Ask 4 Questions Before Targeting B-to-G

By Mark Amtower

Most B-to-B catalogers sell to the government, albeit in a passive mode. Using the SmartPay credit card, federal buyers appear on B-to-B buying lists with some regularity. When properly targeted, they can become a significant percentage of any B-to-B cataloger’s business.

The few B-to-B catalogers that are proactive in the B-to-G arena are generally quiet about it. They have no desire to let other catalogers know about this lucrative market segment.

The reasons for targeting the B-to-G market are fairly simple:

one out of every seven-and-a-half full-time employed adults is a government employee;
there are more than 86,000 governments in the U.S.;
the government buys every legitimate business product and service; and
government spending represents more than 30 percent of the GDP.

Here are four questions to think about before spending time and money targeting B-to-G.

1. How do I start? Ignoring the government market as a major revenue center is no longer an option. In this economy, B-to-B catalogers have to look at any growth areas, and government business is as recession-proof as it gets. In fact, if you analyze your 24-month buyer data, there’s a strong likelihood you’ll find that 2 percent to 5 percent of your customers are government.

This data also will show that government orders tend to be 15 percent to 20 percent larger than B-to-B orders. These orders most likely are placed using a government credit card, such as SmartPay for federal orders, but are still registered as Visa or MasterCard orders in your records. On the federal level, this surpassed $19 billion in fiscal year 2008. The micropurchase level — the level under which no contract is required — is now $3,000.

This isn’t an easy or fast market to enter, but real growth with real profit is doable for companies that sell in both open market environments and via contract.

Start slow, be smart, target your efforts to legitimate buyers (people and agencies that need your products and/or services), and real growth can occur.

2. Can my company handle the long haul? The government is a long-haul market. No company comes in and starts accumulating market share fast and easy. Understand and accept that if you want 15 percent or more of your business in B-to-G, this is an incremental process requiring resources you may not currently have in-house.

These resources vary from company to company, but you may need a veteran of the government market, some new accounting methods if you choose to sell via contract or perhaps some outside guidance.

3. Does the government buy what we sell? The government buys nearly everything to greater or lesser degrees. This includes all B-to-B products and services, and even some B-to-C things. To get a feel for the range of products the government buys, go to www.gsa.gov/elibrary and spend some time browsing categories.

4. Will we sacrifice margin in the B-to-G market? Margins are sacrificed when you’re negotiating contracts in any market; the government market is no different. If you choose to target the government credit card business and sell via the open market (less than $3,000 per order), you sacrifice no margin. But when you enter the bidding process, often the driving factor will be price.

You start in this market like any other: research, and when necessary, advice and guidance. One place to start your research is at the www.gsa.gov/elibrary. Another is GovernmentExpress.com (click on the “resources” button and browse).

It’s time you start getting back some of your tax dollars!

Mark Amtower is a B-to-G consultant and author, and is senior partner at Amtower & Co. Reach him at Mark@FederalDirect.net.