Lately we’ve been getting inquiries from marketing agencies and other software development firms about white-labeling our web and mobile applications or development services. It’s an interesting business model that we’re considering, so we figured it may be helpful to share our thoughts on the subject and provide some things to ponder if you’re considering a white-label relationship.
For those who aren’t familiar with the concept, a white-label product is one that is produced by a company (the producer or software developer) that other companies (marketers) re-brand and sell as if they made it. Common examples include the store-brand products sold in your local supermarket, such as Safeway Oatmeal or Trader Joe’s Turkey Meatballs (which are delicious, by the way). Safeway and Trader Joe’s don’t actually produce the product; rather, they contract with a food manufacturer to make the product and then they slap their label on it and sell it in their stores.
In the white-label software development world, a well-known example is CakeMail. CakeMail develops e-mail marketing software that marketers and agencies can brand then use to service or resell to their clients. CakeMail takes care of all the technical aspects of the software, such as product improvements, data security, and e-mail delivery and reputation, while the marketers use the software to help their clients.
There are a few things that need to be taken into consideration, whether you’re the marketer or software developer, before jumping into the white-label world. As with any business deal, there are pros and cons to weigh.
Pro and Cons For Marketers
The primary pro for marketers is that they can create new revenue streams for their company via the sales of these white-label software products or services. They’ll also save valuable money and time since they don’t have to deal with software development, maintenance, and hosting.
On the other hand, the product may not have all the features that clients desire and marketers may not have the ability to customize the software. And because there is a layer between the client and the software developer, service and support issues may take longer to rectify, and there may be some details that are lost in translation and communication.
Pro and Cons For Software Developers
Pros for software developers include access to end users to whom they normally wouldn’t have access, and the cost savings from not having to hire a sales and marketing team and spend advertising dollars to promote the product or service.
Because the marketer is the middle man and the software developer doesn’t interact directly with the end user, it’s much more difficult for the developer to obtain feedback on the product, which is always important for continuous improvement. Additionally, if a software developer white-labels her product to multiple marketers, each may desire specific customizations to the software, which may be difficult for the developer to implement and maintain. Finally, margins for the developer may be very low; sometimes agencies may try to offer competitive pricing to their clients, which in turn leaves little room for profit for the software developer.
In order for a white-label software development relationship to work, both the marketer and software developer need to really trust each other, ideally having a prior working relationship. Both must believe that the other’s products and services are worthy of their own brand. And finally, the financials have to benefit both parties.
What are your thoughts about white-label software and mobile app development? We’d love to hear from you, whether you’re a marketer or software developer, in the comments.
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