Retailers who deal in cannabis have the same basic problems as any other retailer of products and services.
Loyalty Strategy

Cultivating Loyalty in the Growing Cannabis Retail Market

Photo by Ryan Lange on Unsplash

A relatively new North American industry has experienced massive retail growth and innovation, especially in the last 5 years. As a whole, the North American legal cannabis market is projected to reach $38.2 Billion USD by 2028 and is expected to continue growing as legalization spreads and use of marijuana for medical purposes increases. Recreational or adult-use of cannabis is legal in 18 states and the District of Columbia in the United States of America and in all provinces and territories of Canada, which accounts for an active retail customer base with high demand for the regulated product.

If a product is a product and if customers are customers, does the recreational cannabis retail market face the same challenges as any other retail industry when it comes to cultivating customer loyalty?

We assume that retailers who deal in cannabis have the same basic problems as any other retailer of products and services:

  • How to retain customers to get them coming back sooner between shops and returning more often
  • How to grow baskets or move them into higher value brackets
  • How to engage profitably with them and remain their top choice among a sea of options

These problems boil up to business objectives that have traditionally been supported by well executed customer loyalty strategy. Usually, with the right rewards for the desired behaviors, retailers can reasonably expect to reap the benefit of high value return customers at the low cost of rewards with high perceived customer value. As well, with timely and personalized communications, customer engagement is the retailer’s to lose if the right balance isn’t achieved.

There is already much in the retail market to learn from, potentially many loyalty and technology experts with whom to choose to partner to build out a winning loyalty strategy and execution plan, based on their successes with other products and customer bases. Except, in the case of a highly regulated product with operational considerations that vary state to state, as in the case of the US market or the parameters for responsible customer communications when it comes to marketing a controlled product in Canada, the traditional knowledge base for customer loyalty marketing may not easily translate in the realm of cannabis retail.

Examples of challenges faced by the budding industry have been written about before, including what options specific stakeholders in the market have exercised to circumvent those challenges. With this knowledge, what is the value of investing in strategy and execution to cultivate customer loyalty and engagement? It’s not a value that’s unknown to the industry, especially when there is data to evidence the benefits of executing loyalty programs well.

Since it isn’t quite as seamless to plug and play, those in the cannabis retail industry must start with the foundational truth that while loyalty may be built in for customers who were converted prior to the advent of the regulated and legal market, there continues to be opportunity to attract new customers, retain existing customers, and increase customer lifetime value from active consumers. There are depths to plumb and it takes marketers who are willing to explore and ultimately reach new heights.

Beyond the awareness of regulatory adversity, marketers in this industry should lean into truths such as, but not limited to these to be able to create opportunities for growing cannabis customer loyalty:

  1. Your customer base is open to discovery and education. Serve them. This isn’t a customer base that is closed off to new products, accessories, techniques, formulations that enhance their experience of the product. Be their source for information, education and product. Are you equipped to tell them what’s new, notable and pertinent based on their preferences? Can you ensure availability aligns with what you advertise? Do you have the data and can you translate that data into information your customers can consume?
  2. Your industry is heavily regulated. Safeguard and wear your compliance like the badge that it is. It is what elevates you as a retailer or brand and protects the experience of your own law-abiding customers, who should appreciate what it takes to maintain compliance from seed to sale so that you can ensure the availability of only top of the line and safe products. Can you leverage your understanding and access to regulatory information to earn customer confidence as their trusted expert?
  3. The hum of the hive sustains the buzz. Keep the vibes positive. All puns intended, the roots of the community of cannabis advocates created functional social and economic networks for cannabis’ grassroots spread, predating the regulated supply chain and market. It’s inherent to the core product and its advocates that communities bud and flower around cannabis. Will you invest in what creates community? Where possible events may create wider circles of connection. Are you amplifying voices and personalities that will attract consumers, fans and more advocates?

In Canada, federal regulations on the industry are allowing the evolution and growth of cannabis loyalty from e-commerce and community rewards programs to loyalty programs that span province-wide store networks for larger retailers.

In the US, factors such as state regulations, continued market growth and collaborative and strategic partnerships, may create regulatory-compliant loyalty solutions that will allow more retailers to take a share of the highly-valued and growing industry.

There’s still more to learn in the coming years as stakeholders in the cannabis industry look to the evidence of success from the rest of the retail industry. We know it’s still all a matter of discovery, propelled by many more years of experimentation to chase the high of sustainable and profitable customer loyalty.

Cultivating Loyalty in the Growing Cannabis Retail Market
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