How loyalty programs can power growth in the legal cannabis industry
Legalisation of cannabis in the United States and Canada has sparked industry growth at an extraordinary pace. As this industry transitions from illicit markets to more regulated ones, cannabis brands and retailers will all be looking to cultivate one thing: customer loyalty.
What does the global cannabis industry look like today?
160 billion dollars. That’s how much the U.S. legal cannabis industry is expected to reach in 2025. 19 states have legalized recreational use of the plant-based drug, with a further 12 states decriminalizing it over the past decade.
In Canada, cannabis has been legal nationwide for both medicinal and recreational purchases since 2018. The Canadian market is set to hit over $4 billion this year.
Europe tells a different story. As with the United States, cannabis legislation across Europe is fragmented. Some countries allow access to ‘medical marijuana’, and others have decriminalised possession of the plant. However, most European countries prohibit any use of cannabis. But these rulings haven’t stopped people from consuming it. According to Europol, illegal purchases on the black market amount to over 9 billion euros per year.
Europe still has a way to go before legal markets open up. But research suggests we are not too far behind our friends across the Atlantic. A study by Hanway Associates showed that over half of Europeans support legalisation - a potent sign for investors and entrepreneurs who want to capitalise on this industry’s growth.
For North America, cannabis businesses and brands are already blooming. As a result, customer loyalty, engagement, and retention are under the spotlight. Cannabis retailers face similar challenges seen across the retail industry:
- How to improve customer retention and engagement
- Increasing basket value with cross-selling and upselling
- Keeping the customer experience easy with digital customer journeys
However, the cannabis industry also faces unique obstacles:
- Legacy infrastructure and changing regulations make it difficult to manage sales
- Marketing restrictions can make advertising complicated and expensive
- Cannabis use holds a negative public stigma. Customers may hesitate to visit stores or engage with brands, making new customer acquisition and engagement more difficult
Cannabis consumers are looking for community: enter loyalty programs
Growing markets need to be driven by active and engaged consumers. The best way to do this is through loyalty programs. This is because cannabis consumers are looking for a unique experience, and they often feel like they're part of a community. When a retailer can create an exclusive sense of community, customers will want to stick around long-term.
Why does customer loyalty work?
- According to Retail Touchpoints, loyalty members spend more in-store than non-members.
- On top of this, improving customer retention rates by just 5% can increase profits by up to 95%.
- Loyal customers buy more products and spend more money per transaction. Data from Headset, a cannabis analytics company, shows basket spend among retailers with loyalty programs is larger than average spend at retailers without rewards schemes. Dispensary loyalty program customer baskets also contain more items at higher prices.
- Loyalty programs can bring in new customers via referrals and word-of-mouth marketing. This is a great way for retailers to get around complicated marketing restrictions - customers can ‘advertise’ on your behalf by making recommendations to friends and family.
How to create a dispensary loyalty program
Loyalty programs are a key part of the retail experience. But learning how to use them for maximum return is paramount.
START WITH DATA
Loyalty programs provide insightful data about your customer’s activity. You can gather information from different data points, such as online and offline purchases, campaign interactions, or even entry into a geofence. Use this level of data to understand your customer’s activity and target campaigns to different segments of your customers.
PERSONALISE YOUR PROGRAM TO BUILD RELATIONSHIPS
Loyalty programs aren't just about rewarding customers—they're also about building relationships with them so that they'll come back again and again. Collecting detailed data via a loyalty program means you can provide personalised offers based on customer preferences. This will spark a closer consumer-brand relationship. For example, if you know that a customer purchases a strain for pain relief, offer them discounts on CBD products that could help them.
CREATE A DIGITAL-FIRST, FRICTIONLESS JOURNEY
Your customer’s retail experience can be made seamless with the right technology. Using data capture options such as receipt scanning or card linking gives you the insights you need with minimal customer effort.
DRIVE ENGAGEMENT BY REWARDING ANY CUSTOMER ACTIVITY
The aim of a loyalty program is to encourage long-term customer relationships. At White Label Loyalty, we know that relationships are built using data, event-based technology, and rewards. Instead of just offering customers a reward for signing up to a loyalty program, reward the activities and behaviours you want to drive.
For example, reward people for making a second or third purchase. Or for buying a new product. Customers that get rewarded for any kind of activity are more likely to be highly engaged with your brand and will keep coming back for more.
Loyalty programs are a necessary investment when trying to achieve growth in expanding markets.
Growth in this industry will also have positive effects on local economies. According to Ross Lipson, Co-Founder of Dutchie, a tech platform powering cannabis commerce, “the industry can inject new and much-needed tax revenue into local communities, providing more resources for critical public services and public projects like schools, hospitals and roads”. Cannabis retail rewards programs can play a major role in this growth by helping retailers understand their customers, build relationships and increase engagement.
The industry is still relatively new and has yet to be saturated with competitors. This means there are plenty of opportunities for cannabis brands and retailers to differentiate themselves using customer loyalty programs.
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Senior Content Marketing Executive
Helen is our Senior Content Marketing Executive. She shares valuable information about the Future of Loyalty and will keep you up to date on the latest industry insights...