What is Drop Servicing?
Every now and then you may come across the term dropshipping. Although drop servicing is not exactly the same and selling services vs. products differ, the premise is somewhat similar. The difference is that instead of selling a product, you sell a service, hence the name – drop servicing.
In recent years, the drop servicing business model has seen a rise in popularity. It’s not a surprise, as it allows the entrepreneur to start a business without investing a large amount of money. Also, what is important nowadays is that it can be done remotely, with no office space required.
You may have also seen the term “service arbitrage” hanging around drop servicing. It essentially means the same thing and can be used interchangeably. Fun fact – you, me, and probably thousands of other people most likely bought something from either a dropshipping or drop servicing company without even noticing it.
Drop servicing is like a little brother to dropshipping. A smaller, yet, if handled correctly, a profitable business model.
The model can be applied to a broad spectrum of services, ranging from writing, translating, SEO, and content creation to marketing, graphic design, and many more.
Is Drop Servicing Legal?
This question has probably been asked a lot of times. But fear not, we’re here to answer and get rid of any doubts, and we have good news! Nothing in the drop servicing business is against the law. If you’re planning on starting a drop service business in the future, there shouldn’t be any obstacles when it comes to law.
However, you should make sure that you understand the business thoroughly before making any transactions. By doing so, you’ll be certain that you won’t end up promising a customer a service that can’t be delivered. Not only that, it is important to have some knowledge about issuing invoices and taxes in the local law to avoid any trouble.
Is Drop Servicing a Moral Thing?
Though we already discussed the legality of the drop servicing business model, the question of its morality in terms of culture and religion remains. So, is it morally appropriate to start a drop servicing company? Let’s try to find out.
In most countries drop servicing isn’t a matter of morality. However, there are others that may find it morally ambiguous.
On the contrary to dropshipping, which can be perceived as inappropriate in Islamic countries due to the matter of selling an item that is not in one’s possession, the drop servicing business only provides the service, just like the name suggests. It is a form of outsourcing, therefore it shouldn’t cause any problems.
However, if you find yourself in a situation where you ask yourself that question, it would be best to contact an expert in the field.
Is Drop Servicing Profitable?
Like every other business, drop servicing requires some thinking and research to properly function and earn money. You can’t simply get into the drop servicing business without choosing an appropriate niche beforehand.
If you want your business to succeed (of course you do), you need to do some research first. Try to find a niche with high demand. Look for monthly search rates, check how much the certain service costs, and what’s its demand. If you come across a niche with high demand with plenty of monthly searches, and the one that suits you, go for it.
Certainly, a good option would be to use a website called Ubersuggest. Ubersuggest is a handy tool created by one of the best marketers on the planet and New York Times bestselling author – Neil Patel. On Ubersuggest you can find out which keywords perform the best in the field that you are interested in.
Keywords with high CPC (cost per click) are the ones with the highest buyer intent, but let’s face it, probably with the most competition. A good practice would also be searching for keywords with lower CPC, as focusing on them may give you an advantage over the competition, it’s all up to you.
There are different ways of gaining traffic which may seem like a difficult task at a first glance, but they’re not as bad as you might think! Let’s take a look at these three examples:
- Google Ads – here, you need to find corresponding keywords, test a lot, and optimize to have a good ROAS (return on ads spent);
- Social media ads – smaller buyer intent; Though there is a chance of hitting the right spot and it might be less cost-heavy than Google Ads;
- SEO – slow but steady way to gain traffic; It might take months before the first purchase, but in a long run it is the most cost-effective way to run your business;
Though bear in mind that all that glitters is not gold, so to speak. Be aware that a drop servicing company can suffer from various risks, just like any other business. For example, you would have to engage in customer service queries or create a refund policy. There are other potential risks also, like promising clients a service that can’t be delivered in the pre-defined deadline due to the freelancer being swamped with work. Relationships between you and cooperating freelancers may also change over time. That all can influence your drop servicing business and its credibility.
When your business would be up and running, you might just start having some trouble with customer inclines. Luckily, there’s a solution! Here is where Zendo comes into play. It’s designed to help you declutter communication between you and your customers. You can also manage the workflow and take care of payments, all in one tool.
How Drop Servicing Works?
So far, we have only covered the general idea of drop servicing business. But how does it really work?
You are being contacted by the clients who wish to make a purchase, and you outsource the work to others. That’s essentially it.
But how to run the business? First, you need to come up with an idea. An idea that could potentially evolve into a profitable service arbitrage business. When that step turns its status into checked, you can proceed to the next one, which is setting up a website.
The most popular, efficient, and practical way to do so is to build your website on WordPress, along with needed services (the task may seem difficult at first glance, but there are websites that may provide additional help, such as, for example, WPKraken.io).
You could also choose another popular option, Shopify. Though you would have to find a proper template. Additionally, Shopify is an e-commerce platform that specializes in selling products instead of services. What’s more, you need to pay a provision after finalizing every transaction.
Once you get it done, it’s time to build your website and make the necessary changes. After adjusting the website to suit your and your customer’s needs, the next step would be to look for freelancers who would be willing to cooperate with you.
In drop servicing, you are the “middleman”. What you do is basically reselling the service. It’s like you are Detective Gordon, company or freelancer is Batman and clients are Gotham City. Whenever Gotham needs help, it first contacts Gordon, and Gordon contacts his pal Batman.
Now, let’s answer the core question, how does drop servicing work? It’s honestly a very simple answer. You sell a service at a rate of your choice, then you outsource it to a freelancer at a lower cost. When it’s done, the freelancer should contact you with ready service, and what remains is only sending it to your customer. Of course, some additional checking and reviewing the end result would be required, but most of the work has already been taken care of.
But how to find a freelancer and where to look? Here is where Fiverr (professionally known as the Freelance Services Marketplace) comes to save the day. If you have never heard of Fiverr before, it’s a website where freelancers post their offers. Let’s take a look at the following situation. You have been contacted by a customer who would like to place an order for a small, minimalist, vintage logo. In this case, you as the owner of the drop servicing business oriented in the design industry should look for a freelancer who specializes in creating such logos. If the freelancer matches your requirements, you can decide on a potential partnership.
There are other cooperation options, though. Instead of partnering with a freelancer, you could team up with a white-label company, which could result in a long-term relationship that can deliver high-quality service in a timely manner.
The upside of partnering with such agencies is that even though they do the work, the end result is still attributed to your own brand. However, such partnerships may be more cost-heavy than a regular partnership with a freelancer.
How to register on Google Ads Planner
We mentioned Neil Patel’s Ubersuggest before, but there are other options worth taking into consideration. Such an option would be Google Ads planner. By using this tool, you can find appropriate keywords that will help you get traffic to your website. For your convenience, let’s get through the registration process as it might cause some confusion.
Google Ads by default starts a campaign creator right after registration. In order to get to the keyword planner, you need to skip it.
Once you log in or register on Google Ads you should see this window. To get to the next step, click “Switch to Expert Mode” on the bottom of the page.
Once you do it, you should get to this page. Now, click on the “Create an account without a campaign” button.
After doing so, you will be met by the business information page. Fill out the information according to your preference and location, then click submit.
Click on the “Explore Your Account” button.
On this page, click on the settings option (the one with the wrench icon) on the right side of the screen.
You should see this menu. On the left side, there’s a planning tab. Click on the “Keyword Planner” below.
Once you do it, you should get to this page. Since you don’t have any keywords yet, let’s click on the “Discover new keywords” button.
You will be met by the search page. Now, all you have to do is search for the keywords of your choice.
And here we are! For the purpose of this quick registration and searching tutorial, we used a “personalized book cover” example.
In the picture above you can see various statistics for the searched keyword. They can tell you how popular the keyword and its related variations are.
We hope that you will find this quick guide useful, as a lot of people seem to have a problem with setting up an account without creating a campaign.
Pros and Cons of Drop Servicing
Even though drop servicing appears to be perfect, it really isn’t. Just like any other business, it has its pros and cons. Let’s take a look at them in detail.
- Doesn’t require huge amounts of money to set up;
- Less risk compared to other businesses;
- Easy to set up using Shopify or WordPress;
- The shipping process is entirely eliminated;
- Lower risk of refund compared to dropshipping;
- Can be highly profitable if you manage to keep deadlines and deliver high-quality service;
- No skills required, though it’s always preferred to have some experience and knowledge in the topic;
- You set your own rates;
- No inventory needed;
- A reasonable choice for aspiring entrepreneurs;
- It may be risky and tricky with managing deadlines due to the work being handled by third parties;
- High competition due to the growing popularity of drop servicing business model;
- No control over the process of development;
- Since you are not the one who does the work, communication problems with freelancers may occur;
- Not keeping deadlines caused by freelancers being swamped with work;
Even though drop servicing has a lot, and I mean a lot of advantages, it also comes with some disadvantages. Here are the important bits that you should keep in mind.
- Pay attention to the local law and proper financial management, i.e. invoices and payments;
- Scout the market and apply one of the two approaches we mentioned before;
- Stick to deadlines to the best of your ability as it can greatly benefit your credibility;
- Partner only with trusted freelancers or with white-label agencies;
Drop servicing business model is definitely an interesting one when it comes to the way it works, its profits, and the moral point of view. It’s a little brother to dropshipping that is becoming more and more present on today’s global market. Who knows, maybe one day it will outgrow his brother and take his throne?
Frequently Asked Questions: Drop Servicing
What is drop servicing?
Yes, the referral system is an amazing customer acquisition method as it’s simultaneously benefitting current and future clients, as proven by DropBox — after launching its referral program, Dropbox gained 3.9 million new registered users.
What are examples of drop servicing?
You can drop service almost anything, from designing YouTube thumbnails, through writing and graphic design, all the way to SEO or WordPress customization.
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