Updated July 25, 2023
Difference Between Bidding vs Auction
In Bidding vs Auction, bidding is when a person makes an offer on an item, while an auction is the event where many people compete by bidding to buy something.
What is Bidding?
Bidding is competitively offering a price that the bidder or the person offering a bid is willing to pay for a commodity. This commodity can be anything, cars, bikes, properties, etc. The price offered is called a bid, the person offering the price is called the bidder, and the entire phenomenon is known as bidding. Various economies and industries use bidding as bidding defines demand and hence the value of a particular commodity. It is one of the most normal ways of the formative price of a commodity in a free market.
Similar concepts like social bidding and reverse auction have been used recently.
What is a Bid?
The highest price a marketer is willing to pay for a commodity at a given time for security. Or the product in an auction is offered a specific amount in exchange for that product, also called a bid. Sometimes, a bid refers to the maximum a company will pay to take over a specific target.
In business, bidding is a way of competing with other businesses for a contract to win a project’s contract. The companies that hire the contractors compare the proposals of different businesses and choose the best bid based on the business offered to the company. Remember, only a company interested in the lowest price for a product or a service will select this process of choosing a contractor. A contractor or vendor quotes a bid, which is the price or fee offered to provide the required product or service to the company.
To be precise and upfront, bidding is pure competition.
What is Auction?
The auction, what is this term? It sounds quite similar to the word ‘Bidding’? The difference here is that an auction is a process of buying and selling goods and services by submitting them for a bid, and finally, the product or the service is then sold for the highest bid. The auctioneer announces prices, and the bidder calls out the bids. Here the auctioneer calls for the highest prices for the commodity. He is seeking the highest bid or price for his product or service.
You can also say that an auction is a different type of sale where the price of a commodity is neither pre-decided nor arrives by negotiation; however, the price is set by a competitive and open bidding process.
Types of Auction
There are two types of auctions:
1. Forward Auction: This type of auction is where many buyers bid for single sellers’ products and services.
2. Reverse Auction: In this type of auction, many sellers bid for a single buyer’s order. The auction process only completes when the buyer and the product seller actively accept the bid. Since the internet and the media have advanced, bidding and auction, have become open as everything is auctioned for, from books to ships. Of course, services from air tickets to legal advice can be bided by anyone anywhere and anytime from different websites.
Many auctioneers choose auction over the sale for several reasons. Because an auction is a good marketing plan, an auction brings people looking for items being sold, and the more people you have at the auction, the better chances you have of earning the highest bid for your products and services. The motive of an auction is to get a better price for the goods and services you want to sell. Here you need two or more people competing for a single product or service. This pulls up the price or the value of the commodity. This serves your motive of getting the highest price for your sales.
Head To Head Comparison Between Bidding vs Auction (Infographics)
Below are the top comparisons between Bidding vs Auction.
Most auctions require two people to handle the bid. The 1st person gets a bidder number, and the 2nd person identifies the items before bidding. The bid for a commodity usually starts at a low price. The auctioneer raises the commodity price every time someone bids until the auctioneer receives more bids on that particular commodity. When the auctioneer receives the highest bid, the commodity the bidding process is on. After receiving the highest bid, the auctioneer sells the commodity to the person with the highest bid.
Auction is going against the most common practice of printing an MRP of a commodity to sell it in the market; it is an idea of creating enthusiasm amongst people regarding a product and letting them become a part of an open auction where they can place a bid to acquire or own a product. Bidding refers to placing a bid; the person who actively wins the bid becomes the product or service owner. A small percentage of the bid is also given to the auctioneers.
If you go back in time, you will know that the word auction comes from the Latin word ‘Augeo’, which means I increase or an argument. Long long ago in ancient India, in the era of the kings in our tradition, we had Swayamwars, where our beautiful princesses choose their life partners from amongst a number of princesses that gathered for the ceremony. This was a form of auction where the princess displayed their abilities, and the princesses would choose the one they liked the most. So after analyzing the qualities and abilities of the princess, the princess garlanded them as her life partner. This is where auctions came into being, where the weddings of the princesses were auctioned, and the prince the princess liked the most, the prince here, was the highest bidder of the princess. Similarly, people bided for lifetime labor. In Rome, auctioning for someone who could not repay debts was an extremely common practice. During the 17th century in the UK, an auction started with the lighting a candle and ended when the candle went out.
Now I hope the confusion and the difference between auction and bidding are clear. It is normal to be in a dilemma because an auction has a number of processes and types, and bidding sounds like one of its types. Let’s clarify this topic by focusing on the differences between the two.
Key Differences Between Bidding vs Auction
Let’s discuss some of the major key differences between Bidding vs Auction:
1. Difference in Meaning
Bidding: Bidding is a competitive price offer for a product or service to own the same. It is the buyer’s willingness to buy the commodity for a price by offering a bid or a price to buy the same. It finds utility in purchasing various items, from books, ships, tickets, and advice. Bidding determines the value and, in return, the demand for the product and service offered by an auctioneer and the bidder’s determination to buy the commodity.
Auction: Whereas auction is a process where buying and selling goods is up for a bid. The purpose of an auction is to actively obtain the best value for the goods and services sold. Marketers often auction their goods and services to get the best value for their sales. The reason for putting up commodities for an auction is to get the highest price.
In marketing, an auction is a dynamic sale where the price of a commodity is not predetermined or set through negotiation. The price is with the help of competitive and open bidding.
2. Traditional Difference
Bidding: Traditionally, bidding is placing a bid or a value of a product or a service up for sale. Or you can also say that bidding is nothing but an act or a process of placing bids to show the value or demand for an asset, product, or service.
Auction: Auction is placing the goods and services for a bid that allows the person who places the highest bid to own the goods and services. This has been an ancient tradition and has been practiced for ages.
3. Successive Difference
Bidding: A bid is completed by the bidder when he or she accomplishes his/ her desire to acquire the product and service. The bidder achieves the goal by winning a contract or a job put up for auction by an organization.
Auction: The motive for an auction is to call for the highest price for a good or service. The auctioneer succeeds by actively receiving the highest bid and selling their goods and services to the bidder. So receiving the highest bid for a product or a service makes the auction successful.
4. Motive Difference
Bidding: The motive of bidding is to create competition. The property buyer can receive the contract, object, or service in a simple business transaction. Bidding creates competition to increase the value and demand of the given object, be it a product or a service. The motive is to create competition amongst the buyers to increase the demand for a particular commodity.
Auction: The auction aims to change a commodity’s marketing plan to increase value. Auction is a different and more demand-creating mode of marketing. It helps in understanding the value of a particular commodity. Auction increases the demand for a commodity. The motive here is to create a different marketing plan for the commodity. The commodity can be anything, a product or service.
5. Value Difference
Bidding: Mostly, a bid is made to achieve the highest value for a commodity, be it a product or a service. However, some bids are made for business contracts. In such bids, the organizations create an auction for contractors where the lowest price bid with the correct quotations and appropriate work is selected. However, here the bidding is to get the best work done at the lowest rate.
Auction: An auctioneer arranges the auction to get the highest bids for the goods and services that he has put up for sale in an auction. Here, the motive is to receive the highest value for the product and service. Companies often conduct auctions to determine the value and demand of commodities in the market.
It is all about getting the right price for the product and the services the companies or individuals offer. Be it a forwards bid or a reverse bid. The motive is to determine the value and demand of a product and service the auctioneer offers.
Certain bids sell products and services to the highest bidder, the individual willing to pay the highest price. In a few auctions held for selling contracts to vendors by organizations, the organizations look for the best job offered at the lowest price to hand the contract over to the concerned vendor.
Bidders compete by offering a competitive price to acquire or secure ownership of the provided product or service. Organizations can choose the lowest bid offered to obtain the product or service, thus reversing the process. Similarly, an auction invites competitive bidding to understand and sell a product and service offered at a competitive, high value and price. Thus, vendors can competitively offer low prices in auctions to win bids and secure contracts with organizations. This was all about Bidding vs Auction.
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