Selling to Government Cardholders
A number of important changes came out of the federal Procurement Reform Era of the mid 1990s. Perhaps the most significant of these was the emergence of widespread government credit card purchasing.
In an effort to reduce red tape and increase efficiency, federal end-users were given the power to make simple purchases with a government-issued purchasing card (called an I.M.P.A.C. Card, but basically just a credit card).
A manager of a federal government field office, for example, can drive down to the local Office Max and buy equipment and supplies for the office, just like you and me. He doesn’t have to put the purchase out for bid, doesn’t have to call up two other office supply stores for quotes, etc. He can just find what he wants and make the purchase, as long as the total doesn’t exceed $2,500.
Market Size
Over 700,000 federal, state, and local government employees possess credit card purchasing power. Government agency credit card use is estimated to exceed $18 billion in fiscal year 2002, up from $15 billion last year. The majority of government cardholders are federal end-users who have been delegated authority to make purchases up to $2,500 from a single source. The $2,500 ceiling for a single purchase is a federal limit. Some states and municipalities have limits that are much higher.
The Hidden Market
The government credit card market segment is “hidden” because there is no convenient way to find out what local card holders buy other than surmising based on their position or the agency they work for. For example, the office manager of a local social security office in your city probably buys office supplies and computer equipment, while the head of a motor pool at the military base down the road probably buys auto parts.
The invisibility of the market is a double-edged sword: Card holders probably are located in various government offices in your locale and it takes work to find them and determine what they buy. The effort required to find them, however, may be more than offset by the reduced competition resulting from their invisibility. If you own a local computer store, Dell may not have found its way to the local credit card holders who buy computer equipment. And these local card holders may prefer to do business locally.
Start With a Basic, Low Cost Approach
How do you sell to government credit card holders? If yours is a small business, start off with a simple, low cost approach. Obtain the most comprehensive telephone directory for your area. The “Blue Pages” of the directory usually will show a comprehensive listing of federal, state, county, and city agencies in your geographic area, with addresses and telephone numbers. Use these contact listings as your starting point. Call the agencies and find out who buys what with credit cards.
As an example, suppose you are a small business selling office supplies in a medium-sized city. Use the local telephone directory to find one or more federal, state, county, or city government offices in your city. Those offices will have an office manager or administrator who buys office supplies. This person will probably have a credit card and can buy from you directly without having to consider other sources (that is, under certain established thresholds, as discussed above).
Sound like the commercial market? It should because there isn’t much difference between the two. Will the card holder in this example have an office supply vendor that he is perfectly happy with? Probably. Will he want to buy from you immediately? Probably not. But, hey, what else is new in sales, right?
A prospective commercial customer will undoubtedly act much the same as a government card holder. He will already work with a vendor and not have much interest in you unless you can distinguish yourself by price and/or exceptional service. One helpful distinction to keep in mind, though, between commercial buyers and government credit card holders: the latter are encouraged to rotate their buys. Be persistent so that the next rotation goes to you, and then perform well so that you stay in the rotation down the road.
Marketing to Credit Card Holders
If you have success with the low-cost approach, you might try reaching out to credit card holders with a marketing campaign followed by direct sales from the leads you generate. Keep your campaign as focused and targeted as possible.
At the low cost end, you can email an electronic brochure to a targeted group of hundreds or thousands of cardholders. But first you must find out who they are.
Most government agencies maintain lists of credit card holders, which are available to the public under freedom of information laws. The availability of cardholder data varies by agency, and the content of cardholder records can range from name and address only to full contact information. Cardholder records will often have:
- Agency name
- Cardholder name and address
- Telephone number
- Email address (sometimes)
You can obtain this public credit card data yourself for agencies in your business area. Many federal Web sites publish credit card holder contact data, but few state and local sites do. When the data is not at an agency’s Web site, you will have to request it using formal public information request procedures. Expect to find the data in varying formats, in both electronic form and paper. (Only roughly 20% of credit card data is available in electronic form.)
Alternatively, you can purchase the Fedmarket.com CD-ROM of federal credit card holders, which contains data for about 118,000 credit card holders. Custom searches of the credit card holder database are also available. Our CD-Rom of Federal, State, and Local Purchasing Agency Web Site Addresses will save you considerable time if you decide to try to find the credit card holder data yourself. The Internet addresses of purchasing sites are available by state. Bidengine.com is a similar time-saver.
Targeting Credit Card Holders
One of the keys to selling in the government credit card market is to determine how you can cost-effectively reach credit card holders using public contact lists. How you do this will depend on the products or services you offer.
As examples:
- An office supplies company might contact every cardholder in its geographic shipping zone. The bigger the zone the more emphasis should be placed on fast shipping at low costs and customer service.
- A company selling motor vehicles wouldn’t focus on credit card holders, since they typically do not make purchases of this size, at least at the federal level.
- A medical supplies company might contact the cardholders in health- related agencies.
What type of message you send will depend on the type of contact information available for the target audience you want to reach. As examples:
- A laboratory supply company might send a targeted email message to all or a subset of cardholders with email addresses with a link back to catalog information maintained at its Web site.
- A small services company might start by personally calling a test group of cardholders in its home city.
- A janitorial supply company might direct mail its brochure or catalog to credit card holders in its shipping zone.
You should consider starting with several targeted campaigns–i.e., test samples using different contact techniques and messages. Test campaigns are particularly important for direct mail because of its high cost. We do not recommend sending sales literature to fax numbers without first obtaining express permission from the recipient. There are specific federal laws against this practice. Also, depending on where recipients reside, there may be specific state laws against sending untargeted and/or unsolicited email. The law in this area is in flux and far from uniform right now. Before beginning any email campaign, it’s prudent to do thorough legal research or consult with an attorney.
In any case, email campaigns should be targeted based on expected interest. Give buyers the opportunity to “opt out” of future messages, and be diligent and responsive with regard to their requests. Needless to say, there are no benefits to be gained in trying to communicate with buyers that have no use for your product or service.
