More businesses turning to the government market in 2009
While the economic news in the private sector over the past few years has been consistently grim, government agencies continue to buy goods and services at a steady pace – and savvy vendors are adjusting their sales and marketing strategies accordingly.
Purchases by all levels of government are predicted to grow from $2.88 trillion in 2008 to $2.95 trillion in 2009, as reported in Government Product News’ upcoming January issue, which will mail out later this month.
Government’s consistent spending patterns provide ample motivation for vendors such as Madison, Ind.-based vehicle-lift maker Rotary Lift to turn its attention toward the government market. Faced with declining sales to commercial truck maintenance shops, Rotary Lift is marketing its new Mach 4 lift, which is ideally suited for bus maintenance, to public transit agencies around the United States.
“We are far more focused on the government market than at any other time in our history,” said Roger Perlstein, sales manager at Rotary Lift’s Commercial Truck and Transit Division. “We are barely marketing to commercial right now, and I have been directing all resources toward public agencies since January 2007. Our sales performance validates the strategy.
“Regardless of economic cycles, schools, municipal services, transit and public safety are the most stable budgets in our economy. In most cases, they are actually trending upward.”
Over the past year, the Sherman Hill Group, a minority-business-enterprise consulting firm based in New York City, has launched a more concentrated marketing campaign to attract government clients.
“The overall economic slowdown has affected our core commercial client base, and state and local agencies have increased their target budget allocations for small- and minority-owned firms such as ours,” said Rafael Pabon, Sherman Hill’s managing principal.
Another positive trend influencing Sherman Hill’s decision to focus on government business is that New York Gov. David Paterson has “renewed emphasis on enhancing the pool of small- and minority-owned firms performing work for New York state,” Pabon explained.
Sherman Hill Group has taken several steps to land government business, including attending city and state networking conferences, partnering with other firms to bid on government projects, and scanning publications and Web sites that spotlight government opportunities.
The company also has applied for and passed certification for several continuous-recruitment contracts, enabling government agencies to use the firm on no-bid contracts under certain maximum amounts. Sherman Hill Group leads large-scale technology outsourcing, development and integration projects.
Selling to government: a long-term process
Marketers reaching out to government should plan for the long haul, Rotary Lifts’ Perlstein suggested.
“It will take longer to penetrate the market because we are discussing future budgets as opposed to current-year allocations,” Perlstein said. “It may take as long as three years to fill the pipeline with projects that will produce revenue, but once the revenue stream begins, it will be dramatic, consistent and practically immune to recession.”
However, the government market isn’t well-suited for vendors “who demand instant gratification,” Perlstein added.
“You could conceivably invest hundreds of thousands of dollars in marketing activities that don’t produce any profit in the current year,” he said. “Some managers just don’t have the stomach or the vision for that kind of opportunity.”
Rob Howlett, director of Circlesprout, a Cleveland-based firm that specializes in generating public-sector sales leads, agreed.
“New players [in the government market] often give up too early,” Howlett asserted. “The companies that accept the longer sales cycles and maintain a consistent presence ultimately are the winners.”
Howlett noted that he has observed increased interest among sellers to government agencies.
“During economic downturns, the public sector often sees new players enter the market,” Howlett said. “They often do this in anticipation of soft markets in other sectors. On a trip to the NIGP [National Institute of Governmental Purchasing] Forum and Expo, which was held in Charlotte, N.C. in late July, we saw several mainstream new players enter the government market.”
One other sign of increased interest: NIGP’s Southeast Florida Chapter’s 11th Annual Reverse Trade Show held this past November in Fort Lauderdale attracted 624 vendors that want to do business with government, compared to 332 vendors that exhibited at the 2007 show – an 88 percent increase.
President-elect Obama’s proposed economic stimulus package would boost the already-steady government market even more. The plan includes a public works component that would funnel billions of dollars to local and state governments to pay for renovations and upgrades of sewer systems, electrical grids, dams, municipal utilities, schools and other local government projects.
Local and regional transit systems, which have $8 billion in projects on the drawing board, also would benefit. Local transit systems for instance, would get money to buy hybrid buses and expand light rail systems.