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Optimizing customer segmentation in cannabis retail for 2021

Dec 21, 2020

While every customer matters to your retail business, not all customers are the same, nor is the value they provide to your bottom line. Because of this reality, it is critical to use data-driven analysis to segment and better understand your customer base so that you can cater to their individual needs. Luckily, the Customer Segmentation dashboards available in Retailer Premium will help you do just that. These dashboards will equip you with the information you need to know who your customers are and give recommendations to increase their engagement and sales in the new year.

What is the Pareto Principle?

While every customer matters to your retail business, not all customers are the same, nor is the value they provide to your bottom line. Because of this reality, it is critical to use data-driven analysis to segment and better understand your customer base so that you can cater to their individual needs. Luckily, the Customer Segmentation dashboards available in Retailer Premium will help you do just that. These dashboards will equip you with the information you need to know who your customers are and give recommendations to increase their engagement and sales in the new year.

Customer segmentation in cannabis retail: what is the pareto principle?

We see the Pareto Principle play out at many levels of the cannabis industry. For example, from January through November 2020 in the California Adult Use market, the top selling 20% of distinct products sold generated 81.04% of total sales.

It is critical to segment your customer base for efficient analysis, but you may be wondering how to create effective and actionable customer segments. To make the process easier, we've done the work for you in the segmentation dashboards by using RFM analysis.

Using RFM analysis

Customer segmentation in cannabis retail: RFM analysis

RFM stands for recency, frequency, and monetary value. Your customers are given scores based on how long it has been since they last visited your store (recency), how often they have visited your store in the last 365 days (frequency), and their total spend at your store in the last 365 days (monetary value).

The segmentation dashboards in Retailer Premium automatically group your customers into segments based on the scores they receive in each category of the RFM model. For example, your 'Champions' have the highest possible score in each category. While they are a small proportion of your total customer base, they generate a disproportionately large amount of your total sales (the Pareto Principle in action).

Segment definitions and suggested strategies

The dashboards in Retailer Premium provide recommendations based on customer segments so that you can increase customer engagement and sales. Using these recommendations, you can better target these specific groups of customers with the provided tactics to keep them coming back to your store.

Customer segments in cannabis retail
Customer segments in cannabis retail

If you're ready to unlock the power of customer segmentation and RFM analysis to grow your business in 2021, contact us for a demo of this and the many other powerful features of Retailer Premium.