May 5, 2008
BtoB Magazine

The economy may be slowing, but government spending activity is expected to increase this year, and marketers that target the right message to the right audience stand to win business from federal, state and local government entities whose annual cumulative spend on goods and purchases is in the trillions of dollars.

The 2008 Government Procurement Outlook, recently released by Onvia, a provider of market intelligence, found that 80% of 1,400 purchasing officials at state, local and educational entities plan to maintain or increase spending activity in the year ahead, compared to 2007.

The survey found that government infrastructure and construction procurement will grow, with 41% of agencies planning to increase spending. IT procurement also continues to grow because of modernization, security and privacy initiatives, with 82% of agencies planning to increase or maintain procurement activity for hardware and for telecommunications, and 83% planning to increase or maintain procurement for software and services.

During economic downturns, overall tax revenues, which are used to pay for many purchases, go down, said Irv Alpert, exec VP of Onvia. However, he said, these effects won't be felt for a year or two; projects that are already in the pipeline are going forward in most cases. Still, government agencies are preparing by looking for products and services that are “faster, smarter, cheaper,” he said.

COMPANIES SEEK OUT PUBLIC SECTOR
A tougher economy also has caused companies that might not have considered selling to a public sector market two years ago to rethink their strategy. “Right now, a lot of people believe that because of the transparency and predictability to public sector work, that it's looking more attractive in the current economic environment,” he said.

Yet companies looking to target the lucrative government market often fail to do the research necessary before jumping in, said Mark Amtower, partner at marketing consultancy Amtower & Co. “They assume that if they come in that their status in the outside world or their name brand [will win clients],” he said. “Probably 80% of the companies that come into the market will leave in less than a year because they haven't done their homework.”

Many marketers mistakenly think that they should tackle marketing to the government by getting a General Services Administration schedule (the basic license to market to the government), putting a handful of sales reps in a Washington, D.C., office, advertising in trade publications, waiting a year or two and hoping that something happens, said Gal Borenstein, CEO of Borenstein Group, a marketing agency that specializes in business to government (see case study, page 18). “What most companies are discovering is that they don't have the basic building blocks necessary to identify who their customers may be and what are the best ways to sell their product and market their product within a specific federal agency,” he said.

Instead, he said, companies should survey the terrain to find out whether their product fits with a specific federal agency, identify the buyer and, most important, identify if they can meet the requirements of that buyer directly or if they need to team with a seller that already has that agency as a customer. “That would expedite your waiting game by two years, generate sales within a shorter period of time and increase overall ROI dramatically,” Borenstein said. “That's the secret that most companies have not learned yet.”

PUBLICATIONS STILL EFFECTIVE
In determining the best ways to reach their audience, marketers must know what prospective buyers read, what associations they belong to and what events they attend, Amtower said. “Publications are still key to reaching defined audiences,” he said.

Online advertising, e-newsletters, webinars and white papers can also be useful tools in reaching this audience, Amtower added. And as always, lead quality is far more important than lead quantity. “If I have only five people download my white paper on some esoteric niche of enterprise architecture, I can bet that each of those five people is exactly who I need to reach in the government market,” he said. “It's the same thing with a webinar; if you only have five, or 10 or 15 attendees, it doesn't matter—people aren't going to spend that time with you unless they're interested.”

With the November election approaching, marketers also should be solidifying relationships with their senior management clients, Amtower said, as these are the people most likely to migrate internally in government and also to migrate out of government. “Either way, you need to know where they go, who is replacing them and if they can use you in their new positions,” he said.

There is a 15% to 18% migration annually, he added, and that can spike to 30% after an election. Lower-level staff members often migrate with their bosses, opening a window of opportunity for marketers. “You can [maintain] business in the old agency and try to get business in the new agency,” he said.