Loyalty programs, which have long been a staple of consumer marketing strategies, have found a place among regulated cannabis retailers in the US and Canada.
Retailers offer perks like discounts, points, specials, and new product notifications, saying that loyalty programs can be a useful tool for:
- Increase basket sizes.
- Increasing the frequency of customer visits.
- Offers age-tested buyers targeted marketing opportunities even when government regulations restrict marijuana advertising.
It’s not free to offer these perks, but loyalty program operators say the benefits can easily outweigh the costs.
Data shows loyalty advantage
Recent figures from Seattle-based marijuana analyst Headset illustrate how loyalty programs can boost shopping habits.
Around 50% of Washington state cannabis stores appear to be using a loyalty program, according to Cooper Ashley, data analyst at Headset.
Over a 90-day period, the average shopping cart spend for retailers with loyalty programs was $ 37.18 – 13% higher than the average spend for retailers without such a scheme.
Loyalty baskets also had more items per basket and slightly higher item prices.
“That’s a pretty significant advantage to having a loyalty program right there,” said Ashley. “Your customers tend to have larger transactions.”
Customer behavior insights derived from loyalty programs can also be used to target promotions to a store’s most valuable customers.
“I think if a business is collecting customer data most of the time, it will be tied to a loyalty program,” said Ashley.
Clear loyalty benefits encourage registration
In Las Vegas, Planet 13 has a Loyalty Member program that is open to non-state buyers and offers additional benefits for Nevada residents.
All participants in the loyalty program receive SMS notifications about daily transactions and collect bonus points when they make purchases.
But Nevadans also get 20% off regular price items and special prices like 25 eighths of selected cannabis flowers.
Only loyal members get access to Planet 13 promotions such as daily deals, said David Farris, vice president of sales and marketing at Planet 13.
“We have a lot of people signing up to really get into the daily deals or the ongoing promos,” he said.
The benefits of the loyalty program are obvious, so getting customers to sign up is not very convincing, Farris added.
“I think we’ve all been shoppers in retail stores and everyone is trying to get you to sign up,” Farris explained.
“And there aren’t many perks besides giving you your information – where I am thinking here, you actually get a lot of perks if you’re a frequent buyer.”
Communication with loyal customers
High Tide, a major Canadian cannabis retail chain with private labels such as Canna Cabana, operates a loyalty program called the Cabana Club.
Andy Palalas, chief revenue officer, said Canadian restrictions on the use of incentives to sell cannabis are preventing High Tide from offering certain types of loyalty benefits.
“For example, we can’t say, ‘hey, if you buy a certain amount of cannabis, you can get that extra amount of cannabis at a better price,’ nor can we encourage it with points,” he said.
Other loyalty benefits, such as B. a discount of 5% on products at regular prices, but are limited for High Tide.
Palalas said a simple discount will help sign up for loyalty programs in the store.
“There is no accumulation of points waiting (until your) next visit, none of that – it says,” Today you can get 5% off your order when you sign up for the club. “A lot of customers respond pretty well to this. “
However, the ultimate purpose of the loyalty program is “better communication with our customers,” said Palalas.
“There are many new products coming out every day and promotions are challenging to telegraph customers outside of the dedicated channel with them.”
The Cabana Club reaches customers via SMS with about one or two texts per week.
“They appreciate knowing when we are introducing new products and when we will be replenished, etc.”
In a quarterly filing earlier this week, High Tide said its loyalty program members spend an average of 20% more than non-members.
“In general, they spend more and visit more often,” said Palalas.
The cost of loyalty
Of course, it costs money to give customers discounts or points for future purchases.
For example, for the quarter ended September 30th, Planet 13’s rebates and loyalty point provisions were $ 1.3 million versus total revenue of $ 24.1 million.
Despite the cost, Farris of Planet 13 regards loyalty programs as “a mandatory part of doing business”.
“We believe customer service is who we are, and I think part of that customer service is having a loyalty platform to keep them happy,” he said.
High Tide’s palalas offered a similar perspective.
“I don’t think you can pay enough for a loyalty program to be honest – it’s one of the most important parts of your business,” he said.
For aspiring retailers, Palalas recommends starting a loyalty program right away.
“It is one of the first decisions to find out what you are willing to offer as a benefit to the customer, to earn their trust so that you can communicate with them over the long term,” he said.
“You should do it before you start figuring out your margin profile. You should make this decision before you find out what type of products you will be selling,” continued Palalas.
“Because it ultimately leads to all of these decisions being made. As a new retailer, the only thing you can do in the store is focus on who your customer is, learn about them, and figure out how to best serve them. “
Solomon Israel can be contacted at [email protected].