January 17, 2020

Cannabis and dispensary loyalty programs

Loyal customers? Customer retention? The key could be in dispensary loyalty programs
Written by
Blake Fery
Published on
January 17, 2020
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As with any major retail or consumer market, many dispensaries offer loyalty programs for their cannabis loving customers. As the name would suggest, this effort is meant to generate repeat customers by creating and communicating exclusive discounts and promotions for those who join. Given how much the cannabis industry is expanding, dispensary loyalty programs play an important role in both customer retention and attracting new customers. 

Though cannabis loyalty programs can be effective, they’re not exactly perfect. Consumers that are a part of loyalty programs tend to spend more, buy more frequently, and go for more expensive products. However, there are discrepancies between individuals who initially sign up for a dispensary loyalty program and those who continue to participate in them. It’s a matter of those who sign up with the intent to repeat shop and those who sign up just for the initial discount. 

Loyal customers. Increased spending.

Between the discounts and offers loyalty programs provide and the excitement that repeat customers feel, it is apparent that dispensary loyalty programs work. According to our data, Loyalty customers buy more frequently and spend more money. 

Loyal cannabis customers spend more than the average consumer
Loyal cannabis customers spend more than the average consumer

Loyalty customers spend $39.67 on average, which is 35% more than the average consumer basket size at $29.41. Loyalty members also buy 2.2 items, compared to 2 for the average consumer. That’s not significantly more, but there is an increase of average item price (AIP). The AIP for non-loyalty customers is $14.70, while the AIP for loyalty customers is $18.41. The potential revenue that these loyalty programs create is clear, and loyalty members may want to try out pricier products.

Trying new things. Trying everything.

Loyalty customers have more diverse baskets than average customers, especially in their initial purchase. On average a loyalty customer spend $47 on his/her first purchase. With a notable curiosity, these purchases tend to be less flower and more nuanced methods of cannabis consumption, such as edibles, vape pens, tinctures, topicals, and capsules.

As previously mentioned, loyalty members purchase more individual items than the average customer. Their baskets are 15% more likely to have 4-5 different products, and 18% more likely to have 6 or more products. With a variety of different items, loyalty customers give themselves the opportunity to try everything that’s available, understand what they like best, tailoring their cannabis experiences to their taste. 

What are they buying?

Though loyalty customers may have more variety in their basket than non-loyalty customers, both groups have about the same product category mix. The only product categories that demonstrate any discrepancies are pre-rolls and concentrates. Loyalty customers buy 20% fewer pre-rolls than the average customer, yet they buy 15% more concentrates. This may have to do with the level of consumption from loyalty customers, as concentrates are usually purchased by more avid cannabis consumers.

What is certain in the data, though, is that loyalty program members buy more expensive products. The AIP for concentrates, capsules, tinctures and sublinguals had a 25% increase from loyalty customers. Edibles, flowers, pre-rolls, and vapor pens had a 20% increase, and beverages saw a 10% increase. The only decrease was in topicals by 5%. This again may have to do with loyalty customers wanting to try higher end products as they continue to develop their taste in cannabis.

The downside

As many dispensary loyalty programs come with a sign-up discount, customers will often sign-up only for the discount without the intention of returning. In fact, 40% of customers who sign-up for a cannabis loyalty program end up not coming back. So, the variety, amount, and AIP in loyalty customers baskets may in fact just be because customers want to take advantage of a good offer.

In conclusion

Whether dispensary loyalty programs create a one-time major splurge or an enthusiastic returning customer, these programs have the potential of influencing consumer spending behavior. Even with their faults, they still end up being advantageous because they can help develop a deeper relationship with the customer base, through text and email communications, and in turn increase revenue.

The execution of a cannabis loyalty program, however, remains up to what the dispensary thinks will create the best response. In this growing cannabis market though, dispensaries can expect a continuing increase of customers. It’s just a matter of keeping them loyal. 

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