As businesses grow, they often find themselves outpacing their initial product offerings or skill sets. Customers and sales teams may start requesting services or products that your company doesn’t currently provide, forcing business leaders to face a critical decision: Should I invest significant resources to expand our products and services in order to keep our clients happy? Or do I risk sending them off to another vendor, and ultimately losing their business?

There is a third option, one that allows you to quickly satisfy new customer requests without disrupting your core business or massively investing in new competencies. The solution is white labeling.

What Is White Labeling?

White labeling, to try to make it as clear as possible, is when Company A partners with Company B to sell Company B’s products or services as an extension of Company A’s offerings, under the Company A brand. That may sound confusing, but it’s clearer in practice, and it is often used in ways that are invisible to the end consumer. Some of the coffee sold at Costco, for example, is supplied by Starbucks but sold under the Kirkland Signature Brand. Similarly, technology infrastructure like cybersecurity software and cloud services, where standardization and reliability are crucial, are often white labeled, allowing companies to offer industry-standard solutions under their own brands.

Increasingly, businesses are recognizing the potential for using white labeling to expand product lines and enter new markets without the need to build out new teams and products in-house or make substantial R&D investments. On the white label provider side of the equation, companies can scale exponentially by allowing other businesses to market their products and services under different brand names.

When Should Your Business Consider Using White Label Products or Services? 

  • When your expertise stops, but your customer needs don’t.

Say your company built great software that is being used so widely that you have a significant number of customers coming in asking for user support. When you get to this point, you might start asking yourself: do we need to build an IT support team, or can we partner with an IT support firm that’s already up and running, and just white label it? 

  • When you need a product or service to be set up quickly.

Even if developing a new product or service line is part of your company’s long-term vision for the future, it might be smart to white label to build it now, if you need it up and running immediately. It can take years for your company to develop its own solution, while a white label solution can be set up in mere weeks or months.

  • When it is more cost-effective to go with a white label solution.

Hiring teams and developing products and service strategies takes money. From a business perspective, it might make more sense to go with a white label solution when there is a big chance you won’t see a return on your investment for a long time, or ever. 

  • When using a white label solution reduces risk.

There are times when there is a temporary surge in demand for a product or service, like the Covid-19 pandemic, for example. White labeling allows your company to meet short-term customer demands without the long-term commitment of building a new team. 

  • When the product or service you are considering white labeling is not a part of your business’s core focus or niche.

Take the earlier scenario with the software company needing to provide its customers with IT support: if that company wants to continue to focus most of its resources on building the high-quality software that brought in business in the first place, it might be wise to hire out a white label service to field support questions.

All that being said, sometimes it does make more sense to build a product or service in-house. If developing your own capabilities aligns with your company’s long-term goals and your company has the time and money to invest, then choosing to build can make sense. Still, a white label offering can be a stop-gap solution to serve your customers while you are taking the time to build out the new product or service in-house.

How to Avoid Common Pitfalls in White Labeling

  • Understand brand impact.

Before diving headlong into white labeling as the solution to all your business’s problems, you need to know what your brand stands for, its unique proposition, and who your target customers are. Your white-labeled solution should feel like a natural extension of your brand rather than a disconnected add-on. 

  • Do your due diligence in selecting the right white-label partner.

The right white-label partner is someone who has the same beliefs about how you’ll be servicing your clients together, as well as a similar understanding of what success looks like. Ask your potential partners if they have any performance metrics they can share with you, what is going well for them, and where they have room to improve. The right partner will be clear and up front about what their strengths and weaknesses are, and how they are uniquely positioned to help you realize your goals.

  • Maintain brand consistency across interactions.

Brand consistency is not just about the fun, pretty details like logos and colors; it is also about your customer’s experience of you across various touchpoints. Whether they are interacting with an in-house account manager or a third-party IT support team, customers want and should receive a seamless experience. This requires establishing shared objectives, cross-training, and continued communication between your internal teams and your white-label partner. 

  • Establish clear success metrics.

Without a clear plan and solid objectives, even the best white-labeled products can fail to gain traction. Once you choose your white-label partner, set realistic goals for your newly integrated offering, create a plan to market it, and clearly define responsibilities among your internal teams and third-party provider. As with in-house solutions, it is important to continuously test variables like product quality assurance, marketing messages, and customer engagement strategies.

When Does It Make Sense for My Business to Provide a White Label Solution?

  • When you have a scalable, standardized solution that serves broad, multi-industry needs.

If your product can be scaled to accommodate a growing number of users without a proportional increase in costs, it is a prime candidate for white labeling. Software solutions like cybersecurity tools, cloud services, and payment processing are designed to handle varying levels of demand without requiring major modifications for each new client. In addition, these solutions don’t require extensive industry-specific customization or tailoring from company to company, because they are built on standardized protocols and technologies

  • When you want to focus on innovation, not customer acquisition and sales.

If you are passionate about the technological aspects of your product – like developing cutting-edge SaaS solutions or pioneering new tech innovations – white labeling can be a strategic move for you. Instead of diverting resources to building a sales team and managing client acquisition, you can white label your technology, allowing other companies to market and sell your product under their own brand while you continue to do what you do best.

The Bottom Line

In this era of business, you don’t need to reinvent the wheel to thrive.

White labeling, when appropriate, is a practical and effective way to expand your offerings and market reach without the doing the heavy lifting of developing new products and services outside the realm of your core business focus. Partnering with established providers and leveraging their strengths to fill in your gaps allows you to work smarter, not harder, ultimately positioning your business for sustainable growth and success.