This article was originally published by Yahoo! Finance
By Jeffrey Harris, Co-Founder and Chief Executive Officer, springbig.
Financial predictions about the cannabis market have been exciting analysts for some time as marijuana becomes more mainstream. Consider the facts: As of 2018, there were already 12 cannabis companies with stock market value worth more than $1 billion; One of the first celebrity-chef darlings, Martha Stweart, has signed a deal to market CBD; The company behind Budweiser has invested in a venture to research cannabis-infused beverages.
Cannabis is becoming big business, yet cannabis retailers face steep challenges when it comes to marketing products. Federal and state regulations and strict social media platform guidelines make advertising in the traditional sense virtually impossible for dispensaries and cannabis companies. This has forced cannabis retailers to change their approach to target the right consumers since Google, Facebook, geographic limitations and age restrictions prohibit traditional advertising. Marketing and email acquisition strategies used by retailers like Apple, Target and Expedia do not apply to the cannabis industry.
Marketing cannabis takes ingenuity to work around rules and not land in hot water with regulators - but it can be done. Content and thought-leadership is one way for dispensaries to better their brand, but it takes a lot of time to develop and execute articles, blogs or podcasts about the subject. Most dispensary retailers don’t have the time to create marketing campaigns while tip-toeing around regulations.
The solution? Dispensaries should be spending more time looking inward rather than outward.
Customers drive revenue, and it costs less to sell to existing customers than acquire new ones. Depending on the industry, it costs five to 25 more times more to get a new customer than to service an existing customer. One way to market to current customers is to create a loyalty program. An increase in customer retention by just 5% can result in profits of 25% - 95% from repeat business. An example of this is Amazon Prime. More than 100 million people have a Prime account. The company reports that Prime members spend an average of four times more on products than other Amazon customers buying the same items.
And it’s not just Amazon. Data from analyst firm Headset demonstrates that loyalty programs increase sales. Loyalty customers spend $39.67 on average, which is 35% more than the average consumer cart size of $29.41. In fact, consumers who have a connection to a brand have a 306% lifetime value, and stay with the brand for over five years compared to those who stay with a brand for about three years. Not surprisingly, 60% of brand-loyal customers make more frequent purchases.
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Companies like Starbucks with 25 million customers on loyalty program have mastered the space, and cannabis vendors like springbig, with 7 million customers on loyalty program, recommend the coffee giant’s model with automated, tiered programs that incentivize on numerous levels. They suggest making rewards attainable by sending trigger-based communications and giving loyal customers a reward “nugget” every few purchases to keep them coming back often and spending more to gain higher reward status.
Loyalty programs also help companies find the right customer because repeat business provides data. About 18% of marijuana users are between the ages of 18-29. That’s great news for loyalty programs. Millennials are loyalty driven, more than any other generation. In a recent study about 22% said brand-loyalty programs drive their decision-making to be repeat customers, and 15% said rewards are the driver for their purchases. This is the highest among any of the generations. Baby boomers, on the other hand, want convenience. If a loyalty program is easy, it influences 36% of their purchase. With technology and data, dispensaries can target their marketing messages to exactly who has the highest chance of becoming a repeat customer.
Custom loyalty programs that use software technology platforms like springbig allow customers to opt-in at point of sale and store information on that customer so marketing campaigns can be sent by text and loyalty points awarded the next time the customer returns. With this type of technology, dispensaries have an automatic program in place with no requirement to post a weekly blog or seek out article placement opportunities within the weed industry. The technology does all of the marketing, point-counting and overall heavy lifting for dispensary owners.
rom the humble beginnings of a paper punch card, loyalty programs have become the new normal. Technology is making loyalty easier for dispensaries and cannabis retailers willing to reward existing customers with incentives to come back for more and grow revenue. It is a win-win for both companies who earn profit and customers who feel closer to a brand they know and trust.
Jeffrey Harris is Co-Founder and Chief Executive Officer of springbig, which helps dispensary and cannabis retailers drive business growth through effective customer loyalty marketing.
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.