Ever since Al Gore appeared on “The Late Show With David Letterman” six years ago, selling goods and services to the government has been more accessible for business-to-business catalog marketers. A few computer hardware and software catalogers have made significant investments in this hugely profitable niche, although many have yet to tap its potential.
Gore smashed an ashtray with a hammer on the late- night talk show to shatter the public’s perception of government while at the same time publicizing the “National Performance Review,” a federal program that, among other things, made it easier for the government and its employees to buy goods and services without having to fill out endless paperwork. The introduction of federal Visa credit cards within the past decade also helped streamline the procurement process.
MicroWarehouse Inc., Norwalk, CT, a computer catalog marketer, is poised to garner significant market share in the government arena. The $2.2 billion computer marketer hired Gail Bergantino earlier this year as senior government programs manager to lead that effort, and she was brought on board specifically because of her direct government experience at Unisys Corp., Blue Bell, PA, and its catalog, SelectIT. “It’s difficult to get a handle on how the government works unless you live in that environment,” said Bergantino. “I brought that to the table.”
There is serious money in selling to the government, said Mark Amtower, partner, Amtower & Co., Ashton, MD, a consultancy and specialty compiler of federal government mailing lists. Traditional resellers to the government, such as GTSI, Chantilly, VA, are experiencing the biggest threat from the computer direct marketers, including Dell and Gateway. GTSI had a lock on doing business with government agencies in the past, acting as middleman and navigating through the complicated process of selling to the government.
Dell sold more than $500 million worth of equipment to the federal government last year, while GTSI and Gateway tied for second with about $300 million each in government sales, according to Amtower.
“Dell came into the market in the 1992-1993 time frame, right at the moment that Al Gore was riding this National Performance review,” Amtower said. “They were the right business model at the right time.” GTSI ranked first for most of the 1990s, until Dell surpassed it in 1997. PC Connection is another catalog marketer devoted to gaining more of the government’s business, according to Amtower.
“It’s a huge market,” agreed Bergantino of MicroWarehouse. “The Department of Defense alone spends multibillion dollars in the IT market.” MicroWarehouse developed a separate customized catalog for the government to build brand awareness. “We want to get mindshare,” said Bergantino. Copies are mailed to targeted lists – from end users up to contracting officers – along with a GSA schedule, which is essentially a prenegotiated price list with the government so that any agency within its ranks can buy the product at the same or similar cost.
“You have to make the GSA schedule attractive to your end user,” said Bergantino. Along with ease of use, she said, it’s important to learn more about customers’ needs and use that information in formulating the product mix. “We look at historical purchasing data,” she said.
Ease in purchasing and customer satisfaction sets companies like MicroWarehouse and PC Connection apart from the traditional government resellers who typically might take an average of six weeks to ship a product. “One of the major discriminators with the catalog marketers is the ability to deliver fast,” Amtower said. These marketers are able to ship products overnight and certainly within a few days. MicroWarehouse doubled its catalog mailing to government over last year. Total dollars spent using federal Visa credit cards for fiscal 1998 was $7.95 billion, according to Amtower, compared with $4.95 billion in fiscal year 1997.
The toughest nut to crack for companies interested in doing business with the government is in finding the right people to target. “You can get information from the Small Business Administration office,” said Amtower. The information may be well worth tracking down, with 25 percent of the GNP tied directly to government spending.
Most business-to-business catalog marketers already have some current government customers whether or not they’re aware of them. “If you’re an intelligent business-to-business marketer, in all likelihood you have a significant niche in government,” said Amtower. All government credit cards have one of three exclusive prefixes: 4716, 4486 and 5568. So a simple test can be conducted of prior sales data to determine a company’s government business level.