Developing customer relationships can help overcome marketing challenges.
Marketing is a major challenge for cannabis dispensaries. Although the cannabis industry is enjoying rapid growth and undeniable commercial success, the regulatory frameworks that guide it have not yet matured sufficiently for most marketing initiatives to make sense.
This is a cash-only, brick-and-mortar business that can’t sell across state lines, make home deliveries (except in states like California), or even take out television advertisements. If any other industry were subject to these kinds of restrictions in the 21st century, it would struggle to survive.
The cannabis industry’s greatest strength is its customers. Cannabis users have played an important role in the many successes of the long road to legalization and will continue to play the principal role in how cannabis use comes to define itself alongside other legitimate recreational activities. And unlike customers of clothing retail stores, for example, it’s almost guaranteed that once a customer steps into your dispensary, they’ll buy something.
Dispensaries that understand their customers and cater to their needs have a much better chance of establishing themselves as trusted providers. And dispensaries that focus on customer retention and loyalty-building have the best opportunity to overcome the marketing challenges of today’s cannabis marketplace and set themselves up for a secure, profitable future.
Why Focus on Repeat Customers?
When it comes to brick-and-mortar retail, every brand can divide its potential customers into two groups: new customers and repeat customers. Technically, there should be a separate category for one-time customers, but the idea is to transform them into repeat customers.
The bottom line for retailers (including dispensaries) is that acquiring new customers cost money. Acquiring a new customer costs anywhere between five and twenty-five times more than retaining an existing customer. Retaining those customers is key to developing a successful business.
As a cannabis dispensary, the majority of your profits will come from repeat customers. Consider the lifetime value calculation of a “regular” – someone who visits your dispensary to purchase something five days a week.
Let’s assume your regular makes an average $10 purchase with every visit and multiply that figure to a full year. The annual value of that customer is $2,600, and the lifetime value can be anywhere from five to ten times that number – ask a local realtor how often people move out of your area, and you’ll get an idea of how many years a “lifetime customer” qualifies for.
But the true value of repeat customers is not the $10 average purchase they make; it’s the several hundred face-to-face interactions you get with them every year. Every single one of those interactions is an opportunity to provide additional value through up-selling, cross-selling, and personalization.
The long-term approach to generating customer loyalty is powerful and lucrative. In the calculation just described, every $2 increase in average purchase price for a regular customer equals an extra $520 per year.
Cannabis dispensaries are similar to bars and coffee shops in this regard. None of these establishments waste much time or money on above-the-line marketing techniques. Instead, they focus on creating an immersive, personalized in-store experience that draws repeat customers back and back again.
5 Ways Dispensaries Can Build Customer Loyalty
Successful bar and coffee shop owners know how to develop customer loyalty. The interesting thing is that they do it in slightly different ways, according to their customers’ expectations.
At a coffee shop, customers are likely to receive a stamped reward card and be awarded a free coffee once they collect a certain number of stamps. You’ll probably never see that at a bar – but you will see regulars given discrete discounts just for showing up frequently.
Because customers can’t consume marijuana on premises, dispensaries occupy a more retail-oriented niche. From a customer loyalty point of view, this is a major advantage as it opens up a broad range of options for developing and cultivating customer relationships.
1. Implement a Rewards Program
The easiest and most effective way to quickly encourage return customers is using a simple point-based rewards system. The key to rewards program success is making the system as simple as possible while still keeping it financially sound for your dispensary.
Point conversions should be straightforward and easy to understand. Some enterprising dispensaries encourage tiered VIP memberships and other, more complex rewards systems, but these types of programs are often better-suited to high commitment, high price-point organizations like airlines and insurance companies.
Dispensaries are generally better off encouraging frequent, short-term purchases. This is why rewards programs are such a crucial profit-generator for coffee shops.
2. Create an Immersive In-Store Environment
Consider your in-store environment. Is it accessible? Is it easy to navigate? Can customers easily find the information they need?
Streamlining the in-store experience is vital in today’s retail landscape. The biggest brick-and-mortar retailers are already investing huge sums into in-store environment management and developing innovative solutions that could impact the cannabis industry.
For instance, dispensary owners who track indoor foot traffic can identify the best place to put high-margin cannabis products that are likely to sell well. Tech-oriented dispensary owners can offer customers educational product information using augmented reality to improve the in-store experience.
3. Consider Personalized Services
If you believe your customers will appreciate a premium service, consider personalized subscription-like solutions that cater to the most adventurous cannabis enthusiasts. This is a viable business model for any consumable product that comes in a wide range of styles, tastes, and recipes – consider the monthly hot sauce club Fuego Box.
Applying this to the regulatory framework of a cannabis dispensary can be tricky. Because most dispensaries can’t deliver, premium customers need to physically pick up their orders. But if you have a frequently changing selection of cannabis products coming in, you can encourage curious customers to try the newest, latest ones on a regular basis.
You’re already tracking every single one of your sales for regulatory compliance. It’s easy to create records for individual customers so you can keep track of new products they haven’t tried yet.
4. Invest in Your Employees
The happier and more engaged your employees are, the better they will treat your customers. The human element of the in-store experience your dispensary offers customers is the most important asset you have.
Communicative, educated employees who make customers feel valued and appreciated are worth more than nearly any other investment you can make in your dispensary. According to Dale Carnegie & Associates, 71% of customers would rather buy from a sales professional they completely trust than one who gives them a lower price.
Invest in training your employees to handle retail sales like experts. Empower them to become an important part of your customers’ in-store experience, and your customers will repay you many times over.
5. Ask for Feedback
Every business should collect feedback from its customers and take that feedback into consideration. For cannabis dispensaries, the customer feedback process carries even greater importance because customers may not always understand the latest developments in industry regulation or overall industry trends.
Opening up a discussion with your customers is a valuable way to get honest feedback about how you can run your dispensary more effectively. Some customers will offer unhelpful feedback, while others will ask for things you can’t deliver – but every single one of them believes that their opinion counts.
When you indulge the idea that their opinion counts, you establish the foundation for a constructive customer relationship. This is where you can identify your dispensary as an invaluable member of the community and earn your customers’ respect at the same time.
If you establish a rewards program or start offering personalized product packages to certain customers, you have the perfect opportunity to ask for customer feedback. The process is often as simple as sending an email.
The In-Store Experience Is Still Supreme
Even in jurisdictions where cannabis home delivery is legal, the in-store experience is still the major value-driver for cannabis dispensaries. Organizations that optimize the in-store experience to deliver value to their customers will be rewarded with greater customer loyalty and higher average purchases.
Human beings like to feel accepted as part of a group, and the in-store experience your dispensary offers its customers can encourage this feeling. Rewarding repeat customers is a proven method for improving customer loyalty in a variety of industries. Often, the reward does not even need to be valuable – a keepsake mug, T-shirt, or other souvenirs can work wonders.
Similarly, keeping your company culture open and encouraging discourse between your employees, your best customers, and the cannabis industry as a whole is a vital step towards building a positive in-store experience.
Your most loyal customers are your best target market to survey attitudes and opinions about things beyond the scope of a cannabis dispensary. You may learn things about them that will give you even greater opportunities to shape the in-store experience in a way that keeps them coming back.