Definition & Meaning:

Often when companies enter negotiations to win a contract with a new customer, they offer their product/service at a low price (where they make little or no profit from the sale). Why would they do this?

The reason is they use this first 'sale' or 'deal' as a foot in the door, a way to build up a relationship with a new customer (a company or person) and 'sell additional products/services' to them in the future. And this 'selling additional products/services' in the future is basically what 'follow on business' means.

As the purpose of a company is to make a healthy profit, the 'follow on business' they do with the new customer will be more profitable for them (they won't sell the products/services at such low prices).

This type of sales strategy not only happens when between business-to-business sales, but also when companies sell products/services to the general public. A common method that many companies use to get 'follow on business' is to sell one of their products at such a low price that they actually make a loss on each sale (called a 'loss leader').

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Related Vocabulary:

Loss Leader, Zero-Sum Game.

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