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Chances are if you’re considering selling online, you should understand why drop servicing is better than dropshipping, and a way better option for you!
Unlike dropshipping, drop servicing allows you to earn more money with less volume of sales. Besides, your customers will be paying you on a monthly basis, maybe for years to come. The thing that will boost your customers’ lifetime value and will result in more revenue for you.
In this article, I will be going through 9 drop servicing pros and advantages that make it a better business than dropshipping.
If this is something you’d like to learn more about, stick around, and don’t forget to share it with your friends if you find it helpful and useful!
Advantages Of Drop Servicing Over Dropshipping
Both business models are great, indeed! However, the sole purpose of this comparison is to identify your opportunity cost when considering starting an online side hustle.
You will already be putting in the time, effort, and money, so why not put it into the most rewarding, flexible, and scalable business model?
Being said, below are the 9 advantages of drop servicing over dropshipping:
- Higher Profit Margins
- Lower Volume Of Sales
- Potential For Monthly Recurring Revenue (MRR)
- Higher Customer Lifetime Value
- No Painful Shipping Periods
- Faster Order Fulfilment And Delivery
- Way More Flexible
- Better Up And Cross-selling Opportunities
- Lower Customer Acquisition Cost On The Long Run
1. Higher Profit Margins
In drop servicing, your profit margins are significantly higher.
Assuming you’re selling social media management services for $1,000/Month, with an initial cost of $350. This is a pure profit of $750!
Having two clients a month is responsible for making you $1,500. That’s the power of selling high-ticket services and offers.
However, not all services are high tickets, but the majority of services have the potential of reselling at 3X its initial price.
In dropshipping: Profit margins are slight and the competition controls the price too. You need to adhere to the market average price for that product.
2. Lower Volume Of Sales
You don’t need to have hundreds of sales in order to get profitable.
Drop servicing allows you to earn a 6-figure a year by having a customer base who pay you every single month.
Let’s say you have 8 clients at $1,000/month each, you’ve almost on the walls of a 6-figure annual revenue!
Now, as a dropshipping business owner, let’s assume you sell a product for double its cost of $20 ($40), you would need 400 orders a month to make $8,000!
On average, you’d need at least 13 orders a day to get close to that!
In dropshipping: The trouble with dropshipping is that you need to have a high volume of sales to make a thousand bucks at a low-profit margin.
3. Potential For Monthly Recurring Revenue (MRR)
And this is key my friend; doing the work once and keep getting paid for your hard work for months, or even years to come!
Monthly Recurring Revenue: It is the monthly predictable revenue that you can expect to receive every single month, based on the number of your active users or clients.
Let’s take SEO, for example (search engine optimization). SEO is not an overnight success and it takes time to get ranked on the first page of Google.
It simply doesn’t happen overnight!
So, if you’re selling an all-in-one SEO package for a monthly fee of $700, your clients are more likely to commit to your service for at least 6 months (as long as you’re achieving progress for their businesses.)
That is a potential revenue of $4,200 in a period of 6 months, from one client only!
The same goes for other services that need constant efforts like social media management, content writing, video editing, and many other services.
However, you should be really picky with your freelancers, so you can deliver exactly what you promise your clients, to have them pay you for the same service on a monthly basis.
In dropshipping: A person who has bought a selfie stick, a backbag, or a shoe is less likely to need it anywhere in the near future or buy it again soon!
4. Higher Customer Lifetime Value
“In marketing, customer lifetime value, lifetime customer value, or life-time value is a prediction of the net profit attributed to the entire future relationship with a customer.”Wikipedia
In fact, this is a great indicator of whether a company is doing well or not. The higher your customer lifetime value is, the higher the annual predictable revenue would be.
In drop servicing, you will be helping business owners to get more business, leads, sales, and revenue.
You will be the solution to their problems, and as long as you’re able to provide astonishing results for them, they will continue to hire you and pay you every single month.
Why? Because no one can say no to more business and sales. Simple!
In dropshipping: Customer lifetime value is way less because people usually buy non-essential products. Even if the product solves a particular problem, customers won’t need to buy it again soon.
5. No Painful Shipping Periods
The great thing about drop servicing is that you’re selling digital services that need no actual shipping.
Which will make your sales process, faster, easier, and more efficient!
Studies show that long shipping periods dramatically affect returns, and guess what? Returns are not good for your brand’s identity, reputation, and loyalty!
Luckily, you don’t need to deal with all of that when running a drop servicing business!
However, you would still need a strong refund policy on your drop servicing website! Your customers’ satisfaction should be your number one priority!
In dropshipping: Sometimes, it takes buyers an eternity to receive their orders; especially if the product is coming from China!
6. Faster Order Fulfillment And Delivery
The drop servicing supply chain is way faster and more efficient.
Are you wondering what does the service supply chain look like? Here it is in action:
- First, a customer comes to purchase a service from your website.
- You will receive their money and their complete details.
- You will then transfer their order and requirements to a third-party freelancer
- The freelancer will start the work right away, taking into consideration the timeframe of delivery.
- Depending on the type of service, once the order is completed, the freelancer will send the final order to you so you can send it back to the customer under your brand’s name.
The great point here is that both order processing and fulfillment are instant here.
Once the payment has gone through, the freelancer can start with the work right away to make sure to deliver it on time.
In dropshipping: Once the order is completed by the customer, the drop shipper should go capture the payment and transfer the order to the supplier. The supplier then fulfills the order (up to 5 days), starts processing it, and then ships it (up to 3 weeks.)
7. Way More Flexible
The drop servicing business model is a way more flexible solution for entrepreneurs for many reasons.
So, if you’re looking for a more “Set & Leave” solution, drop servicing will work better for you.
You can even save your customers’ info and credit cards in your database and instantly charge them on the same day for each month.
If you’re not sure how to do this, a developer on Fiverr can help you get it done in a matter of a day or two. Click here to go to Fiverr.
Long story short, the money is rolling in and there’s someone who’s doing the actual work on your behalf!
There’s nothing much to be done than monitor your email and make sure to fulfill people’s questions.
You can even hire a virtual assistant that can handle the customer service on your site. It can be fully automated.
In dropshipping: You should keep an eye on the stock of the supplier, keep your storefront fresh and updated, and just remove out-of-stock items. In the long run, it gets more time-consuming especially if you sell a multi-variants type of product.
8. Better Up And Cross-selling Opportunities
Up-selling: It’s a marketing technique to increase the average order value by offering the customer an expensive item, add-ons, or upgrades when they are on the checkout page. And this is the exact tactic that Macdonalds uses.
Cross-selling: It is the act of trying to sell an existing customer an additional product or service.
Related: Russell Brunson (founder and owner of Clickfunnels) is the lord of up/cross-selling and funnels. Want to learn more about how can you leverage those tactics in your business? Grab your FREE Dotcom Secrets Book here.
For example, a person who has just purchased a logo design is more likely to need a slogan for his business too. This can be offered as an upsell.
Another great example could be someone buying a content writing service. You can offer keyword research or a competitor analysis as an upsell too.
Those integral services are just a great opportunity for raising up your cart and average order value.
For cross-selling, if you are selling an SEO service, for example, you can send your clients a discounted offer for a monthly managed social media service.
As you can see, opportunities are just endless with drop servicing and there’s a lot of potential within the industry of services.
In dropshipping: I’m not saying that there are no up-and-cross-selling opportunities for dropshipping, but it’s just limited. You can offer discounts, coupon codes, and personalized items.
9. Lower Customer Acquisition Cost On The Long Run
The customer acquisition cost identifies how much it actually costs to acquire a new customer or client.
The great thing about drop servicing is that customers will be paying you more than once.
After successfully acquiring the customer, next month would be a pure profit (after you deduct the service cost.)
It’s like having free customers with zero acquisition cost! I hope that you get my point.
And that is what explains the companies’ willingness to pay their affiliates high commissions because they are bringing them, potential clients, for a percentage share of the product/service cost!
Related: The step-by-step process to start earning affiliate commissions fast (Join the free course here.)
In dropshipping: Most of the money you make will go back into marketing because your profit margins are just slim! You need to keep paying for ads in order to acquire new customers.
How To Get Started With Drop Servicing
Getting started with drop servicing is really simple! Here are the four basic steps for starting a drop servicing business today:
- Selecting a niche with specific services to sell
- Creating an online storefront to showcase your services
- Find freelancers to do the work on your behalf
- Get clients to buy from your store
Trust me, this is easier than it sounds like! You just need the know-how, the step-by-step process and the needed resources for that.
Luckily, I have created valuable resources for you to help you get started fast:
- How To Start A Drop Servicing Business On WordPress In 2023
- How To Start A Shopify Drop Servicing Business (Stupid Easy)
- 7 Top Niches To Drop Service In 2023 (Rewarding & Recurring)
Related Frequently Asked Questions
The drop servicing is a fruitful and rewarding business model if only you pick the right niche and know exactly what you’re doing! Thousands of websites are being created on a daily basis, and need people like you to handle the design, content, and marketing!
There’s nothing that makes the drop servicing an unlawful or illegal business model. In fact, you will be amazed how willing are freelancers to do business with you and bring them clients, by reselling their gigs online!
It absolutely is! I mean, what’s better than having customers who are paying you on a monthly basis and you just hire someone else to do the job? This is purely monthly recurring passive revenue!
There are three different platforms that are good for drop servicing; (Shopify), a cloud-based and hosted eCommerce company, (Clickfunnels), a sales funnel builder), and (Hostgator) a self-hosting company that allows you to start a website on WordPress.
There are various drop servicing courses that are cheap and affordable for beginners. However, there’s still no comprehensive and full drop servicing guide as this is a relatively brand new business model. By the way, we are considering creating something awesome for you soon!
Starting an online business is becoming more desirable and popular each day.
In fact, making money online is not shortened to dropshipping anymore!
There are a bunch of different rewarding business models that allow you to reap the rewards of being your own boss and work anywhere, at any time you want!
We at eComDimes help you figure out what’s the best business model that fits your skills, interests, and capabilities by opening new doors of opportunities for you.
In this article, I’ve discussed why is drop servicing is better than the dropshipping business model, and have provided you with the needed resources to get started today.
So, which is better dropshipping or drop servicing? What business model would you be considering starting your next side hustle with?
Have you grabbed your free Network Marketing Secrets Book? What are you waiting for? It’s for FREE! Get your copy from here.
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