Navigate to the Admin: Auction: Items tab: Bids: Bid History page. There is a blue colored 'Email All' button towards the top of the page. Clicking on this will open a pop-up window where the admin can choose which bidders will receive the email - all participating bidders is the default - and then the admin can fill in both the email Subject line and email Body.
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We have also created a new corresponding Email Template called, "Item Level Bidders". The admin can select this template from the top of the pop-up window drop down to auto-fill in the subject/body of the email. The admin can also customize this email template from the Configurations: Email Templates at any time.