Pity the cannabis marketer. Among the 23+ states where recreational use is legal, some prohibit advertising, while others impose myriad restrictions—the rationale, naturally, being to keep minors from seeing the ads.
Even if you’re in a state that allows advertising, good luck online. Google Ads prohibits cannabis advertising, as does Meta/Facebook.
So it’s no wonder that for retail cannabis marketers, an essential in their stash box is something with considerably more leeway: loyalty marketing.
“Loyalty is a cornerstone of the cannabis marketer’s playbook,” Mikaela McLaughlin, SVP of business development at Springbig, which provides loyalty and other marketing solutions for the cannabis industry, told Retail Brew.
But as retailers who’ve moved from other retail sectors into cannabis know all too well, and as Retail Brew has covered extensively this year, the cannabis business seems to always face headwinds, from being dropped by banks and point-of-sale vendors, to being spurned by credit-card companies.
Ditto for cannabis loyalty programs. Setting them up is more complicated than for coffee shops and drugstores, but with a bit of navigation, you can get there. So we leaned on McLaughlin to come up with this cheat sheet:
1. The Pareto Principle applies
Named for the Italian economist Vilfredo Pareto, who in 1906 found that 80% of land in Italy was owned by just 20% of residents, the Pareto Principle— aka the 80/20 Rule—is applied broadly across industries.
In retail, it undergirds the notion that 80% of a company’s sales typically come from just 20% of customers.
“That’s true in most other verticals and we see that it’s true in cannabis as well,” said McLaughlin, who added that loyalty programs are “so important because you want to keep that 20% engaged, happy, and continuing to visit you.”
2. Focus on dollars, not visits
It’s the boxers-or-briefs question for any loyalty program: Will points be awarded based on the number of visits shoppers make, or the money they spend?
Whereas visit-based loyalty programs might be best for businesses where consumers tend to spend about the same per transaction, such as coffee shops and barbershops, McLaughlin noted that’s not the case for cannabis store.
“You could have one guy coming in for a pre-roll [joint] and he’s paying $10 and he’s getting his punch, and then you have the person that’s coming in and stocking up and buying an ounce of cannabis flower and edibles and concentrates and he’s walking out the door for $250, and he’s getting that same punch,” McLaughlin said. “So who is that program really incentivizing? If anything, it’s more the guy buying the pre-roll because he’s racking up points quicker.”
3. Obey the law
No two states’ cannabis laws are the same. And that’s why a loyalty strategy that is a hit in one state could get a cannabis retailer in another state in trouble.
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In California, for instance, cannabis retailers giving away products for free—a loyalty program staple in some states—is prohibited. But you can charge a small amount for a perk—say a penny for a pre-rolled joint or other item when you buy a certain number of full-price items, which is what some cannabis retailers do in California.
Another idea: Give away something from another business. Springbig works with a dispensary in Massachusetts, for instance, with a perk of giving away gift certificates to other local businesses, like taco shops, pizzerias, and yoga studios, McLaughlin said.
4. Mind the state lines
Your Starbucks loyalty points don’t turn into a pumpkin when you cross state lines (but they do turn into pumpkin spice lattes). Not so for cannabis retailers.
Some states, including New York and Massachusetts, require retailers to sell cannabis grown only in state, while regulations for marketing and sales vary state by state, so if you’re a multistate operator, your customers may be frustrated if they hope their loyalty at your shops in one state will be rewarded at your shops in another.
For a “cannabis company that may operate in five states where cannabis is legal, chances are they currently have to operate with five different loyalty programs for each of those states,” McLaughlin explained. “Because the products on the shelves are different in every state, and what they may be allowed to use to incentivize a consumer could be different.”
5. Incentivize, don’t cannibalize
Cannabis retailers want their most avid customers to be incentivized, but not so much that it imperils the retailer.
“We don’t want them hemorrhaging free pre-rolls every time someone walks in the door,” said McLaughlin. “There is a little bit of a method to the madness, if you will, of getting a loyalty program right and making sure it fits within the percentage of their margins.”