Weed sells itself.
At least that’s how the saying goes.
However, if you’ve ever spent time managing (or even working at) a dispensary you probably know there is more to it than that. I won’t even get into the uphill financial battle with 280E looming over you, or the inability to transparently access a bank account (If you are thinking about getting into the industry and aren’t thoroughly educated about these issues, please become a member of the National Cannabis Industry Association and join the fight for our financial survival).
Aside from these crucial issues, cannabis is a lot like any other industry.
The laws of supply and demand determine the price of goods sold, and 50% of all new businesses will close within the first five years (according to the Small Business Administration). According to New Frontier Data; in Washington, Colorado, and Oregon, the three states with mature (as mature as it gets in this industry) recreational markets, there are 474, 441, 217 dispensaries respectively.
With that many retail outlets vying for the business of multiple generations of cannabis consumers who now have access to infinitely more product choices than their illicit market weed guy had available, what are you doing with your business to stand out from the crowd?
There is no shortage of business advice on the internet these days, but a couple weeks ago two of my favorite business personalities teamed up for an interview that really made my imagination run wild.
Jon Taffer, the host of Spike TV’s Bar Rescue was a guest of Gary Vaynerchuk’s #AskGaryVee show talking about the bar/restaurant industry when a caller’s question sparked five minutes of advice that I think should be heard by every retail owner in the cannabis industry.
If somebody goes to a restaurant for the first time and has a flawless experience, the statistical likelihood of them doing a second visit is about 40%.
The second time a customer comes and has a flawless experience, The statistical likelihood of a third visit is still about 42%. The third time they come, the statistical likelihood of a fourth visit is over 70%. You have to market to three visits, not one.
Visit one, you offer a free rib dinner. You sit them down, put a red napkin on the table, not a white one. Identify them as a first time customer, connect with them and work to get them back a second time and a third time. Everyone on your staff should know what’s going on. These are the inside tricks of the trade. Once they’re there the third time, you own them.
Holy moly, the red napkin thing is genius! We can totally make that work!
Okay, so you put a red napkin at the table. Gary sits down, he’s eating dinner, now he’s getting his free rib dinner, he orders water, and it cost him nothing. I know he’s a first-time customer because he’s got a red napkin. When he’s leaving, the manager comes to the table, and writes on the back of a business card:
“$5 off chicken.” “Did you like the ribs?” “Loved them!”
“Well then, you have got to try my chicken. Come in for the chicken!” Now I’m prompting a second visit. Not with a printed coupon, a handwritten card. Now he comes in for the second visit, drops the business card on the table, everybody knows this is the second visit, because the red napkin was the first visit and now he’s got the business card.
So you’re in, but the statistical likelihood of this customer coming back has only slightly risen. You need to get them in the door one more time. It’s never about the one time sale, it’s always about the relationship and repeat business, especially in a hyper-local environment like restaurant and food.
So they finish the meal, you go up you say, ”So how was the chicken?” ”It was freaking great!” “Are you full?” “Totally stuffed.” ”Man, next time you got to try my cheesecake. Offer one free piece of cheesecake.“
The rib dinner cost you $5 in ingredients. The chicken was a wash out because it was a discount. The cheesecake is $1.35. So for about $6 you got 3 visits out of him with a 70% likelihood of a 4th. That’s the way you market a restaurant within the four walls of it.
That’s great advice for the restaurant industry but how does it apply to the cannabis industry?
Even though Taffer’s example had to do with chicken and rib dinners, the key point of his advice was that businesses have to market to multiple visits, not just one.
In states like California, where strict adult-use regulations haven’t yet been put in place it’s not uncommon for dispensaries to give first-time patients (customers) freebies in an effort to entice them to return. I’ve personally received free grams, joints, edibles, grinders, etc. when visiting a dispensary for the first time, but too often the freebies seem an awful lot like they are just trying to get rid of some snicklefritz rather than surprising and delighting the customer.
Just last week I went into my local California dispensary because my customer loyalty punch card was just two stamps away from a free 8th. This particular punch card is good for a free eighth after 12 purchases of a “top-shelf eighth”, which are typically between $50-$60. So imagine my excitement when after several months of frequenting this dispensary I was finally going to be eligible for an eighth.
I began to look over the top-shelf flowers trying to think which one I wanted for my freebie, but as I handed the budtender my card, she turned around to a drawer and pulled out an eighth of some dry (not great looking) Cherry-AK that wasn’t on the shelf. It turns out after spending at least $600 (on only top shelf flowers) at that location over the course of a few months, that my loyalty had only earned me some random mid-grade flowers. Not a great look.
Dispensary owners in Oregon have had to resort to creating customer loyalty cards (without freebies) because burdensome (and I would argue “knee-jerk”) regulations have banned dispensaries from being able to market to potential customers by giving away any free marijuana products of any kind.
This is yet another example of how cannabis business owners are being treated differently because of the type of commodity they have chosen to sell. Without the ability to sample small amounts of products on premise (like wine tasting rooms) or the ability to give away product samples for customers to try later, it is hard for consumers (many of which have never had access to so many new products) to become educated about all of the available choices.
Another portion of that clip that I want to highlight is Gary Vee‘s advice about how to use Instagram to locate local influencers that your business can offer free stuff in hopes of securing some promotion through their social channels. Even though cannabis companies are specifically banned from advertising on social platforms like Facebook and Instagram, this is great advice about how cannabis brands can still lean on advertising through influencers who aren’t beholden to the same corporate rules and are able to incorporate your product natively into their social feeds.
I’m looking at nine posts right now that are top posts and there are literally unlimited amounts of people posting that are from Lexington, Kentucky. I scrolled down and now I can see the most recent posts as well. Forty pictures down, forty-eight minutes ago. Thousands of people are posting right now on Instagram from Lexington, Kentucky. I go to the top nine posts. I click the middle one. It’s a nice cute couple. They have 298 likes. Abby, she’s lives nearby. She’s part of a sorority it looks like. She has 2,387 followers.
I hit it. It lets me send her a message. I send her a message. “Abby, see you’re in Lexington. We love being part of Lexington. Here’s a $20 off coupon, $10 coupon, free chicken.” Only she sees it. You’re grabbing somebody who has a big social media profile. You haven’t hurt any of your loyal customers like me and Jon because no one else sees it. Abby comes to your restaurant and she posts a picture of the food and creates word of mouth. Now that $5 acquisition created no friction to loyal customers, and because she’s using her social media presence, she amplifies it and you’re getting an 80, 500, 4,000 dollar media amplification against your $5 fucking dollars.It’s a no brainer. It will work.
Last thing, don’t discount. People get addicted to discounts. They don’t get addicted to free.
I often see cannabis industry operators and marketers complaining on social media about how it’s unfair that our industry is banned from social advertising and how brand accounts are often shut down without any notice or warning (and they are right). However, networking with the right social influencer can bring a bunch of new customers into your business and the price of exposure can often be cheaper than traditional advertising. Not to mention, focusing more on the branding element (working w/ influencers) and less on the transactional sales (posting your daily discounts) will keep you safe from the social network monitors that have the ability to shut down your account.
If you’ve ever read Malcolm Gladwell’s “The Tipping Point” then you understand the concept of finding the social “connectors” who can help drive micro-trends within their own spheres of influence. If you’ve never read it, you should. It focuses on how social epidemics spread over time and there are a lot of principles in the book that can be applied to building a brand in the cannabis industry.
Even though cannabis brands have to implement different marketing tactics than most businesses, the underlying principles are the same. Customer service & customer experience are paramount, word of mouth & personal recommendations (especially from trusted influencers) are worth their weight in gold, and the key is to focus on lifetime value rather than one-time transactions. If you can focus on these principles, you’ll be able to build a brand that business icons like Jon Taffer and Gary Vaynerchuk would be proud of.