[ Articles list ] [ Home ]

Marketing to Government Organisations in India

ABSTRACT:

1.0 Relevance of Marketing

1.2 While it might be impractical to apply all concepts of marketing, some of them do help to address the government clients effectively. You stand to benefit if you proactively coordinate bids and prepare projects to meet the government clients' requirements rather than just respond to their enquiries or tenders. You need to gather competitive intelligence and prepare better communication programs to convey your company's competence. More suppliers and contractors now recognise the importance of studying the opportunities in government market and responding creatively with products, systems and services. They also understand the role of multiple buying influences from inside and outside the organisation that affect the purchase decision.

1.3 The system for governmental purchases is quite formalised and involves considerations of government regulations and public accountability. When pressed to select between 'doing a thing in the right way' and 'doing the right thing', the government client normally prefers the former. He would follow the rulebook faithfully even if it means some delay.

2.0 Understanding the Government Market

2.2 Central Government ministries like Defence and Railways have considerable funds to spend at their disposal. The Central Government owns gigantic corporations in core economic sectors such as agriculture (FCI), oil exploration (ONGC), refining (IOC), petrochemicals (IPCL), steel (SAIL), power generation (NTPC) and transmission (Power Grid). State Governments own their respective Road Transport Corporation, Electricity Board and Water Supply & Sewerage Board. Some of them regularly exhibit the products they purchase in bulk so that new vendors could be empanelled. All these establishments generate demand for goods and services in even remote areas where their units are situated. Central and State Governments' local offices, municipalities and village 'panchayat's too are regular buyers in their respective geographical areas.

2.3 The Government buys raw material, processed material, capital goods, components, consumables, office equipment and services. It buys goods ranging from clay-pots to aircraft carriers and services ranging from capturing stray dogs to civil construction in colossal projects. In addition to regular purchases like fuel, stationery, electric lights, etc. the Government requires products like ballot boxes and electronic voting machines from time to time. It also buys services like enumeration, data entry and analysis for elections and census as also computer training and maintenance.

2.4 The principal objective of governmental purchases is to satisfy the collective need for goods and services that are required to govern effectively. However not only in India, but also in developed countries there are subsidiary goals such as those affecting the location of business, or the state of competition in an industry. Thus 'khadi' uniform and furniture made by village co-operatives are bought although better products from the organised sector are available. While not a real objective, the preference for 'the lowest price' in all government organisations qualifies it as a virtual one.

3.0 Characteristics of a Government client

3.2 Year-end rush
The client tends to place the lion's share of his purchase orders in February and March, i.e. the end of the financial year. He is concerned that the funds allocated to him for the current year would lapse, and his genuine requirement for the following year might be discounted. That threat often takes precedence over logical decision-making.

3.3 Trial order
For sophisticated products involving new technology, e.g. telecommunication equipment, the client initially places a small trial order. Based upon the performance of a vendor's equipment in the field, the client decides whether to consider that vendor for subsequent orders in future.

4.0 'Buying Centre' in a Government Organisation

4.2 Initiators:
They highlight the need for specific products and services in the organisation. They are concerned with improving the system and its performance and are generally receptive to new ideas and technologies.

4.3 Influencers:
They have a bearing on the buying decision at some stage. They are the top management, external experts, consultants, financial institutions and government policy makers. In spite of their questionable role, politicians too wield a powerful influence in government purchases in India.

4.4 Users:
They actually use the product or the service. They are the indenters such as administrative officers, engineers, technicians and safety officers.

4.5 Deciders:
They are entrusted with the responsibility of making the buying decision. Often a purchase committee plays this role.

4.6 Purchasers:
They formalise the final order and commercial terms and conditions. Normally they are executives of the purchase department.

4.7 Gatekeepers:
They are the individuals who control the flow of information in an organisation. They are the top management personnel and information analysts such as computer personnel. Sometimes even the persons receiving and sorting postal and electronic mail might filter information and act as gatekeepers.

4.8 Fixers:
They motivate individuals from the above categories to favour a particular supplier or contractor. They sabotage the system by exploiting human weaknesses such as self-aggrandisement, sex, the ambition for power and the fear of insecurity.

4.9 Retirement and transfer of individuals constantly shift the point of gravity within the buying centre. Thus it becomes vital for the marketing personnel to be in regular touch with the buying centre of client organisations.

5.0 Purchase procedure in a Government set-up

5.2 For special products and systems the client resorts to open bid system wherein he formally invites quotations. Each bidder needs to pre-qualify and get registered with the client in order to receive tender documents. The client often specifies certain minimum qualifying requirements such as ISO 9000 accredit ion, past record of similar supplies and timely delivery, availability of spares, and infrastructure for after-sales service. The client requires earnest money deposit along with the offer. Normally he calls for separate bids for technical and commercial matters. The technical portion of all bidders is brought on par after correspondence and discussions. Only after that is the commercial bid opened.

5.3 When finalising orders for sophisticated products and installation/commissioning services, the client requires the supplier to provide a security deposit or a performance bond in the form of a bank guarantee. It amounts to about 5% of the order value.

6.0 Changing trends in Government buying

6.2 Importing directly involves foreign exchange, letter of credit to the foreign supplier, custom clearance formalities, freight and demurrage charges at the port. Many government clients prefer to pay a little more if someone were to manage all such procedures and deliver the imported product at their door. So far, units owned by state governments provided that service. Now the private sector is permitted to address that need, and it has moved in aggressively.

6.3 Shortage of funds, the Fifth Pay Commission's magnanimity, overstaffing and employee unions' unending demands have forced many government organisations to halt new recruitment and even offer voluntary retirement. Increasing number of jobs that were earlier done in-house are now being executed through private contractors.

REFERENCES:

Sarin, Sharad. The Buying Centre Concept. Study note of XLRI, Jamshedpur. (1985)

© Vasant Davé

Please click here to get this article in Adobe Acrobat (109 KB). If not installed on your PC already, you could download Acrobat Reader from:

**