“Off-White Paper” #7 – End of FY 1998 Lessons Learned

The Federal fiscal year has ended, and what do we know? Are there lessons to be learned from the apparent winners and losers of the annual GSA Schedule rankings? Can we decipher anything from the open market, where no stats beyond credit card sales figures will give us any data? Let’s see. First, the credit card data. Just shy of $8 billion on 16.7 million transactions averages $480 per purchase and 47 transactions per cardholder per year. Let me repeat this: $8 billion. And more than 16 million transactions. Spread out pretty evenly over the year, with no single month way ahead of any other (a minor spike at the beginning and end of the FY). The GSA Schedule did $4.5 billion, and Dell alone accounted for 10% of this activity, and the top five (Dell, Gateway, GTSI, IBM and Micron) 20% of all Schedule 70 sales. Even if all Schedule purchases were made via the credit card program, that leaves $3.5 billion in loose change out there for smart (open market) vendors to pick up. The Schedule standings show me one big thing: if you are part of the lower end of the 1,628 Schedule 70 vendors (and by this I mean any of those not in the top 100, so the other 1,528), your marketing dollars are non-existent or are grossly being mis-spent. Or you shouldn’t be on Schedule. Or all of the above. If your average sale is below $2,500, you have to consider the open market. But the major lesson is: smart, consistent marketing pays. Identifying the audience you want/need to reach, understanding how they make buying decisions, knowing how much you have to spend, and making the most of the money available. Federal purchasing has been decentralized. When we started tracking this (late 1980s), about 70% of money spending decisions were made in Washington. When we get accurate info on FY 1998, we expect this to drop under 50% for the first time ever. What does this mean? Well, for one thing, when the big Federal trade show guys call and ask you to spend mega-bucks to be at one show in Washington, tell them to pound sand. Unless you are Dell, Gateway or Micron, and have lots of money to spend, the big government shows probably don’t fit for you. Regional table tops are less expensive and give exposure at the user level. Direct mail also works, when done properly. Our research shows that IT decision makers in government read their mail. They don’t spend much time reading each piece, but if it is pertinent to what they do, they read it, save it or route it. If it is not pertinent to what they do, they toss it. Our research also shows that card decks work, especially for “commodity” level purchases (micropurchases, under $2,500). And card decks are relatively inexpensive. Regional radio is good. Most companies don’t understand that there are 27 cities with more than 20,000 Federal employees, and several of those cities have over 30,000. So radio spots can be effective, and relatively inexpensive. In Washington, there are several companies that run radio spots regularly, and some are both memorable and effective. Litton/PRC ran spots with a “blues” theme that were very effective, to the point where customers were humming the tunes. And Dunn/IDP ran spots positioning themselves as local (therefore more responsive) PC source versus the “far away” companies in Texas and South Dakota. Space ads in the trades (Federal Computer Week, Government Computer News, Government Executive and Government Technology) are also effective, but single ads are NOT effective (that’s why they call it an “ad campaign”!). And don’t forget the web. An interactive, transactional, informative web site is a must. Look at the Dell, Compaq, GTSI and Micron sites to see what true transactional sites are like. Emulate them. And include your web address on every piece of literature produced by your company. And don’t let the sales force dictate the marketing (“We have a special from Compaq. Let’s spam the universe!”) Spamming and blast-fax (sales-force favorites)are intrusive, often considered rude, and can ruin any good will and positioning effective marketing works so hard to build. The overall objective is to understand how much money you have to spend, undersatnd the information gathering habits of your prospects, then develop a cost-effective mix that will maximize your exposure to key audiences. This includes your current customer base. If you ignore these people, they will go elsewhere. The lesson from FY 1998 is simple: smart, consistent marketing pays. Those that don’t have a plan to maximize their exposure to carefully defined groups will be doomed to sit by a phone that doesn’t ring. Copyright 1998, Amtower & Company