The Government End-of FY Spending Frenzy
Every August and September, there is a spike in Federal spending. This is the annual “use it or lose it” period referred to as “busy season.”
Governments do not spend like corporation. Perhaps it would be better if they did, but that is not the situation. Government agencies (federal, state and local) are allocated specific funds each year. If the money is left at the end of the fiscal year, the agency does not get to keep it – it goes back to the Treasury. It works this way at the federal level and all indications are it works this way at state and most local levels as well. The Federal FY is October 1 through September 30. Most states are on a July 1 to June 30 FY.
The question then becomes how does a company go after that end-of-FY trove? Well, here’s the good news. You don’t need a contract to go after the “low hanging fruit,” in government parlance “micro-purchases.” These are orders that are under $3,000 on the Federal level, and somewhat lower for state and local governments.
First, let me put the government market in perspective. There are over 86,000 governments in the U.S, federal, state and local. These governments represent over 20,000,000 full-time employees (out of 151,000,000 total, according to the U.S. Census Bureau), and the spending represents over 25% of the GDP. According to institutional list compiler MCH, which includes healthcare as institutional along with government, the spending is over 303% of the GDP
And governments purchase every type of business product and service imaginable.
So let’s go back to how you can get part of this end-of-FY spending for your company. On the federal side of the equation, the micro-purchases are done via a credit cards called the SmartPay card. You may have heard it referred to as the IMPAC or IMPACT card, but that program was changed several years back to the SmartPay program. In FY 2006 there spending on the SmartPay card topped $17 billion on over 26,000,000 transactions. In FY 2008 (final figures not available when I was writing), the spending should hit $18 billion.
Government credit cards (federal, state and local) are designed so front line managers and employees can get products and services they need quickly. Often times, these cards are used in emergency situations. In both cases, as long as the cardholder feels they are getting a good product at a competitive price, no contract is required below that “micro-purchase” threshold.
More good news for catalogers? The average federal order on a credit card averages 15-20% higher than a regular BtoB order.
How do you exploit this?
First, in all of you advertising material, include the GSA SmartPay logo. You can download this from the GSA web site – www.GSA.gov/SmartPay . There is no fee to sue the logo, nor are there restrictions. Put the logo wherever you post the credit cards you accept. The government buyers will know what it means.
Second, plan your circulation strategy around the FYs. For state and local governments, you need to be mailing more frequently in the March through June timeframe. For Federal mailings, mail at least monthly from June through September.
Third, as many companies do not have government segmented in their databases (and no company has it completely identified), use an outside matching source to identify likely pockets of current government buyers in your database. MeritDirect can do this with your data, and possibly MCH, which has perhaps the largest institutional database available.
Fourth, match your data against similar available mailing lists and augment your lists by selecting similar lists to mail. There are pockets of key government influencers on virtually all of the B2B magazine files, so look more closely at the BPA Audit statements from the publication lists you already mail and select the government buyers from those files.
Fifth, develop a portion of your web site for government buyers. I really like the way Lab Safety does this (www.lss.com) . On their home page, toward the bottom right is a “Resource Centers” section where you can select government.
Once you go to the “government” page, the first thing you see is that Lab Safety “welcomes” the SmartPay cardholder. Then they proceed to enumerate several reasons to buy from Lab Safety.
Does lab Safety have a government contract? Not that I know of. They are going after the government credit card buyers. Are they getting government business? Last I heard they were doing quite well in this area.
Sixth, if you can swing it, for your government mailings put the SmartPay logo on the cover, creating a “government edition” to your catalog. Very little, if anything, has to be done inside the catalog, but since 1990 when I saw the first National Audio Visual “Government Edition” catalog, I have seen this kind of catalog pull much better than a standard issue.
Seventh, as your government program grows, you will want to train someone or some people on your staff to become the in-house experts on “all thing government.” While this may seem like a daunting task, it will help you grow your program faster and more successfully.
This is a “tip of the iceberg” approach to growing the largest B2B segment in the WORLD, but it works. I have used this approach successfully with over 100 catalogers over the years, and it works every time!
Mark Amtower, author of Government Marketing Best Practices, can be reach at Mark@FederalDirect.com
SIDEBAR:
AND YET ANOTHER
Many people in government, including the lawyers, do not understand how business is done, and as a result they occasionally apply rules that are onerous to manufacturers. Now is such a time, and it should bode well for catalogers selling via open market (no contracts).
To stay on the GSA Schedule (a very popular and highly used government contracting vehicle representing over 12,000 vendors and over 10 million SKUs), manufacturers are required to give GSA all pricing data so the government can determine what a :”fair and reasonable” price for government buyers is. While this may seem sane, the government does not take into consideration how much it costs to market and sell to a particular market when determining this “fair and reasonable price.” Further, they want any and all discounts offered to any buyer anywhere to apply to your price to them – regardless of how much they purchase.
The result so far has been three major firms giving up their GSA Schedules: Sun Microsystems, EMC and Canon.
So why is this good news for catalogers? First, these will not be the only manufacturers to vacate GSA. As GSA demands more information from more manufacturers, they, too will migrate away from GSA Schedules.
This will open a door for open market vendors selling those products successfully to government via the open market. Let’s say you sell Canon products open market right now, and you have some government business. This is a great time to contact your Canon rep and emphasize you willingness and ability to target government business for them. This should lead to more funding from Canon to you to go after those open market government customers.
The government regulations occur in a pendulum-like way, and we saw a similar situation in 1994. The regulations will likely change back in a couple years to favor manufacturers, but you can build a significant relationship with both the buyers and manufacturers until GSA figures out it is shooting itself in the foot!