Thanks, Uncle Sam

Nov 01, 2003 10:30 PM  By

Call him Sam. He’s a dream customer. He buys everything imaginable: safety gloves, flood lights, computers, pool supplies… even air-activated hand and foot warmers.

But Sam isn’t your average credit-card-happy customer. He’s Uncle Sam. That’s right, the federal government. For catalogers that sell to the feds, September — when the fiscal year ends — is the equivalent of December for gifts catalogs. And many of the mailers contacted reported a banner “holiday” season.

When the year-end figures are tallied, Mark Amtower, president of Ashton, MD-based Amtower & Co., a consulting firm that advises marketers on selling to the government, estimates that sales to the federal government will have increased 10% from last year.

And whereas consumer sales wax and wane depending on factors as varied as the weather and unemployment rates, “federal spending never goes down. Never,” Amtower says.

No reduced spending here

The ledgers of numerous catalogers support Amtower’s assertion. Growth at PC Connection’s Gov Connection government subsidiary, for instance, exceeds that of the Merrimack, NH-based company overall. GovConnection’s second-quarter sales rose 18%, to $75.0 million for the three months ended June 30, while PC Connection’s total revenue increased a more modest 10% during the same period.

Likewise, Vernon Hills, IL-based CDW’s public-sector division, CDW-G, which sells to the federal government, increased its second-quarter sales 19%, to $217.3 million for the three months ended June 30. Overall CDW sales increased just 2% for the same period.

Indeed, while he wouldn’t give an exact percentage, Charlie Luecker, president of Concord, CA-based cataloger Lincoln Equipment, says government sales are exceeding those of last year, even though he hasn’t changed his marketing strategy. Lincoln mails about 50,000 copies annually of its Commercial Swimming Pool Equipment catalog to purchasing agents and “morale, welfare, and recreation personnel” at military facilities.

“Swimming pools are a well-used amenity on military bases,” Luecker says, “and the government is putting more money into buying supplies for those types of things.”

Sales to the U.S. military also rose somewhat this year for Radcliff, KY-based U.S. Cavalry. September sales were particularly strong, says president Randy Acton, “up in the double digits” from September 2002.

Besides its eponymous catalog, U.S. Cavalry also mails the Cavpro catalog to purchasing officers at military bases such as Fort Bragg as well as to law-enforcement departments. Sales to the federal government account for 26% of the overall business at the company.

Of course, not everyone ended the federal fiscal year with increased governmental sales. Government sales at Farmers Branch, TX-based Sport Supply Group, which sells sports equipment and recreational products to schools, institutions, and all branches of the military, reports a 10% drop in federal sales for the first six months of its fiscal year.

“The government is definitely a huge market,” says Steve Beasley, Sport Supply Group’s government sales manager. “However, we market only to a small segment — sports, recreation, outdoor recreation, and youth activities. We do a little with child development centers on military bases.”

Grafton, VT-based cataloger National Audio-Visual, which sells training and presentation tools, has also seen a decline in sales to the federal government. Government sales account for about one-third of National Audio-Visual’s business, says president Eric Lennard. Sales to the feds are down less than 10% for the year.

Yay and nay for SmartPay

Lennard blames the government-issued SmartPay credit card for the decline in revenue. Known as the International Merchant Purchase Authorization Card, or IMPAC, until 1997, SmartPay was implemented to facilitate governmental purchases of less than $2,500 — that amount that does not require government buyers to purchase from a vendor on a General Services Administration (GSA) schedule (see “Not Without Its Challenges,” above).

Amtower says that SmartPay orders are on average 15%-20% higher than nongovernmental credit-card orders. But Lennard says that use of SmartPay among his governmental customers has led to “lower but more frequent average orders.”

SmartPay helps the government reduce the paperwork and related costs previously required to make even small purchases. Before 1989, the paperwork required to process a purchase of less than $2,500 could cost $90-$120. “What it took to buy a simple PC was a very expensive process for the government and for the contractor,” recalls Ann-Marie Clark, general manager, public sector marketing for CDW-G.

In the past, when purchasing supplies was such an onerous task, many government buyers likely bought more than they needed to avoid having to make another purchase later in the year. Now, as Lennard says, purchasers buy more frequently — and are less likely to overorder.

SmartPay has also led to increased competition for government business, says Sport Supply’s Beasley. SmartPay “allows any vendor who will accept Visa/Mastercard to become a competitor, whether it has a GSA contract or not.”

In fact, other catalogers credit SmartPay with increasing government business. Frankfort, NY-based Northern Safety, for instance, says the card — along with improved marketing efforts — accounted for much of the company’s double-digit growth in sales to the federal government during the past year.

Earlier this year the safety supplies cataloger introduced the SmartPay logo on its Website, says Roe Polczynski, marketing communication team leader. Although government buyers can purchase from marketers that don’t display the logo, the visibility of the symbol helped raised Northern Safety’s profile among purchasers. The company also mails print catalogs to governmental facility and maintenance managers.

Not Without Its Challenges

Selling to the federal government can be fruitful — but it can also be an exercise in frustration. For instance, if you specialize in items that cost more than $2,500 or if you want to go after larger-ticket orders, you should consider getting on a General Services Administration (GSA) schedule.

Federal purchases of more than $2,500 must be made from a GSA schedule, which is in essence a master catalog of government-approved vendors and goods. To be listed on a schedule, a vendor has to prove that it is giving the government its best price on the merchandise it wishes to sell the feds. The paperwork and related costs of getting on a schedule can be steep, however; a marketer may have to pay up to $10,000.

And the fun doesn’t stop once you’ve made the schedule; updates are frequent. Charlie Luecker, president of pool-supplies cataloger Lincoln Equipment, says getting the necessary approvals and price changes for the roughly 3,000 products that his company has on the GSA schedule is “an absolute nightmare.”

You can, of course, try to communicate with government buyers using the same direct marketing tools you rely on with other buyers: direct mail, including catalogs, and e-mail. “There’s more of an emphasis on the Web these days,” says Mark Amtower, president of consultancy Amtower & Co., “but unsolicited e-mail marketing to the feds is about as successful as selling Viagra on the Web. A certain number of people may respond, but as soon as you send unsolicited e-mail, they will block your Website.”

Finding appropriate mailing lists is a challenge, in part because of the freqency with which government workers are reassigned and transferred. Luecker notes that maintaining relationships with purchasing agents on military bases is tough because they move around so much — more so than civilian business customers.

And if you’re going to mail catalogs or other marketing pieces, a recipient’s name must be attached, says Ann-Marie Clark, general manager, public sector marketing for CDW-G, a division of computer reseller CDW. Mail addressed to a job title will not be delivered.

But if you can get your catalog through to a purchaser, Clark adds, you’re in good stead. Government employees “love to flip through catalogs,” she says. “You have to be sensitive to what the government is looking for. A lot of times they are not looking for specs and a price; a lot of times they are looking to the catalogs and the Internet for information.” To that end, CDW-G mails detail-rich magalogs, or “reference guides,” on particular subjects, such as the wireless mobile marketplace.