A government market is a market where the main buyers are federal, state, and local governmental organizations. They purchase goods or services from private businesses.
This article focuses on the key features of the government market. We’ll also unpack an example of a company that works with governments. Let’s start by exploring the differences between institutional and government markets.
Institutional and Government Markets
Institutional and government markets are often mentioned together. However, they have fundamental differences.
The institutional market encompasses organizations that provide care to people or contribute to society — schools, hospitals, nursing homes, and prisons. These institutions are often private and run on donations from sponsors and funds.
The government market includes only government-funded institutions and makes purchases that help perform the direct functions of government. It forms the unusual characteristics of the government market.
Government Market Characteristics
- Specific procurement process
- Strict contract monitoring
- Preferences to certain sellers
- The minor role of marketing
Government institutions have to take special care of the legality of their purchases. Moreover, they have to operate under the watchful eye of the public. Hence, the government market acquires specific features.
Specific procurement process
To avoid accusations of money-laundering, participants of the government market have to perform a specific procurement process. When a government institution needs to buy something, it places a public bid or request. In return, it gets a bundle of offers from sellers. The organization needs to choose among them the one that provides the lowest possible bid. Other criteria might be the company’s reputation on the market or the superior quality of goods or services.
Strict contract monitoring
Since government institutions have to show their spending decisions to the public, they keep an eye on their contractors. The monitoring encompasses different stages of the contract execution and requires tons of paperwork from sellers. Thus, companies that work with the government often have special departments for these purposes.
Long sales cycle
The sales cycle of the government market often surpasses that of B2B sales cycles. Accepting bids and choosing between the offers can take several months. During the execution of a contract, bureaucracy and reconciliation also play for time.
Preferences to certain sellers
Government institutions tend to prefer specific types of sellers. For instance, they often opt for domestic suppliers, even if foreigners provide better options. Moreover, government institutions may rely on non-economic reasons in decision making. They may favor depressed firms and areas, small businesses, minority-owned companies, and businesses that avoid race, gender, and age discrimination.
The minor role of marketing
Sellers working in the government market may reduce their marketing budget to zero. First of all, they have no need for frequent marketing activities and a robust strategy, as the procurement process does not rely on brand awareness. Secondly, saving on marketing their budget allows a business to lower the price of products.
The government market may seem too complicated to work in it. However, there are a great many companies that specialize in state procurements. Let’s see how they make deals.
Government Market Example
The government units work both with small and large businesses. The prime demand is advanced knowledge and understanding of the government market system. Among the companies that know the rules well is Envisage Technologies – a small software development firm.
Envisage Technologies provides training applications and human resource management platforms for federal, state, and local organizations across the United States. The company makes more than half of its deals with the federal government.
To get access to these deals, Envisage Technologies monitors the General Services Administration’s website. This platform allows the company to work with smaller procurements. These contracts imply a shorter sales cycle, so, Envisage can receive a response within two weeks.
However, large contracts bring more revenue, and Envisage Technologies doesn’t neglect them. The company has a comprehensive bid proposal prepared for this type of deal. This document runs 600-700 pages to fit the federal paperwork requirements.
Although marketing is not a primary factor of success in the government market, you may need some of its tools to alleviate your work. For instance, automated email flows may come in handy to stay in touch with customers and provide timely responses. Sign up with SendPulse to create email automation that works.
Last Updated: 22.03.2023