When it comes to growing your business, whether it's Cloud and Telecom related or not, the distribution method you choose for your services is key to your future success! Do you want to manage everything yourself via direct selling? Or are you more of a "win-win" type of collaboration through white labeling or its nuance, grey labeling? Each option has its advantages and benefits, so here's an article to sum it all up and make it clearer. You should have made your choice by the end of this article... Enjoy your reading!
In this article you will find :
- Definitions to distinguish between direct selling, white label and grey label
- Concrete examples to help you choose the best strategy for your business
1. Service provider and distributor: direct selling
Definition of direct selling
Direct selling is a method of distribution in which only one actor is involved: you. You will be both the service provider and the distributor of that same service. In short, on a daily basis, you develop, manage and deploy services to your customers, whom you have canvassed and transformedyourself.
Direct selling for your customers
In the case of direct selling, your end customer knows you perfectly well. They know who you are, they can name your company if asked who provides their Internet access (for example) and they know they can contact you directly if they need to intervene on their services. To illustrate, the major incumbents all practice selling, usually via a "business" or "B2B" entity.
Why choose direct selling?
Direct selling has several advantages. Firstly, as you are the only actor in the chain between developing a service and marketing it, you are perfectly free. Free to develop the solutions and services you want and free to follow the sales strategy that suits you best.
From a customer relations point of view, you can both guarantee a better personalisation of your services: you know your target customers directly and perfectly, so you can offer them the services that suit them. You also have better control of all the steps requiring interaction with the customer, a good way to take care of them!
Finally, from a financial point of view, you control your development costs and you steer your own commercial strategy. You therefore have control over your production costs, your selling prices and your final margin, which does not have to be distributed to third-party intermediaries. So it's up to you to find your target customers, set and monitor your KPIs and develop your sales!
What are the obstacles to direct selling?
Direct selling seems to have many positive aspects, in particular the independence and freedom that comes with it. However, it is also demanding in some areas that are crucial to business development. You need to be able to finance the development of your own services: infrastructure, R&D and recruitment costs are particularly high. In the Cloud and Telecom sector, these barriers to entry are particularly high.
In addition, in order to offer solutions that evolve at the pace of technology and customer needs - i.e. very quickly - you also need to be able to maintain your services and be able to offer innovations. Again, this implies a very high cost, even if you specialise in one of the main branches of a Cloud and Telecom operator's multiple activities.
To sum up selling...
To summarise direct selling in 3 points, we can say that, in a business strategy, it is :
- Complete freedom from start to finish of the production/distribution chain
- Direct and privileged contact with its customers
- A strong requirement in financial, human and technological terms
2. Choosing a partnership and remaining a distributor: the white label
What is white labeling?
As opposed to direct selling, white labeling inherently includes a notion of partnership. A third party company is in charge of providing the solutions and services while you distribute them to your own end customers.
White labeling for your customers
This is called white label because the brand of the service provider is unknown to the end customer. The distribution is completely transparent, and it is the distributor who acts as a relay between the users and the supplier (particularly for questions related to support, for example). From your customers' point of view, you are their only provider in charge of deploying, setting up, managing and billing their services.
Why choose a white label?
"Whenitcomes to your Cloud and Telecom business, this proverb is true, at least in part! One could say, "To develop your Cloud and Telecom business, together you go faster AND you go further".
White labeling allows you to limit, or evencompletely eliminate, the barriers to entry mentioned with direct selling: infrastructure costs, R&D and recruitment. This means that you are able toadd services to your catalogue that you could not have developed and offered independently. In addition to diversifying your offer, white label distribution allows you to expand your prospecting area and meet more of your customers' needs.
From a commercial and financial point of view, white label distribution is not without its advantages! Not only you develop your sales force thanks to an expanded catalogue, but you also retain your commercial freedom. You are free to follow your own commercial strategy: sell all categories of services or specialise, for example. You are also free to set your own margins when reselling services.
The other advantage of white labeling, and therefore of a partnership with one (or several) other company(ies), is to be able to benefit from all the resources available and to take part in a virtuous collaboration. In addition to technical considerations (infrastructure and R&D), your service provider can also provide you with support and deployment teams, sales tools or marketing resources... This last point is particularly interesting if you are a small structure that would not have the means to develop a dedicated service, although it is essential to communicate well with your customers .
The disadvantages of white labeling
Intermediaries and partners mean dependence. The total freedom of the sole trader who distributes his services and solutions by direct sale is over. You are dependent on your provider: if there is a problem with the service you have sold to your customers, this will have a knock-on effect on you. You need to be able to act as a "buffer" between your customer and your provider. It is therefore essential that there is good communication between you so that you can keep an eye on what is going on in order to inform your customers.
In white label, you will most likely be one distributor among many. It will therefore be necessary for your supplier's teams, made available to the resellers, to be able to meet everyone's requests. It is up to the supplier to guarantee real availability and concrete proximity so that no one is harmed.
To sum up the white label...
If you had to remember 3 points to imagine the white label in your business strategy:
- A virtuous partnership to accelerate your Cloud and Telecom business
-The opportunity to rely on the skills and resources of a business partner
- Less freedom compared to direct selling
3. The in-between: the grey mark
What if direct selling and white labeling don't quite fit your aspirations for developing your Cloud and Telecom business? Within the spectrum ofdistribution methods, there is also grey branding. Grey labeling is the mix between :
- The distribution of a service provided by a third party company
- The fact that the end customer knows the third party company providing the service through a distributor
In definition, grey branding is somewhat similar to the idea of co-branding. There are, in plain sight, three actors in the production/distribution chain:
-The service provider who uses a distribution intermediary to market its solutions.
-The distributor who resells the supplier's solutions to his own customer base and according to his own commercial strategy.
-The end customer, whose main contact remains his distributor but who knows that the services are provided by a third party.
In short, it is an in-between situation where the notion of partnership persists but is experienced a little differently by each of the parties involved. This can be an interesting strategy if each party wishes to take advantage of its reputation and brand image in particular.
As you can see, there is no shortage of possibilities for building your business strategy and developing your Cloud and Telecom business. Of course, the distribution methods mentioned in this article, white label, grey label and direct selling, are not mutually exclusive. You can very well opt for one form of distribution for one type of solution, and then another distribution logic for another form of solution. It's up to you to find the balance that best suits the growth of your business! At Sewan, we operate with a white label scheme for our entire network of distribution partners. Want to know more? We invite you to discover and explore the White Label by Sewan. 🚀👇