Scaling operations is often the key barrier to revenue growth for both marketing and development focused agencies. White label services are often an efficient way for agencies to increase profitability by improving margin and growing top-line revenue at the same time.
For busy agencies, meeting deadlines while offering consistently high-quality client experiences can be challenging. Fluctuating need for specialized expertise can throw your whole team off balance.
White Labeling Today
White label services and products are sold under the brand name of a business, but developed by a third party. In most cases clients, are never interact or have knowledge of the third party.
“White label,” in general, is often referred to with generic mass-produced products. Most people are familiar with examples in the food and beverage industry. For instance, if you look in the shelf for chips you will find a lot of different brands, but most likely several of these have been made by the same manufacturer, and a third party.
Even though the goods are exactly the same, some brands can price themselves higher because of their reputation and branding. However, most importantly, the product is still the same, and the buyer gets exactly what asked for.
To use a more relevant example, if your agency focuses on UX/UI Design, you could let a third party to develop the software of the concept you are presenting to your client. Because of lack of developer resources internally, this is a simple and practical way to offer a full service deal. The client will believe all was developed by the agency and will receive all needed from one agent.
The use of white label services is considered a form of outsourcing, with certain expertise in their fields as well as lower prices. Freelancers can sometimes fall in the same category, but hiring a freelancer does not give the same advantage in scaling, and typically requires more management resource.
When does it makes sense for an agency to use white label services?
- Offer specialized technology services
The marketing environment is getting hugely diversified, meaning agencies can benefit from offering a range of specialized client services. Of course, it is extremely resource-intensive to obtain and maintain such a wide range of skills. This is especially true for smaller agencies.
There are two ways to get broaden your service offerings. Either hire new competent personnel, or to use a third party provider with the expertise. Hiring new personnel is a big cost, hence the risk increases, and there might not be demand for them anymore when the project ends. Using third party solutions on the other hand, agencies can get a specific expertise whenever needed.
A lot of software and applications being built today is very much alike as well, meaning the agencies could white label such parts of the projects. That way the agencies could use software services, such as Crowdbotics, to build their framework using machine learning as well as their pool of experienced developers. When framework is set up, the agencies could spend less time on simple development and use their developer resources in a more efficient and valuable way.
- MVP new services
Using white label also opens up some new ways of doing business for the agencies, one of them being MVP’s. Simple, straightforward projects may be white labeled to offer rapid development and testing for the clients. The day-to-day business would be the same, with no need for setting up an extra team or focus heavily on the technology. The only demand would be some follow-up and coordination from the project manager, but considering the client value being offered this would be a low risk offer with potential big upside.
Making a simple MVP has become more and more common for fast validation and scaling. White labeling these projects means no need for technology investments as well as starting heavy processes or projects. After validating that there is a need for the product or service, there may be more need for setting up a team for more heavy development.
- Offering full-service solutions
Competing with the big consultancies are getting harder for the small and medium agencies, and the most common way being to differentiate in a small niche. However, even though the agency has good reputation the big consultancies are being chosen for offering a wider range of needs.
One way the small and medium size agencies can compete is to offer a wider range of services. Using white labeling makes agencies able to offer a full-service offer, without using any more resources or workforce. The agencies will still maintain their core skills internally and are still able to command higher prices for their vertical of expertise.
- Put basic services on autopilot
A lot of the projects assigned to the agencies are repeatable and most parts are quite simple. To be able to compete on price for the small and medium sized agencies they need to use their resources sensible and cut costs. By using white labeling on small and basic projects there is more time to focus on higher value clients. Hence the internal expensive resources, such as software engineers, may be used on the projects with highest value.
- Lower margin
By developing a process that can be executed by a white label partner, you can lower your COGS and overhead costs. Even though there will be some extra administration costs, white labeling makes up for this by flexibility and low prices. In a competitive market this makes the agencies able to offer lower prices and take a better market position.
When using white label services you may adjust the development resources according to scaling up or down the production. This would probably be one of the greatest advantages, that will save agencies from a lot of uncertainty and planning. Hiring software engineers fast are not that much stress to meet the demand, and the agencies can spend more time finding the right employees.
- Open Up Pathways to Core Services
Sometime agencies can be blocked on launching a campaign or new project because of relatively minor issues on the client side. For example, launching a new PPC campaign may be blocked by a website redesign project. A new partner program may be blocked by the need for developing a new iOS application. If an agency offers those services themselves white labeling would be a good option not missing out on a new contract.
- Deliver on-time
When the project end is closing by, and there still is a lot of items left in the backlog, white labeling could be the solution. If there are any tasks left that demand quite a lot of time, as well as being relatively simple, this could lead to less stressed developers and in that way result in higher quality.
The Drawbacks of White labeling
The downsides of white labeling all boil down to reputation management.
- Reliable delivery
When doing white labeling a little control will be out of your hands, and there could be harder to follow up on meeting deadlines. However, with good follow up from the agency’s side, this should be quite easy to get around. Also, when hiring a white label service, doing a little research from former customers will decrease the risk of unreliable delivery.
- Quality control
When using white labeling services the agencies are always responsible for the end results when delivering the project to a client. With that in mind having quality controls is an absolute need for not harming the reputation. One way to deal with this is quite similar to the point above: continuously follow ups and research before hiring.
- Slow ramp time
It takes time to onboard and get into a rhythm with a white label partner. Not every agency can afford this kind of up-front resource investment. There need to be a two side trust to make sure
- Ongoing management
Constant contact is also a necessity, there need to be an open line of communication to ensure that the finished product meets the expectations.
This comes with the outsourcing challenges as not all providers are reliable or may not have the best interest in giving a lot of effort. Hence it is important to be sure that the third party will be able to cover every aspects of the white labeling process and is there to fulfill your demands.
The best way to find out if white label services are right for your agency is to start a conversation with potential partners.
You know where your friction points are when it comes to growth. Put the onus on the potential partners to decide.
If your goal is to grow top line revenue, reduce margins, and build a more repeatable business model, white label services should be a consideration.
Thanks to William Wickey for reviewing and commenting on early drafts of this post.