After the Sale is Over

After the Sale Is Over . . .

by Theodore Levitt

Reprint 83511

Harvard Business Review

HBRSEPTEMBER–OCTOBER 1983

After the Sale Is Over . . .

Theodore Levitt

The relationship between a seller and a buyerseldom ends when a sale is made. Increas-ingly, the relationship intensifies after the

sale and helps determine the buyer’s choice the nexttime around. Such dynamics are found particularlywith services and products dealt in a stream of trans-actions between seller and buyer—financial services,consulting, general contracting, military and spaceequipment, and capital goods.

The sale, then, merely consummates the courtship,at which point the marriage begins. How good themarriage is depends on how well the seller managesthe relationship. The quality of the marriage deter-mines whether there will be continued or expandedbusiness, or troubles and divorce. In some cases di-vorce is impossible, as when a major construction or

installation project is under way. If the marriage thatremains is burdened, it tarnishes the seller’s reputa-tion.

Companies can avoid such troubles by recognizingat the outset the necessity of managing their relation-ships with customers. This takes special attention toan often ignored aspect of relationships: time.

The theory of supply and demand presumes thatthe work of the economic system is time-discrete andbare of human interaction—that an instantaneous,disembodied sales transaction clears the market atthe intersection of supply and demand. This wasnever completely accurate and has become less so asproduct complexity and interdependencies have in-tensified. Buyers of automated machinery, unlikebuyers at a flea market, do not walk home with their

Copyright © 1983 by the President and Fellows of Harvard College. All rights reserved.

As our economy becomes more service and technology oriented, the dynamics of the sales process will change. The ongoingnature of services and the growing complexity of technology will increasingly necessitate lengthy and involved relation-ships between buyers and sellers. Thus, the seller’s focus will need to shift from simply landing sales to ensuring buyersatisfaction after the purchase. To keep buyers happy, vendors must maintain constructive interaction with purchas-ers—which includes keeping up on their complaints and future needs. Repeat orders will go to those sellers who have donethe best job of nurturing these relationships, the author argues.

Of course, not all products and services require the same degree of relationship cultivating; the longer the period of timeover which the service will be extended or the more complex the pruduct being sold, the more attention the seller mustgive the relationship. Whatever effort is apppropriate, though, must be made in a systematic and regular way, which meansthat sellers must be alert and sensitive. The author offers suggestions for incorportating these qualities into companies’business practices.

Mr. Levitt is the Edward W. Carter Professor of Business Administration and for the past seven years has been head ofthe marketing area at the Harvard Business School. With this article, he becomes HBR’s most frequent contributor—25articles, beginning with “The Changing Character of Capitalism” (July–August 1956). His most recent articles are “TheGlobalization of Markets” (May–June 1983) and “Marketing Intangible Products and Product Intangibles” (May–June1981). His seventh book, The Marketing Imagination, will be published later this fall by Free Press.

purchases and take their chances. They expect instal-lation services, application aids, parts, postpurchaserepair and maintenance, retrofitted enhancements,and vendor R&D to keep the products effective andup to date for as long as possible and to help thecompany stay competitive.

The buyer of a continuous stream of transactions,like a frozen-food manufacturer that buys its cartonsfrom a packaging company and its cash-managementservices from a bank, is concerned not only withcompleting transactions but also with maintainingthe process. Due to the growing complexity of mili-tary equipment, even the Department of Defensemakes most of its purchases in units of less than ahundred and therefore has to repeat transactionsoften.

Because the purchase cycles of products and majorcomponents are increasingly stretched, the needsthat must be tended to have changed. Consider thepurchase cycles and the changing assurances backingpurchases (see Exhibit 1). Under these conditions, apurchase decision is not a decision to buy an item (tohave a casual affair) but a decision to enter a bondedrelationship (to get married). This requires of thewould-be seller a new orientation and a new strategy.

Selling by itself is no longer enough. Consider thecompelling differences between the old and the newselling arrangements Exhibit 2 illustrates. In the sell-ing scheme the seller is located at a distance frombuyers and reaches out with a sales department tounload products on them. This is the basis for thenotion that a salesperson needs charisma, because itis charisma rather than the product’s qualities thatmakes the sale.

Consider, by contrast, marketing. Here the seller,being physically close to buyers, penetrates theirdomain to learn about their needs, desires, and fearsand then designs and supplies the product with thoseconsiderations in mind. Instead of trying to get buyersto want what the seller has, the seller tries to have

what they want. The “product” is no longer merelyan item but a whole bundle of values that satisfybuyers—an “augmented”product.1

Thanks to increasing interdependence, more andmore of the world’s economic work gets done throughlong-term relationships between sellers and buyers.It is not a matter of just getting and then holding onto customers. It is more a matter of giving the buyerswhat they want. Buyers want vendors who keeppromises, who’ll keep supplying and standing behindwhat they promised. The era of the one-night standis gone. Marriage is both necessary and more conven-ient. Products are too complicated, repeat negotia-tions too much of a hassle and too costly. Under theseconditions, success in marketing is transformed intothe inescapability of a relationship. Interface be-comes interdependence.

Under these circumstances, being a good marketerin the conventional sense is not enough. When ittakes five years of intensive work between seller andbuyer to “deliver” an operating chemical plant or atelecommunications system, much more is requiredthan the kind of marketing that simply lands thecontract. The buyer needs assurance at the outsetthat the two parties can work well together duringthe long period in which the purchase gets trans-formed into delivery.

The seller and the buyer have different capitalstructures, competitive conditions, costs, and incen-tives driving the commitments they make to eachother. The seller has made a sale that is expected toyield a profit. The buyer has bought a tool with whichto produce things to yield a profit. For the seller it isthe end of the process; for the buyer, only the begin-ning. Yet their interdependence is inescapable andprofound. To make these differently motivated de-pendencies work, the selling company must under-stand the relationship and plan its management inadvance of the wedding. It can’t get out the marriagemanual only after trouble has begun.

EXHIBIT 1Purchase Cycles and Assurances

ITEM PURCHASECYCLE(in years)

ITEM PREVIOUSASSURANCE

PRESENTASSURANCE

Oil field installationChemical plantEDP systemWeapons systemMajor components ofsteel plantPaper supply contract

15 to 2010 to 155 to 1020 to 305 to 10

5

TankersApartmentsAuto warrantiesTechnologyLaborSuppliesEquipment

SpotRental10,000 milesBuyHireShoppingRepair

CharterCooperative100,000 milesLeaseContractsContractingMaintenance

HARVARD BUSINESS REVIEW September–October 1983 3

THE PRODUCT’S CHANGING NATURE

The future will be marked by intense business rela-tionships in all areas of marketing, including fre-quently purchased consumer goods. Procter & Gam-ble, copying General Mills’s Betty Crocker advisoryservice, has found that the installation of a consumerhot line to give advice on its products and their useshas cemented customer brand loyalty.

In the industrial setting we have only to reviewchanging perceptions of various aspects of productcharacteristics to appreciate the new emphasis onrelationships (see Exhibit 3). The common charac-teristic of the terms in the “future” column of thisexhibit is time. What is labeled “item” in the firstcolumn was in the past simply a product, somethingthat was bought for its own value. More recently thatsimple product has not been enough. Instead, buyershave bought augmented products.

During the era we are entering the emphasis willbe on systems contracts, and buyer-seller relation-ships will be characterized by continuous contact andevolving relationships to effect the systems. The“sale” will be not just a system but a system overtime. The value at stake will be the advantages of thattotal system over time. As the customer gains expe-rience, the technology will decline in importancerelative to the system that enables the buyer to real-ize the benefits of the technology. Services, delivery,reliability, responsiveness, and the quality of the hu-man and organizational interactions between sellerand buyer will be more important than the technol-ogy itself.

The more complex the system and the more “soft-

ware” (including operating procedures and protocols,management routines, and service components) itrequires, the greater the customer’s anxieties andexpectations. People buy expectations, not things.They buy the expectations of benefits promised bythe vendor. When it takes a long time to fulfill thepromise (to deliver a new custom-made automatedworkstation, for example) or when fulfillment is con-tinual over a long period (as it is in banking services,fuel deliveries, or shipments of components for as-sembly operations), the buyer’s anxieties build upafter the purchase decision is made. Will the deliverybe prompt? Will it be smooth and regular? Did weselect the best vendor?

Differing ExpectationsWhen downstream realities loom larger than up-frontpromises, what do you do before, during, and after thesale? Who should be responsible for what?

To answer these questions it helps to understandhow the promises and behavior of the vendor, beforethe sale is made, shape the customer’s expectations.It is reasonable for a customer who has been promisedthe moon to expect it to be delivered. But if those whomake the promises are paid commissions before thecustomer gets everything he or she bargained for,they’re not likely to feel compelled to ensure that thecustomer gets fully satisfied later. After the sale,they’ll rush off to pursue other prey. If marketingplans the sale, sales makes it, manufacturing fulfillsit, and service services it, who’s in charge and whotakes responsibility for the whole process?

Problems arise not only because those who do theselling, the marketing, the manufacturing, and theservicing have varying incentives and views of thecustomer but also because organizations are one-di-mensional. With the exception of those who work insales or marketing, people seldom see beyond theircompany’s walls. For those inside those walls, insideis where the work gets done, where the penalties andincentives are doled out, where the budgets and plansget made, where engineering and manufacturing aredone, where performance is measured, where one’sfriends and associates gather, where things are man-aged and manageable. Outside “has nothing to dowith me” and is where “you can’t change things.”

Many disjunctions exist between seller and buyerat various stages of the sales process. These may besimply illustrated, as in Exhibit 4.

AFTER THE FACT

The fact of buying changes the dynamics of the rela-tionship. The buyer expects the seller to rememberthe purchase as having been a favor bestowed, not as

Selling

Seller Salesdepartment

Buyer

Marketing

Seller Buyer

EXHIBIT 2The Change from Selling to Marketing

4 HARVARD BUSINESS REVIEW September–October 1983

something earned by the seller. Hence it is wrong toassume that getting an account gives you an advan-tage because you’ve got a foot in the door. The oppo-site is more often the case. The buyer who views thesale as a favor conferred on the seller in effect debitsthe seller’s account. The seller owes the buyer oneand is in the position of having to rebuild the relation-ship from a deficit stance.

In the absence of good management, the relation-ship deteriorates because both organizations tendnaturally to face inward rather than outward towardeach other. The natural tendency of relationships,whether in marriage or in business, is toward erosionof sensitivity and attentiveness. Inward orientationby the selling organization leads to insensitivity andunresponsiveness in customer relations. At best thecompany substitutes bureaucratic formalities forauthentic interaction.

A healthy relationship maintains, and preferablyexpands, the equity and the possibilities that werecreated during courtship. A healthy relationship re-quires a conscious and constant fight against theforces of decline. It becomes important for sellersregularly and seriously to consider whether the rela-tionship is improving or deteriorating, whether theirpromises are being completely fulfilled, whether theyare neglecting anything, and how they stand vis-à-vistheir competitors. Exhibit 5 compares actions thataffect—for better or worse—relationships with buyers.

Building DependenciesOne of the surest signs of a bad or declining relation-ship is the absence of complaints from the customer.Nobody is ever that satisfied, especially not over anextended period of time. The customer is either notbeing candid or not being contacted—probably both.The absence of candor reflects the decline of trust andthe deterioration of the relationship. Bad things accu-mulate. Impaired communication is both a symptom

and a cause of trouble. Things fester inside. Whenthey finally erupt, it’s usually too late or too costly tocorrect the situation.

We can invest in relationships, and we can borrowfrom them. We all do both, but we seldom accountfor our actions and almost never manage them. Yet acompany’s most precious asset is its relationshipswith its customers. What matters is not whom youknow but how you are known to them.

Not all relationships can or need be of the sameduration or at the same level of intimacy. Thesefactors depend on the extent of the actual or feltdependency between the buyer and the seller. And ofcourse those dependencies can be extended or con-tracted through various direct links that can be estab-lished between the two parties. Thus, when BergenBrunswig, the booming drug and health care productsdistributor, puts computer terminals in its custom-ers’ offices to enable them to order directly and getinstant feedback regarding their sales and inventory,it creates a new link that helps tie the customer tothe vendor.

At the same time, however, the seller can becomedependent on the buyer in important ways. Mostobvious is vendor reliance on the buyer for a certainpercentage of its sales. More subtle is reliance on thebuyer for important information, including how thebuyer’s business will change, how changes will affectfuture purchases, and what competitors are offeringin the way of substitute products or materials, atwhat prices, and including which services. The buyercan also answer questions like these for the vendor:How well is the vendor fulfilling the customer’sneeds? Is performance up to promises from headquar-ters? To what new uses is the customer putting theproduct?

The seller’s ability to forecast the buyer’s inten-tions rests on the quality of the overall relationship.In a good relationship the buyer shares plans and

EXHIBIT 3Perceptions of Product Values

CATEGORY PAST PRESENT FUTURE

Item Product Augmented product System contracts

Sale Unit System System over time

Value Feature advantages Technology advantages System advantages

Leadtime Short Long Lengthy

Service Modest Important Vital

Delivery place Local National Global

Delivery phase Once Often Continually

Strategy Sales Marketing Relationship


expectations with the vendor, or at least makes avail-able relevant information. With that information thevendor can better serve the buyer. Surprises and badforecasts are symptoms of bad relationships. In suchinstances, everybody—even the buyer—loses.

Thus, a system of reciprocal dependencies devel-ops. It is up to the seller to nurture the relationshipbeyond its simple dollar value. In a proper relation-ship both the buyer and the seller will benefit or therelationship will not last.

Moreover, both parties should understand that theseller’s expenses rarely end with acquisition costs.This means that the vendor should work at convinc-ing the customer of the importance of maintainingthe vendor’s long-term profitability at a comfortablelevel instead of squeezing to get rock-bottom deliv-ered prices. Unless the costs of the expected postpur-chase services are reflected in the price, the buyer willend up paying extra in money, in delays, and inaggravation. The smart relationship manager in theselling company will help the buyer do long-termlife-cycle costing to assess the vendor’s offering.

BONDS THAT LAST

Professional partnerships in law, medicine, architec-ture, consulting, investment banking, and advertis-ing rate and reward associates by their client relation-ships. Like any other assets, these relationships canappreciate or depreciate. Their maintenance and en-hancement depend not so much on good manners,public relations, tact, charm, window dressing, or ma-nipulation as they do on management. Relationshipmanagement requires companywide maintenance,

investment, improvement, and even replacement pro-grams. The results can be spectacular.

Examine the case of the North Sea oil and gas fields.Norway and Britain urged and facilitated explorationand development of those resources. They were eagerand even generous hosts to the oil companies. Thecompanies, though they spent hundreds of millionsof dollars to do the work, didn’t fully nurture theirrelationships. When oil and gas suddenly started toflow, the host countries levied taxes exceeding 90%of the market prices. No one was more surprised thanthe companies. Why should they have been surprised?Had they built sound relationships with the govern-ments, the politicians, and the voters—by whatevermeans—so as to have created a sense of mutuality andpartnership, they might have moderated the size ofthe taxes. What would it have been worth?

This is not an isolated occurrence. The same prob-lem crops up in similar circumstances where vendorsare required to make heavy expenditures to get ac-counts and develop products. Exhibit 6 depicts cashflows to a vendor of this type during the life of theaccount. During the customer-getting and develop-ment period, cash flows are negative and the cus-tomer eagerly encourages the expenditures. When theproduct is delivered or the joint venture becomesoperative, cumulative cash flows turn up and finallybecome positive. In the case of the North Sea, thesurprising new high taxes represent the differencebetween what revenues to the oil companies mighthave been (the upper level of potential revenue) andwhat they actually became. With worse relationshipsthey might, of course, have fallen to an even lowerlevel of potential revenue.

Consider also the case of Gillette North America.

EXHIBIT 4Varying Reactions and Perceptions Before and During Sale Process

WHEN THE SALE IS FIRST MADE

Seller BuyerObjective achieved Judgment postponed; applies test of timeSelling stops Shopping continuesFocus goes elsewhere Focus on purchase; wants affirmation that

expectations have been metTension released Tension increasedRelationship reduced or ended Commitment made; relationship intensified

THROUGHOUT THE PROCESS

Stage of Sale Seller Buyer1 Before Real hope Vague need2 Romance Hot and heavy Testing and hopeful3 Sale Fantasy: bed Fantasy: board4 After Looks elsewhere for next sale “You don’t care”5 Long after Indifferent “Can’t this be made better?”6 Next sale “How about a new one?” “Really?”


It has four separate sales forces and special programsfor major accounts to ensure Gillette’s rapid andsmooth response to customers’ requirements. Gil-lette also has a vice president of business relationswho counts among his major duties cultivation ofrelationships with major retailers and distributors.This VP carries out that responsibility via a vast arrayof ceremonial activities ranging from entertainmentat trade association conventions to organization ofspecial events for major accounts in connection withthe annual All-Star baseball game, the World Series,the Superbowl, and the NCAA playoffs. These activi-ties establish bonds and affirm reciprocal obligationsand benefits.

Some companies now require engineering andmanufacturing people to spend time with customersand users in the field—not just to get product anddesign ideas or feedback regarding present productsbut also to get to know and to respond to customersin deep and abiding ways so as to build relationshipsand bonds that last. The Sperry Corporation’s much-advertised “listening” campaign has included train-ing employees to listen and communicate effectivelywith each other and with customers.

All too often company officials take action insteadof spending time. It is all too easy to act first and latertry to fix the relationship, instead of the other wayaround. It is all too simple to say, “We’ll look into itand call you back” or “Let’s get together for lunchsometime.” These are tactics of diversion and delay,not of relationship building.

When a purchase cycle is long—as when a beer-

making plant contracts with a can-making vendor tobuild a factory next door, or when the U.S. Air Forcecommits itself to buying a jet engine with a life of 20to 30 years—the people in the vendor organizationwho did the selling and those in the customer organi-zation who did the buying will be replaced over thecourse of those relationships. So, in all likelihood,will the entire upper levels of management on bothsides. What must the seller do to ensure continuityof good relations? What is expected of the customerwhen people who did the buying are changed andgone? Clearly the idea is to build bonds that last nomatter who comes and goes.

Making it HappenTo effectively manage relationships, managers mustmeet four requirements:

1. Awareness. Understand both the problem andthe opportunity areas.

2. Assessment. Determine where the companynow stands, especially in terms of what’s nec-essary to achieve the desired results.

3. Accountability. Establish regular reporting onindividual relationships, and then on group re-lationships, so that these can be weighedagainst other measures of performance.

4. Actions. Make decisions and allocations andestablish routines and communications on thebasis of their impact on the targeted relation-ships. Constantly reinforce awareness and ac-tions.

EXHIBIT 5Actions That Affect Relationships

POSITIVE ACTIONS NEGATIVE ACTIONS

Initiate positive phone calls Make only callbacks

Make recommendations Make justifications

Use candid language Use accommodative language

Use phone Use correspondence

Show appreciation Wait for misunderstandings

Make service suggestions Wait for service requests

Use “we” problem-solving language Use “owe us” legal language

Get to problems Respond only to problems

Use jargon or shorthand Use long-winded communications

Air personality problems Hide personality problems

Talk of “our future together” Talk about making good on the past

Routinize responses Fire drill/emergency responsiveness

Accept responsibility Shift blame

Plan the future Rehash the past


Relationship management can be institutional-ized, but in the process it must also be humanized.One company has regular sensitivity sessions androle-playing seminars in which sales officials assumethe buyer role. It also conducts debriefings on meet-ings with customers. And it requires its customer-contact people (including those who make deliveriesand handle receivables) to regularly ask of variousaccounts the seminal questions: How are we doing inthe relationship? Is it going up or down? Are wetalking with the right people about the right issues?What have we not done lately?

The emphasis on “lately” is not incidental. It re-flects the recognition that relationships naturallydegrade and have to be reinvigorated. If I owe you a

favor, I forget—but you don’t. And when I’ve done youa favor, you feel obligated—but not for long. You ask,“What have you done for me lately?” A relationshipcredit must be cashed in or it expires, and it must beused soon or it depreciates.

Another way companies can institutionalize rela-tionship management is by establishing routines thatensure the right kinds of customer contacts. A well-known Wall Street investment firm requires its secu-rity analysts and salespeople to make regular con-structive contacts with their institutional customers.Constructive is defined as conveying useful informa-tion to them. The firm has set up a regular Monday-morning investment strategy “commentary” thatanalysts and salespeople can convey by telephone totheir customers. In addition, each analyst must de-velop periodic industry commentaries and updates,to be mailed or telephoned to customers. Analystsand salespeople are required to keep logs of thesecontacts, which are compiled, counted, and commu-nicated to all in a weekly companywide report. Thosesalespeople and analysts making the fewest contactshave to explain their inaction to supervisors.

The firm allocates end-of-year bonuses on the basisof not only commissions earned from the variousinstitutions but also the number and types of con-tacts initiated and maintained. Meanwhile, the firmconducts regular sensitivity-training sessions to en-hance the contacts and the quality of the relation-ships. The results, which show that the efforts havebeen highly successful, are analyzed and made knownto all, thus reinforcing the importance of the process.

Relationship management is a special field all itsown, and is as important to preserving and enhancingthe intangible asset commonly known as “goodwill”as is the management of hard assets. The fact that itis probably more difficult makes hard work at it thatmuch more important.

1. See Theodore Levitt, “Marketing Success Through Differen-tiation—of Anything,” Harvard Business Review (January–Febru-ary 1980): 83.

R&D expenses

Presale work

Field and productdevelopment

Buyeris expectant

Buyer encouragesvendor spending

Upper level ofpotential revenue

Actual level ofrevenue

Lower level ofpotential revenue

Cas

hflo

w

Before productis delivered

After productis delivered

Buyer exerts"cash" from vendor inform of "tax" or lowerprices unless givenreasons early not to

Buyer seeks expandedservices with noincrease in price

Buyer is happythat progressis made

EXHIBIT 6Cumulative Cash Flow History of an Account


After the Sale is Over

Documents

Transcript of After the Sale is Over