Wesley: Hello and welcome to the Partner Strategy Network podcast. I'm Wesley Coelho and I'm here with Mark Sochan. Hey mark.
Mark: Hey, Wesley, how's it going?
Wesley: Doing well. Today's topic will be on white labeling and we'll cover some of the considerations for why you should or should not white label your products. And first of all, let's explain what we mean by white labeling. So if you're a vendor of a software product, white labeling means that you're providing your product to a partner who will then take it to market under their own label or brand. And the idea is that the product appears as if it originates from your partner, when in fact it comes from a third party. There's a number of advantages or disadvantages to doing this. Mark, why don't you explain some of the pros and cons.
Mark: Well, I think it's mostly cons. As you know, I think white labeling is a terrible idea I'll share with you why. Almost all the CEOs speak of startups and growing companies. When I asked them, what's your number one problem. They usually say it's lack of brand awareness, lack of market awareness.
And unless you got a lot of dollars, like a multi-million dollar marketing budget, you're just not going to be able to build that brand. And so one of the best ways to create a market awareness is be able to leverage the brand of a large multi-billion dollar size company. One who's invested a tremendous amount in creating a brand and market credibility, leverage them as a strategic partner and leverage their brand.
So maybe Wesley, what are some of the pros, if you were going to speak to this.
Wesley: I think that you definitely covered a lot of reasons why you would not want to white label. If you're going to white label, it might be because you're forced to. You're in a poor negotiating position and you just have to, but even despite that, maybe there's some interesting considerations that you need to think about. And so it can encourage your partner to embrace your product more. If it comes under their brand, there's an emotional aspect to it. That partner has pride in their brand. And if it doesn't feel like a third-party thing that can be motivating for them and they can push it harder into the marketplace, it also helps them create something special, something that's not commoditized.
If it's something that they are providing under a different label. Another consideration might be that customers might be more quick to adopt and trust that product if it's under the label of a larger company's brand. So there are some benefits to doing this, even though you'll be missing out on all of those advantages that you talk about, Mark.
Mark: Right. And I also wanted to say that, I always try to fight tooth and nail to get some brand awareness and maybe there's some areas of compromise. I mean, so you might go for a “powered by” logo that includes your brand. You feature the partner's brand, but use a “powered by” or similar label to indicate your relationship with them which shows that there's a close relationship with the partners still and allows the original software vendor to drive some brand awareness.
And so that might be the compromise and a lot of it is kind of in the negotiation. If they're really pushing hard for the white label, then I'm going to say, I really value this marketing benefit of co-branding. If I can't get that, then I have to charge you a higher price. And I'll often offer two or three different options with pure white label is the absolute highest price.
And if they're wanting to give, either full or partial branding, then I'm going to offer some pretty significant discounts in order to really motivate them to offer that branding. Some of the other disadvantages of doing something that's white label and another way to negotiate. This is that if it's something that's fairly highly customized, it means that when your company does the next release or the next version of that software, that partner is going to be at the back of the development line, waiting until the development team has enough resources to do all those customizations are white labeling.
And that might mean that they have a delay of perhaps several months or three or six months before they can get that new version to their market. So I think there's different ways you can position it in the negotiating to really maximize your chance of getting some sort of branding. And maybe, if it's your hundredth partnership, then maybe you might go for more money and let go on this.
But especially if it's your first major strategic partner or second strategic partnership, I think is just critical that you push to get that branding.
Wesley: Really great points, mark. And, I liked that you press on just how expensive it is do the white label in any case. You've got to get your product to support that. You've got to get your documentation to support that, and that can take a long time and you could miss your opportunities.
So really important points that you're making there. Thanks so much for the time. And for more information, come join the discussion at the Partner Strategy Network LinkedIn group.