The use of an intermediary in business is common practice. Clients brief a job to a first-party and they then outsource that job to a third party. When one thinks of this business model, what usually springs to mind is a T-shirt manufacturer taking orders for a specific type of shirt and then outsourcing it to Asia. Most clients will accept that – they do not expect that the person will actually make the shirts. Or Dropshipping when the supplier turns to a company with existing stock and then fulfills the order from that stock.
However, another model – Drop Servicing used extensively in the creative industries, e.g., to create social media content. Company A manages a clients’ entire social media marketing but outsources it to a third party. Similarly, a small advertising agency can outsource corporate video production without the need to have the skills or assets to produce such video.
However, here is the USP that the company initially tasked with that production brings to the party. Skill, knowledge, and project/asset management.
There are numerous benefits to the Drop Servicing business model. It allows for upward scaling of services without impacting negatively on the sunken costs of human resources. You find the best – and you get the best result. Everyone wins. The third-party supplier is paid a fair rate, the Drop Servicing company takes a cut for management, and the client is provided with a product that has been filtered through experts.
However, you will need to be aware of the challenges.
Quality. This speaks immediately to the time and money (aren’t they the same these days?) that you will be spending correcting and managing the third-party suppliers’ output. That quickly eats into profits. A better solution is to find the best providers and add up your margins correctly. A skilled provider will give you client-ready content.
This means that your agreement with your suppliers has to crystal clear. Make sure that they know revisions are part of the deal. Most professionals will know this – and be only too happy to accommodate your reasonable requests.
Priority. If there is any challenge, it is that a Drop Service company cuts corners and prioritizes cost over professionalism. It’s a simple cost/benefit analysis. Find the right suppliers and they will go to the wall for you. Abuse that trust and they will migrate in the blink of an eye.
Is there a moral problem with the idea of Drop Servicing? The short answer is no. It is one of those rare business models that simply works – upstream and downstream. It is one that has been proven to work. The key is that everyone in the chain needs to benefit.