By Manny Perez, VP of Marketing at Headset.
As we hit the mid-year mark of 2019, it’s a good time to reflect on retail trends in cannabis and look at ways to finish the year strong. One way to uncover retail insights is by breaking down the consumer basket. Retail sales data can tell us what is purchased - and how much. The numbers also reveal customer behaviors, allowing us to better understand buyers.
Below, we unveil sales trends up to Q1 2019, providing guidance on how to capitalize on those insights to increase sales throughout the rest of this year and beyond.
Marketing By Generation
No matter what you’re selling, it’s important to know who’s buying from you. The majority of cannabis customers are Millennials, with a market share at just over 50 percent, followed by Generation X and Baby Boomers, who each hold around 23 percent of the market. The Silent Generation and Generation Z make up the small sliver of what’s leftover.
Of course, the customer base at each store varies by location. Once you identify who shops with you, the biggest mistake is assuming that every customer segment can be reached in the same way and going with a shotgun approach with your marketing tactics.
Generational marketing is one way to segment an audience and make sure that you’re reaching them through relevant channels. By speaking to each customer in a way that feels most comfortable to them, you have a better chance to capture their attention.
Boomers are more receptive to email and direct mail marketing. Coupons are also effective since many grew up at a time when saving was front and center. Generation X is largely considered an educated generation, with higher graduation rates than previous generations. They respond well to educational content and seminars. Millennials are the mobile generation. To reach this group, you’ll need a strong online presence, from social media to email marketing. It’s also wise to put money into online community and reputation management for your retail locations.
Loyal Customers Love Benefits
Besides using your marketing programs to target by demographic are you doing what you can to maximize existing customer relationships? It’s worth noting that over 30 percent of cannabis customers return to dispensaries four or more times in a year, and those visits drive topline sales. Loyal customers are also more likely to tell their friends about your business, driving referral sales. As a rule of thumb, any store that enjoys more than 33 percent repeat business from its loyalty program customers should consider itself successful at this.
So how can you nurture a thriving loyalty program? A loyalty program may give a customer discounts, rewards, coupons, or even early access to new products. Many loyalty programs are based on a simple point system: dollars translate into points, which in turn can be redeemed for rewards. Another way to structure a loyalty system in your dispensary is to create tiers. This system rewards the occasional cannabis shopper with points but provides your power-shoppers with access to coveted exclusives. Exclusivity can go a long way with customer loyalty.
No matter how you set your program, the data shows that loyalty programs increase sales. Loyalty customers spend $39.67 on average, which is 35 percent more than the average consumer basket size at $29.41.
Increasing Basket Items
The basket size of your average shopper can tell you a lot about your retail business. For one, the number of items customers purchase can show you if you’re ranging the correct assortment of products. It also tells you if you are satisfying their needs.
Overall, cannabis consumers tend to purchase about two items per visit. This is a dramatic increase from the early days of legalization when most customers only came in for a single ounce of flower. Today, there are many more categories of products to choose from: edibles, concentrates, topicals, vapor pens, and the list goes on.
To increase the number of items customers put in their basket, one of the simplest actions to take is to expose them to more of your goods. Convenience stores do this all the time. That’s why you’ll often find the bread in the back of the store. Look at your high-traffic categories - those products which are most frequently bought - and then spread them out strategically across your store. This practice exposes your customers to more of your merchandise, making it likely for them to wander by something interesting that they didn’t even know they wanted.
The Trip Effect
Some things just belong together. Peanut butter and jelly. Burt and Ernie. Mac and cheese. Knowing which items bring people to the store on their own – “trip drivers†– and those that are added to a basket alongside other items – “trip passengers†– can help retail owners lay out the shopping floor in a way that will increase sales.
In general, flower is one of the largest trip drivers, while beverages are the most frequent tagalong. Over 75 percent of flower sales go to baskets that only include flower products. In contrast, 65 percent of beverage sales go to baskets that include other categories. This makes sense, as flower is the oldest, most common form of cannabis consumption, while beverages are still very much a novelty.
What does this mean for your cannabis store? For one, it may indicate that a beverage fridge should be placed near the register so consumers can discover these products as they check-out. It also underlines the importance of product placement – or a data-driven floor plan.
Simply put, a data-driven floor plan allows you to identify the hot and cold spots in your dispensary. From there, you can map your store in a way that draws shoppers through the different category segments, reduces floor congestion and groups together categories that complement each other to increase sales.
Five Years Of Analysis
Being able to discuss the different aspects of the cannabis consumer basket is proof of the cannabis industry’s growing market maturity. Basket analytics reveal the diversity of cannabis products and consumers, and how continued innovation can increase sales and success. Five years into legalization, the takeaway is this: the business fundamentals that drive sales in traditional retail industries will do the same for cannabis. Take the data seriously and you’ll thrive.
Images courtesy of Headset.
The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
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