More businesses than most people realize white label their products and services. In fact, some people don’t even realize white labeling is a practice!
That said, white label branding remains for many businesses an underutilized option in their toolkit. Read on to learn how best to consider this option for your business and find out about some of the less immediately obvious ways white labeling might be able to help you.
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The Basics of White Labelling
White labeling (also called private labeling) is pretty simple. First, Business A produces a product or service as normal. Then, once they sell it to Business B, it is packaged in such a way that any reference to Business A is removed.
Business B then sells the product or service ostensibly as their own, usually under some kind of “value” or “generic” brand. Perhaps even more surprisingly, it is often sold on shelves right near the exact same product in Business A’s packaging!
This isn’t just done with products on shelves either. Many companies use white-labeled messenger apps and other digital services.
With some simple reskinning, customers won’t notice an app wasn’t actually custom designed by a given company. Everyone wins in this scenario. The company saves big on designing their own app while customers still get a functional, trendy looking application.
Why White Label Your Products?
Product branding is often considered extremely important, so it may seem odd that so many companies obfuscate their branding with white labeling. Why do they do this?
Simplicity. White labeling allows you to specialize in the production of a given product. Meanwhile, marketing and sales are taken up by whomever you contract with.
The way this can reduce strain on your business should not be understated. White label contracts can be big and long-lasting. A large and guaranteed monthly order is no joke, especially if you pay nothing in marketing.
There’s also some evidence that consumers are less loyal to brands than they once were. As customers focus increasingly on price, the low cost of white label products helps businesses stay competitive.
Incentives are often offered so businesses can white-label your products. They might offer competitive pricing or purchase in significant bulk, often in exchange for partial or full exclusivity. (This is the case with many supermarket deals.)
If your product branding isn’t strong, white labeling has a strong appeal. You lose little and have the potential to reap big benefits.
Why White Label Products and Services Yourself?
Thus far, we’ve discussed why you should consider white labeling your own products and services. However, it’s also worth discussing the appeal of white labeling the products and services of others.
The biggest benefits are largely the same. White labeling allows everyone involved to focus.
Developing new products and services to bring to market takes resources. It costs not just time but significant amounts of capital. A white label contract allows you to skip that process.
White labeling services, such as those of a virtual marketing director, are also becoming more of a norm. Skip the complex and expensive hiring process and just pay another company to help perform vital marketing services as needed.
So long as the company you’re working with is reputable, taking on white label products and services carries few downsides. White label contracts will often allow you to offer products and services at a better cost thanks to the involved parties’ ability to focus on one aspect of the production-to-sale chain.
Pitfalls to Avoid
White labeling is only a viable tactic if done right. Like with any business strategy, there are pitfalls that need to be avoided.
Bad Contracts
The most important but most obvious pitfall to avoid is locking into a bad contract. Whether you’re handing over your products or branding someone else’s, a bad contract can cripple a business venture right as it begins.
Only guarantee what you can deliver on and what makes economical sense. A long-lasting, big contract can be catastrophic if the margins it guarantees are slim. Watch out for contracts where a tiny change in the economics involved will hurt you.
Bad Partners
You should only enter a white-label deal with partners that are trustworthy. All parties involved are going to be relying on each other. Failure on one end will result in failure on the other.
Manufacturers and service providers need to remember they’re going to carry the branding of their partners. On the opposite end, the failure of products or poor service will reflect badly on the end-user branding.
Underestimating Your Brand
For service and product producers, sometimes your brand will be strong enough that it warrants consideration. White labeling could potentially mean you compete with yourself in these cases.
In some cases, your white-labeled products can compete with your personal branded products without issue. This is quite common in grocery chains. In others, you may just be lowering the price you can charge for your product with little gain.
The stronger your brand, the more you must consider whether white labeling is a good option for you. This is doubly true if your product or service is niche.
White Label Deals Are Worth Considering
There’s no golden bullet in business. White label deals won’t work for every business. At the same time, they carry some major benefits that often go ignored.
If your company has the opportunity to sell their products or services under a white label deal, at least consider it. It takes most of the burden of marketing and sales away and often remains quite profitable.
For those looking for more entrepreneurial advice, our blog has even more for you! We have plenty of articles on business, or you can explore our other sections on tech, health, and more.
