Selling to Government Cardholders

Dec 22, 2011 | Government Resources

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.