Articles

Top 5 pitfalls to avoid negotiating a white-label service agreement

By Joanne Hue, Date published: 2022-12-19

White labeling is the process of selling an existing product or service to another company for them to sell to their customers under their brand. White Label Service Agreements are used when any service or product is being white-labeled. If you sell your product to a customer who will be rebranding it and presenting it as their own, you will need to sign a white-label service agreement.

Signing up for a white-label service is a great way to reduce manufacturing or product costs as it allows one to solely focus on the marketing and selling of the item. Similarly, manufacturers or creators, are able to focus on developing and improving products without the worry of having to market or sell them directly to end users. It does sound like a win-win doesn’t it? However, you have to plan and give a lot of thought to white-label service agreements. Whether you’re signing off as the party that is supplying or as a party that is selling, you need to be mindful of the pitfalls of negotiating White label agreements.

pitfalls negotiating white label
Image by diana.grytsku on Freepik

1. Create a strategy before launching your product

The white-label resale seeks to swiftly launch an offer and due to its conciseness, the reselling process tends to occur swiftly. Provided the launch of the product is successful, modification of the business model can be carried forward. However, the white-label agreement could also impede your business autonomies. Therefore, it is intrinsic to create an efficient strategy prior to launching the product. 

First, establish a robust launching plan. The target market, broken down into customers searched, and the financial model, with quantifiable objectives and monitored indicators, make up a compact business model. The white-label relationship is decisive for the offer and the sale. Therefore, a strong strategy is created to manage how the white label integrates with your current model and goals.

 Launch in a formal experimental environment for convenient up-scaling. You may assess the maturity of your new service and structure through a small-scale or phased rollout. If you are buying a product for rebranding,  inquire with your partner about their past client’s experiences, their growth trajectory, or the pitfalls to avoid negotiating white labels. 

2.   Misunderstanding the white label’s additional value

Most resellers can only make a modest profit on a white-label agreement.  In a competitive market, a business could struggle to sustain itself. However, if a white-label reselling enhances an already-existing offer, your company will strongly benefit. Therefore, you need to understand that a white-label agreement does not guarantee growth but could act as a catalyst for it.

The reseller could utilize the agreement to gain new clients faster, meet consumer demands and conduct low-cost market research. 

 A company that provides insurance establishes multi-channel exchanges and adopts a set of measures to increase consumer loyalty. But a reseller condemned to failure could benefit from being the middleman without adding value.

3.   Be careful not to choose the wrong partner

White-label agreements tie producers to sellers and vice versa. There is a direct codependence of one with another. Without one, the other would be insignificant. This close-knit relationship means that you are trusting someone else with an important part of your business. If you end up with a strained relationship, it could easily reflect back on your business. As a seller, you want to have a reliable steady producer who is able to keep up with the needs and fulfill the commitments they have made. As a producer, you want to ensure that the supplier has the means to sell the product or service and continue being in business with you. So, to avoid problems with either, it is important to clarify the division of labor, implementation of products, interaction with customers, and maintenance beforehand. Your partner should understand your limitations and be clear on their expectations.

4.   Ignoring the responsibility as a seller

We overlook the fact that selling involves work. Create a positive online customer experience, drive traffic, influence consumer decision-making, etc. A reseller is not passive in their action. You must present yourself to your clients as their buying consultant. You pay attention to their business concerns and assist them in identifying their needs.

Not only will your clients value your skills, but they will also be attentive to a client-centered strategy. The seamless customer relationship will also apply to you: omnichannel strategy, responsiveness, tailored solutions, etc. You need to be viewed as a business partner by your clients.

You improve your relationship with your white label by taking care of them as well. After all, they are on this excursion because customer relationship management was outsourced. There will only be legitimate resellers who can profit from a white-label approach.

They won’t just act as passive mediators; instead, they’ll help their clients make purchasing decisions. They base their added value and offer on this knowledge, and they also benefit from a faster time-to-market as a result of their cooperation.

5. Remember to keep your customers

Are you one of the businesses that prioritize prospecting above frequent customers? Your clients may act as middlemen and inform your prospects. With a strategy for introducing more complicated solutions and a favored loyalty program, get ready for recurring business from the first transaction. Your clients will value your skills, but they will also be attentive to a client-centered strategy.

The seamless customer relationship will also apply to you: omnichannel strategy, responsiveness, tailored solutions, etc. You need to be viewed as a business partner by your clients. You improve your relationship with your white label by taking care of them as well. After all, they are on this excursion because customer relationship management was outsourced. There will only be legitimate resellers who can profit from a white-label approach.

They won’t just act as passive mediators; instead, they’ll help their clients make purchasing decisions. They base their added value and offer on this knowledge, and they also benefit from a faster time-to-market as a result of their cooperation.

The potential risks of a poorly drafted contract

White-label service contracts that are improperly written invite legal troubles. You may end up making endless financial warranties for the products and services you sell is possible. This is bad since it might lead to financial loss. You could unintentionally consent to be held accountable for any foreseeable financial loss in a contract that has been improperly written.

You could also make burdensome contractual commitments regarding the products and services offered by your business as a result of a badly written contract. As a result, you must ensure that the agreement outlines reasonable expectations on your end. As a result, you won’t be able to accept any additional unfavorable terms that your customer applies to his standard terms and conditions.

Make sure you do not acknowledge that your client may postpone payment while creating a special-label agreement. Additionally, make sure you don’t transfer ownership of your goods before getting paid. Never transfer the intellectual property of any design work you have done at a price that might result in loss. These are some of the main pitfalls of negotiating white-label service agreements.

Conclusion

A strategic approach will help you prevent the pitfalls of negotiating white-label service agreements. It is crucial as a white-label service provider to formulate an agreement that is beneficial to you in the long run. You can customize your white-label service through Zegal’s White Label Solution Template and check on various other Service agreement Templates.

Tags: pitfalls to avoid | white label service agreement

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