast, as we have already agreed on that amount. No thought necessary!
Finally if the trip involves several couples, and no consortiums have been pre-arranged, then it is likely that no one would step in even at a low price for two reasons. There is the hassle of trying to arrange a group after the event, and, if I am already part of consortiums for travel lots later in the auction I do not know how much I will be committed to spend by the end of the event. Buying the current lot does not get me out of the obligation to go in with my friends on the packages I have already agreed to.
In some instances I was surprised when the bidding came to its abrupt halt. I knew the bidder to be wealthy, generous and committed to the cause. The sort of bidder who, having made the decision to buy, the sky becomes the limit.
What was happening was obvious. If they were acting alone they would have continued, but as the agent for a group they could not bid any more. And that’s when it hit me. It should have been obvious, but it had never occurred to me before. IN A CONSORTIUM, THE PERSON WHO IS LEAST COMMITTED, OR HAS THE LEAST RESOURCES SETS THE PRICE. If Bill Gates and Warren Buffet had taken Mother Theresa to lunch and she had insisted on going “Dutch”, then they would have ended up eating rice and bean not caviar and Champagne.
This started me thinking about Buy-In parties or dinners. How should you set the price? Your most ardent supporters will be happy to pay above value for the party, and another group will only buy-in at a rock-bottom price.

A practical example occurred recently. A group had put together a truly extraordinary wine dinner. Every bottle of wine was to be a 100 pointer as judged by Robert Parker. (If you are not a wine buff, take my word this is a big deal). For wine dinners you work in either units of 12 or 16. A wine bottle has 24oz and you want to offer a generous, but not excessive pour, 1.5 to 2oz. We were going to offer places at the buy-in for $2,500. This would raise $40,000.
The donor then called and offered to include 2 bottles of each wine. The question then became how much would a second group of 12 people pay. We knew that the $2,500 a head was a stretch, and that whatever price we came up with would apply to everyone.
The three possibilities we discussed were:
1) 16 * $2,500 = $40,000
2) 38 * $1,500 = $57,000
3) 38 * $1,250 = $47,500
Options one or two were great. Option three made no sense. So the question becomes whether the second group of bidders were prepared to spend $1,250 or $1,500 per place. In the end we went with option one, and ended up with exactly the 16 we needed. We had to work for the last couple.
Consortiums and Buy-ins are here to stay, and quite rightly so. I simply recommend that you don’t take them for granted. Each dinner should be looked at to see if it is appropriate to sell it to one bidder or as a buy-in. Then look at the possible buy-in price.