Reduce the Penny Auction Risk: Developing A New Business Model for Penny Auctions

Abstract

Millions of people around the world are using penny auction websites, at varying capacities, as conduits of exchange. The current exists penny auction business models are not long term sustainable. Researchers have argued that penny auction customer retention is rarely sustainable because the probability of making profits through auction sites is very low. Therefore, this research developed a new business model that reduces the risk of losing auctions by adding more features that could encourage online bidders to join more auctions which help auctioneers to make their business more sustainable. The new model has a reward system for encouraging users to participate in more auctions. Hence, creating a sense of safety for bidders can motivate more participants to join the penny auction business leading to a point of profitability and sustainable turnover. The study explored how the adoption of a new penny auction model, as instantiated in Aukshen.com, helps improve customer retention in order to improve the business outcomes of an online penny auction. The proposed model in this study, developed by design science research (DSR) based on a kernel theory (e.g., Prospect Theory) And, the artifact evaluated by using a quantitative method. The collected data were categorized into datasets and questionnaires. The finding of this study indicates that three new features were significant predictors of customer retention: Refund Tickets, First Hour Reward, and Reward Systems.