The private sector has been getting its fair share of bad news, thanks to layoffs, foreclosures, and shrinking consumer confidence. Governments, on the other hand, continue to buy goods and services at a steady pace. Purchases by all levels of government will actually grow from $2.88 trillion in 2008 to $2.95 trillion in 2009, as recently reported by Government Product News.
By way of example, Rotary Lift, a Madison, Ind., vehicle lift maker, had seen its sales to commercial truck maintenance shops sputter. This lead it to market its new Mach 4 lift—which is ideally suited for bus maintenance—to public transit agencies around the U.S.
"We are far more focused on the government market than at any other time in our history," says Roger Perlstein, sales manager at Rotary’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."
Perlstein explains further: "Regardless of economic cycles, schools, municipal services, transit, and public safety are the most stable budgets in our economy," he adds. "In most cases, they are actually trending upward."
Another example: The Sherman Hill Group, a minority business enterprise consulting firm based in New York City, has begun a more concentrated marketing campaign to attract government clients in the past year. Two trends drove the firm's decision, says Rafael A. Pabon, managing principal. "The overall economic slowdown has affected our core commercial client base," says Pabon, "and state and local agencies have increased their target budget allocations for small- and minority-owned firms, such as ours."
Another positive trend in the government market, notes Pabon, is that New York Governor David Patterson has "renewed emphasis on enhancing the pool of small- and minority-owned firms performing work for New York State."
The 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 spotlighting government opportunities.
The company has also applied for and passed certification for several continuous-recruitment contracts, which enables 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.
Advice for Marketing Managers
Marketers reaching out to government should plan for the long haul, says Rotary Lifts' Perlstein. "It will take longer to penetrate the market because we are discussing future budgets as opposed to current year allocations," he explains. "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."
"The challenge," explains Perlstein, "is that the business does not excite people who demand instant gratification. You could conceivably invest hundreds of thousands of dollars in marketing activities that don’t produce any profit in the current year. Some managers just don’t have the stomach or the vision for that kind of opportunity."
Yes, finding success in the government market is a long-term proposition. "New players (in the government market) often give up too early," says Rob Howlett, director of Circlesprout, Ltd., a Cleveland-based company specializing in generating public sector sales leads.
"The companies that accept the longer sales cycles and maintain a consistent presence ultimately are the winners," adds Howlett, who sees increased interest among sellers to government agencies. “During economic downturns, the public sector often sees new players enter the market. They often do this in anticipation of soft markets in other sectors.
"On a trip to the NIGP [National Institute of Governmental Purchasing] Forum & 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: the NIGP’s Southeast Florida Chapter's 11th Annual Reverse Trade Show. Held this past November in Fort Lauderdale, it attracted 624 vendors who want to do business with government, compared to 332 vendors who exhibited at the 2007 show—an 88 percent increase.
The NIGP (www.nigp.org), based in Herndon, Va., is a membership-based non-profit organization that provides education, research, and other services to professionals in the public sector purchasing profession.
Landing government business takes time, affirms Pabon. "Many [competing] firms have been working with specific government agencies for years, and it takes us much longer to develop the necessary relationships than it does in the commercial sector," he says. "Even though we have excellent educational qualifications and references in the commercial sector—including the largest financial and Fortune 500 firms—the economic downturn has made government entities even more risk-averse, and they are less willing to take a risk on firms such as ours that do not have extensive work experience with government agencies."
One bright spot on the horizon for the government market is President Obama's infrastructure funding program. The program promises billions 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.
The Obama funding looks to be the biggest public works program since the construction of the interstate highway system in the 1950s. The president's infrastructure improvement plan could cost as much as $700 billion, create millions of new jobs, and stem the economic tailspin that started in 2008.
Michael Keating is senior editor for Government Product News, GovPro (Government Procurement) and www.govpro.com. He can be reached at www.mikekeat.net.