7 Things to Consider When Starting a White Label App Business

White label goods and services have been around for decades. In every industry you could imagine, businesses create products which are rebranded by their partners to sell as their own.

The technology industry, and the app sector in particular, is no exception. As consumers go mobile in their tens of millions, digital agencies and entrepreneurs are rushing to catch up, and cash in.

Digital agencies have to make decisions about their mobile offerings to their small business customers: do they want to create custom apps or create apps with a white labeled app builder? Often the cost differential is persuasive as white label app builders dramatically cut down development time and cost, but before making a decision there are a few questions you should ask yourself.

Things to Think About Before Opening a White Label App Business

Is it Your Strategic Focus?

Are you turning to white label app builder because it’s the market you want to serve, or do you think white labeling your app would enable you to diversity income?

App developers often turn to white label when their original strategy to build their own platform struggles, or they’re running out of money. The white label market is littered with apps that attempted to diversity income streams, but found the time, money and effort required to make it successful damaged their core business.

If your heart isn’t in it, if you haven’t oriented every part of your development to white labeling including sales and customer support, then the chances of success aren’t good. Everything needs to be oriented to your new business proposition, from the functionality of your app to marketing.

That’s a lot of work, and a time suck with no guarantee of success. If it is genuinely a great strategic opportunity, then go for it. But if you’re reacting to external pressures on your original strategy and you just want out, then maybe it’s not the way to go.

Do You Have Competitive Advantage?

The white label market is maturing quickly, and new entrants are flooding many market segments. Large white label app businesses with a ready-made platform, extensive templates and a wide reaching reseller market are waiting to take care of your while labeling needs. They have first mover advantage and the benefit of an established reputation.

If you are starting from scratch as a white label business, do your research in the various markets. Some of the most popular market segments are already maturing such as conference apps, online dating, directories, and loyalty apps.

If you already have an app you want to white label, or, if you’re still in the development stage and are testing various ideas for white label apps to launch, consider the following:

• Who is your competition in your chosen market segment?
• What is the value of the market?
• How does your competitors’ functionality compare to yours?
• How price sensitive is the market?

If your app is delivering superior functionality and is sufficiently differentiated from your competitors, if the market is undeveloped (or developing) and there is potential for growth, then you may have a business opportunity.

What is Your Unique Selling Proposition (USP)?

What is unique about your white label offering and is it something your potential customers and the end users will value?

If you are offering a ‘me-too’ product, and competing with competitors already in the market, it will be difficult to gain any traction. Markets are not kind to followers no matter what product they’re selling. There are established companies in the white label market that are already reaping the rewards of first mover advantage.

To have any success in a competitive market you have to be offering a genuinely disruptive app that delivers a leap in functionality, service, and/or design. Incremental improvements in functionality won’t cut it, especially if that functionality can be easily replicated and can’t be protected by a patent.

Entering a market segment with less competition will make it easier to differentiate your app and offer greater opportunity to build market share. If you already have an app and you are serving a market segment that is already competitive in the white label sector, such as conference apps, it will be difficult to build significant market share.

What Do Your Customers Need?

Your customers are resellers, often web developers or web designers, advertising or marketing agencies. These resellers, your partners, use your white label app and rebrand it for their customers, often businesses who serve consumers.

The white label app business is a business to business (B2B) market and, as such, your app must serve the needs of several participants:

• Your resellers’ needs – they need to decide it’s worth buying from you and be convinced their clients would buy your solution off them. It has to have a great user experience at the back end, so it’s easy for your reseller to create an app for their clients.
• The needs of your reseller’s client – they need to be prepared to pay for an app to launch under their company name. Does your app provide them with a business opportunity, will their customers (the end users) use it?
• The end user – your app has to appeal to them. Why should they use it? What does it offer them?

If your app has the functionality and user experience the participants need, your app has the potential to be successful.

Your Service Proposition

You have a great product, its serving a market segment that has lots of sales potential, and it serves the needs of all decision makers from reseller to the end-user. Congratulations, it’s a great start. But there’s more you need to consider.

In the white label app businesss, you can’t just upload your app to an app store and promote it. You need to offer services as well, as a minimum you need to provide training to your resellers and ongoing support.

It’s important you really consider the nuts and bolts of your reseller agreement. An innocuous clause offering unlimited support may seem like a no-brainer, but white label apps often find the after sales process is a huge drain on resources.

Consider what are you going to offer as standard, what rights are your resellers buying, what is a custom add on, and how does this compare with your competition? Seek out reseller agreements with other white label app providers (you may need to be resourceful to get your hands on them) and do your homework.

Remember, you may also find yourself competing with your own customers. If you are marketing your own branded app and using white label sales as an income stream, your customers/partners will be in the same market. Consider how you are going to handle that, can limitations in your reseller agreement help you avoid this situation? For example, if your market focus is in North America, could you limit your resellers to other territories such as the Far East?

The Sales Cycle

When a B2B buyer sources a product for their clients, they are putting their reputation on the line. They are badging your product as their own, and they are usually extremely risk averse when making a decision to back a white label app.

As a result the sale will probably have a long lead time, and the higher the cost of your app, the longer the lead time will be. The fact is, you will be doing a lot of work to achieve a sale with no guarantee of a return. Your potential buyer has no obligation to purchase your white label app even if they have made you jump through expensive hoops to demonstrate how great it is.

You will need to invest considerable resources into closing sales, and be prepared for the costs to build up before you even achieve a sale. Factor in the cost of developing a professional sales pitch that demonstrates the value of your app, developing sales materials, and bringing in personnel with the sales skills (if your team aren’t good at direct sales) capable of closing the deal.

Be Sure You Can Access Customer Feedback

The success of your white label app, like any app, rests on how attractive it is to the end user. In the white label market you are selling your app through an intermediary, and as a result there is a chance that you will not always get direct feedback on your product. You need to make sure that you choose a company that allows you to gather customer feedback.

The wrong company spearheading your white labeling efforts can wreak havoc on your white label business—particularly within the feedback realm.  The continuous development and improvement of your app can become difficult if you are not privy how customers feel about it. The traditional business model when selling direct to the end users is to continually improve the app over time, after evaluating end user requests and feedback.

The loss of this direct relationship will affect your development process, and could affect your market valuation. If you are seeking to white label your app to diversify your income streams, rather than as a strategic direction, then the company you use should be a big consideration in your decision—make sure you have access to customer feedback.

Decide Whether White Label Apps are a Viable Business Opportunity

Deciding to enter the white label app market is a strategic decision that could fundamentally change your business. If you are building your own platform with your app, but want to diversify into white label apps to build an alternative income stream, carefully consider how this decision will affect your core business. Consider whether your app can earn sufficient market share in its niche and whether there is a genuine business opportunity.

If you are a new start up, research your white label app ideas thoroughly, some market segments will already be highly competitive and it will be difficult to build market share in these. Understand the marketplace and consider the needs of every participant in the sales decision when developing your app.

Remember the cost of selling into the white label market can involve significant upfront costs, and your customers will expect ongoing training and support.

Apps Photo via Shutterstock

This article, "7 Things to Consider When Starting a White Label App Business" was first published on Small Business Trends