Many business-to-business direct and multichannel companies are missing a huge opportunity to target government business. Government business is there, it doesn’t go away, and while not recession-proof, it’s the next best thing.
The federal small purchase credit card (SmartPay) program continues to be an important tool for savvy direct marketers targeting federal business. The program accounts for more than $30 billion in annual transactions from three types of cards: purchase cards, travel cards and fleet cards. The purchase card accounts for two-thirds of this activity and averages about 25.5 million purchases per year.
If your average b-to-b order is under $3,000, the government can become your best customer. The federal credit card is designed to expedite the purchase of products and services under $3,000, and these purchases require no government contracts.
The government purchase card program, now more than 20 years old, was originally initiated to expedite the purchase of goods and services under $2,500. To do so, one of the early stipulations was the cardholder could purchase from any legitimate vendor selling a product or service for which there was an immediate or near-term need.
Some very savvy b-to-b direct marketing companies have been quietly targeting this business for years. Yet many still believe the government to be a labyrinth of rules and regulations that make it prohibitive to enter.
If you opt to enter the “open market,” non-contract side of the government market, you can retain your profit margins. The advantage is simple: no contract negotiation, no government audits. It is a straightforward sale. The only caveat is that your open market per-purchase limit is $3,000, which you get by telling them you accept the federal SmartPay card. Most average order size for b-to-b direct marketers is well below the $3,000 limit. If you choose to approach the federal market via a GSA Schedule contract, or any contract, your profit margins will erode during the negotiation process. Staying an open market vendor allows you to sell to the same buyer again and again, but with the $3,000 per purchase cap.