“Open a dispensary,” they said. “It will be fun,” they said. And you know what? They were right. Having a license to sell weed is fun (it’s also pretty cool.) But that’s not all it is.
There will be 20-hour days. Lost weekends. Meals at your desk. Crazy tax bills. Employee turnover. Compliance issues. A black market that undercuts you with impunity. Delivery services that kill you with convenience. Price wars rage in a race to the bottom that everyone loses. Sometimes it feels like you’re Mad Max, and all you’ve got is the car, your dog, the rusty shotgun, and you’re almost out of gas and just trying to stay alive. Pretty fun, huh?
Ok. So maybe the Mad Max thing is a bit over the top. Operating a dispensary is not quite the same thing as navigating a post-apocalyptic wasteland full of people trying to kill you. The point is that cannabis retail can be hard. That said, there’s one thing every retailer can do to make it easier:
Kill it with customer retention.
Marketing burns bandwidth. It’s also expensive. Retention will maximize the value of your time and spend. If you’re still on the fence, check out these fun facts:
Customer acquisition may cost your dispensary as much as 5x more than customer retention.
Improving customer retention by just 5% may increase your dispensary’s profits by 25% or more.
True story. And it could be your story. Retention is one of the best ways to increase revenue. Not visits. Not gross sales. Not per ticket average. No. We’re talking about the one metric that matters more than all of them:
If you’re picking up what I’m putting down, let’s grind on it.
Dispensary Customer Retention Starts With Fundamentals
No bells, whistles, apps, tech, programs, platforms, magic beans, or silver bullets will persuade a customer to return to a dispensary that sucks. Period. Full stop.
Retention starts with keeping your weed game tight.
What’s on the menu?
A dispensary is only as strong as its menu, and the menu must reflect the needs and wants of the community a dispensary serves. If you don’t carry what your customers want, you will lose them.
There will also be some brands and products that dominate sales. Never ever run out of those. It’s a real black eye for your dispensary when a customer visits and what they want is out of stock. It tells them they can’t rely on you, and it’s hard to retain a customer when that trust is broken.
Typically, the buyer is the person who sets the menu and maintains inventory. It’s a key position that can make or break a dispensary. Make sure you have a great one.
Is the price right?
This will start with your buyer as well because the price they negotiate will dictate (or at least influence) the price you charge for an item. Wholesale prices are not static. Dispensaries with multiple locations and high-volume dispensaries can often negotiate lower prices.
Regardless of where your dispensary sits in the pecking order, you cannot afford to pay more for an item than your competitors. Potential customers often use platforms like Weedmaps to shop for the lowest price. If a competitor undercuts you because they negotiated a better wholesale price, you will lose customers.
Checking comps is the best way to ensure your pricing stays competitive. Your buyer must know your competition’s prices and maintain a level playing field. That said, you can’t be reactionary, either. There will be times you just can’t beat a competitor’s price.
- Deep discounts to flush old inventory
- A strategic decision to charge less for a hot SKU to attract new customers
- There’s a partnership between the brand and the dispensary
- The dispensary is a vertical operator and makes the product
In these cases, you might just have to take it on the jaw, and that’s OK. You can’t win them all. In the weed game, you’ll have to learn to roll with some punches. It’s just the way of it.
Is your customer service on point?
Your budtenders are key to your success. The experience they create for your customers and the relationship they cultivate with them will be the single most important factor in whether you retain that customer.
How to treat your customers
People may forget what you said or did, but they always remember how you made them feel. Your budtenders should make your customers feel like they’re the most important person in the room. Greet your customers like an old friend and treat them like a guest in your home. Make sure they always feel welcome and cared for. Get to know them. Their names. Birthdays. Preferences. Build a relationship. The same rules apply to security and reception.
Insider’s Guide Tip: Use the notes section of your POS system to take notes about your customers’ preferences or interests so that you can create a personal experience every time they visit.
How to train your staff
Your budtenders must also be knowledgeable. Cannabis is new, complex, and it can be overwhelming for the average customer. There are terpenes, cannabinoids, the entourage effect, hundreds of cultivars, Sativas, Indicas, and Hybrids. There’s rosin, resin, live resin, and live rosin. There are literally thousands of SKUs, from flower to vapes to extracts to edibles to tinctures and drinks. Your budtenders must know it all to make the best recommendation for your customer.
Do not expect budtenders to learn this on their own. Yes, they should study the menu, but a robust and dynamic budtender training program is essential. Every brand you carry should also provide supplemental training and samples of their products for your budtenders. It’s always best when your budtender can make recommendations based on experience.
Know what you’re selling
If you think you’re just selling weed, consider this:
People can buy weed just about anywhere. That’s not the reason they came to your dispensary. They came for the vibe. They came for the culture. They came for community. They came for the experience. Make it worth the trip, or someone else will.
What’s your return policy?
You will get returns, and how you handle them can be the difference between winning a customer for life or losing them forever. Most dispensaries don’t accept returns. With cannabis, once a product is sold, it can’t be put back on the shelf. While you can usually pass the return on to the brand so you don’t take a total loss, the process is time-consuming and tedious. You will eat labor costs.
That said, products can be defective. Flower gets old and dry. Carts leak or malfunction. Sometimes customers end up with the wrong thing in their bag, or a product doesn’t meet their expectations. Biting the bullet and processing these returns shows that you are willing to go the extra mile, and that builds trust and loyalty.
That said, sometimes returns get hinky. There will be that person who tries to return the preroll pack with one joint left or the empty cart. This is a judgment call. If you decide to process this type of return, train your budtenders to note the customer file (most POS systems have this function). If the return was shady and they got away with it, that customer will likely try it again. Shut it down this time.
Limit Budtender Turnover
You spend a lot of time and money training your budtenders. They are the ambassadors for your brand. They are the people that build personal relationships with your customers. Often, customers come in to see that one budtender they know, like, and trust. Treat your budtenders well. Pay them a fair wage. Respect them. Offer them opportunities for advancement. It’s the right thing to do, and maintaining continuity on the front lines will absolutely pay off in retention.
This is not an operations manual, but everything matters when you commit to creating an experience at your dispensary. We shouldn’t need to talk housekeeping, but here it goes anyway:
Keep your bathroom clean, make sure there’s soap and toilet paper, sweep and mop your floors, clean your countertops, dust everything, empty your trash, keep your displays organized and up to date, and make sure your staff maintains good personal hygiene. Of course, this is not a complete list. Not by a long shot. But you get the gist:
Retention starts with keeping your weed game tight.
Build Customer Loyalty With Deals
Deals, specials, discounts, sales…whatever you call them, are ingrained in dispensary culture. Cannabis consumers shop for them. They expect them. All dispensaries offer them in one form or another. You will be at a competitive disadvantage in the retention game if you don’t offer them.
Here are some examples of different kinds of deals you may offer to create value for your customers:
- Standing Deals: These are deals that are offered every day. First Visit, Veteran, and Senior discounts are all industry standards and are offered everywhere.
- Daily Deals: Many dispensaries offer a daily deal like “Munchie Monday” (discount on edibles) or “Thirsty Thursday” (discount on drinks).
- Sales: Inventory with sluggish sales or close to its expiration date may be discounted to move it.
- Bulk Discounts: Some dispensaries offer discounts when you make a larger purchase. Buy an ounce of flower instead of an eighth, and get a discount.
- Vendor Deals: Vendors love to do “Customer Appreciation Days” at dispensaries to get direct contact with consumers and push their brand. While there’s some debate about how much these help the dispensary, if the deal’s strong and the brand is popular, they can be good for everyone.
- Personalized Deals: These are offered to individual customers on special dates like birthdays or the anniversary of their first visit.
The key to effective deals that drive visits, revenue and retain customers is tracking their performance. Many POS systems, such as Blaze and/or third-party loyalty platforms like AlpineIQ, Springbig, or Happy Cabbage, make this easy to do. When you track deals over time, you learn what works and what doesn’t. This enables you to consistently refine your strategy, improve performance, and give your customers what they want.
Dispensary Loyalty and Rewards Programs
You’re slaying the fundamentals. Your weed game is uber-tight. Your deals are killer, and your customers love them. Sweet. But now is not the time to take your foot off the gas. Now is the time to press. What else can you do to keep them coming back?
Roll out a strong loyalty program, making it hard to even think about shopping elsewhere.
Loyalty programs reward repeat customers every time they shop. When done well, it’s a proven retention strategy. You already know that it’s cheaper to keep the customer you have than to find a new one, but did you know that repeat customers also spend as much as 67% more than first-timers? Well, now you do. Trust is a major factor in customer spending.
So, what makes a loyalty program an offer your customer can’t refuse? Here are a few essential features for your loyalty program to succeed.
- Simple and easy for the customer to understand
- Easy to track and redeem
- The rewards are worth the effort
With that in mind, check out these real-world examples used by different dispensaries to get a feel for the different ways you may offer your customers loyalty rewards:
- Point Systems: These are simple, and simple is good. If your customer isn’t clear on how your loyalty program works, it won’t work. A basic points system offers a point for every dollar spent. When those points accrue, they can be used for discounts. Making sign up easy is also key. Some dispensaries just ask for a phone number or email, and the customer is automatically enrolled.
- Cash Back Systems: These systems offer cash back on every customer purchase. Some dispensaries may offer as much as 5% back. So, if your customer drops $100, they get $5 credited to their account, which they can use whenever they choose. It’s like a saving account for weed, but it can only be spent at your dispensary. Cool.
- Rewarding Behavior: Some dispensaries approach loyalty by rewarding customer behavior. One way to do this is by offering rewards for recycling vape carts, exit bags, or cannabis jars. This reward system also makes a branding statement by letting your customers know that your dispensary is environmentally conscious.
- Tiered Rewards Systems: These work by unlocking escalating rewards the more often the customer visits the dispensary or the more they spend. One way to execute this type of rewards system is to offer a discount for signing up and another discount on the 3rd visit.
- Gamification: Similar to tiered systems, gamification creates multiple tiers and allows customers to “unlock” more rewards as they reach progressively higher tiers. Again, this encourages active participation by your customer and makes it fun.
Insider’s Guide Tip: When considering your loyalty program, it’s a good idea to check out what type of loyalty program is integrated into your POS system. POS-based loyalty programs are much easier to implement and track than those on 3rd party platforms. You want to keep your tech stack to a minimum and avoid siloed solutions.
While loyalty programs reward customers with increased value, they’re about more than just offering a financial incentive for your customer to return. They operate on a deeper human level. The most effective loyalty programs show customers that they are valued. That goes a long way to help forge a long-term relationship between you and your customer that is mutually rewarding.
In a study by the loyalty platform Annex Cloud, 83% of loyalty program members were likelier to continue buying from that brand. So the bottom line is that loyalty programs work.
Grow Loyalty and Retention with SMS and Email Campaigns
Sometimes even the most loyal customers fall off. If you want them back, SMS and email campaigns enable you to re-engage customers with personal offers, promotions, and deals. These campaigns give you another touchpoint with your customer that keeps you fresh in their mind. They’re powerful sales and retention tools that can motivate customers to return, grow brand loyalty, and drive visits and sales.
But before we get rolling, here is a word of caution on SMS/Text Marketing:
Cannabis is still federally illegal, and the FCC can fine businesses $500-$1500 for every unlawful text message. The Telephone Consumer Protection Act (TCPA) is the primary regulatory body for cannabis-related SMS messaging, but its rules are confusing and easy to get wrong. Imagine being fined $1500 per message for thousands of text messages.
While there’s no shortage of entities with cannabis-specific text messaging platforms, and they all say their SMS campaigns are compliant, none will indemnify you or pay your fines. So the SMS risk is real and may not be worth the reward (but many dispensaries still text.)
Insider’s Guide Tip: Focus on Email Marketing
You can’t send a customer an email or a text without an email address or phone number. So you’re going to have to build that database. One place to do that is at your dispensary.
Email capture in-store
Train your staff at reception to ask your customers if they want to join your loyalty program. If so, collect their email here. At checkout, your budtender can reference the customer’s file and see if they have opted in. If they haven’t, there’s no harm in asking again. Sometimes these things get missed in the hustle, and building in some redundancy is always a good idea.
If you want to increase registration, offer an incentive to get their email. A preroll is always a good motivator.
Email capture online
On your website, use a popup window or banner for customers to opt-in to your loyalty program and provide their email addresses. Then, ask again when they place an online order and offer an incentive to increase registration. A discount on their next order is a good way to get the customer’s email and motivate a return visit in the same transaction.
Email marketing regulations
The CAN-SPAM Act regulates email marketing in the U.S. You should always consult with counsel to ensure that your email campaigns are compliant, but some key rules you should never break are:
- Don’t put misleading information in a subject line
- Provide a physical mailing address
- Offer an unsubscribe option
- Disclose ads
Respect Your Loyal Subscribers
When a customer trusts you enough to provide their email address, don’t violate that trust by spamming or otherwise harassing them. What’s spam? As a general rule, never send an email that’s not useful for your customer. They should be valuable. Ideally, they should look forward to seeing your email in their inbox instead of rolling their eyes and sending your message to their junk folder.
More specifically, follow these rules so your customers don’t delete your messages, send them to their junk folder, or opt-out:
- Always get consent: Ensure the customer knows what they signed up for.
- Don’t send emails too often: This can be a moving target when your strategy involves a general campaign sent to all your loyalty members and targeted campaigns sent to a specific demographic. Use your best judgment here.
- Make unsubscribing easy: If you do it right and only send useful emails that offer real value, this shouldn’t be a problem. But still, don’t hide the opt-out button and don’t make the process difficult. It’s just plain annoying.
- Never mislead: It’s illegal. It will backfire. It violates trust. It’s lame. Your customer will opt out. You will lose customers. It’s also dishonest. Conduct these campaigns with integrity.
While the content of your emails matters, the execution also matters. Be professional. Do not get sloppy. These emails are an extension of your brand. Make sure they don’t look like they were drafted by a third-grader in crayon (you’d be surprised).
- The copy should be concise, easy to understand, and include a CTA
- The copy should be free of typos and grammatical errors
- The copy should be written in your brand’s voice
- If you include graphics, they should be on brand and high-resolution/professional
Crafting Effective Email Campaigns for Loyalty and Retention
Always strive to give your people what they want. What they want is useful information that adds value to their lives. What they want is to be recognized and appreciated. Everyone likes to feel special, cared for, and respected. You can do that with these email campaigns that put the customer first:
Refer a friend
Invite your customers to refer a friend that’s never shopped at your dispensary. Give them loyalty points for every referral, and ensure all new customers score with the first-time customer discount. Everyone wins here. Your loyal customer gets points, their homies get a discount, and you get a new customer while you build your relationship with your existing customer.
The daily deal
This one keeps your customers in the loop with what’s happening at the dispensary. If the deal is solid and it’s something they like, it might motivate a visit that would not have happened otherwise. This is useful information that provides value for your customer.
Everyone loves it when people remember their birthdays. Show your loyal customers you care on their special day with a gift or special offer to help them celebrate.
Missing in action
On most loyalty platforms, you can track how often customers shop with you. Set up an automated email with a special offer that goes to every loyal customer that’s dropped off the radar. Make that offer sweet to get them back in the store.
Another thing you can do on most loyalty platforms is target customers by brand or category. If you have customers that love 710 Labs (and who doesn’t), send them an email every time you get a fresh drop from them or another high-end hash company. Do the same thing with your top-shelf flower connoisseurs when you get a fresh delivery of that fire.
On some platforms, you can leverage your loyalty database with brands that you carry in-store and have the brand pay for the campaign. These are win/win/win scenarios. Your dispensary gets free marketing, the brand gets access to your customers, and your customers get value from the brand’s offer.
Choosing a Platform for Loyalty and Retention Campaigns
It would be amazing if SMS and email capabilities were native to cannabis POS systems. We’re moving in that direction but not quite there yet. Hopefully, soon (fingers crossed.) The tech stack of siloed solutions dispensaries are stuck with today is costly, confusing, and challenging to manage. But that’s what happens when you build the plane while flying it.
That said, here are a few third-party platforms with solid loyalty and retention programs that integrate well with most dispensary POS systems:
- Happy Cabbage
They’re all a bit different, and some are a better fit for certain POS systems. Consult with your POS provider and see what they recommend. Request demos. Do your homework, and you will find the best solution for your dispensary.
These have established themselves as successful strategies for long-term customer retention for many businesses. They have the advantage of creating a consistent revenue stream while also providing a platform to showcase new products. While a few companies offer cannabis subscription services, these are a tough nut to crack for several reasons.
Cannabis remains federally illegal. There is no interstate commerce even among states with legal cannabis. There are also strict rules for cannabis delivery, and cannabis cannot be sent by mail. Legal cannabis is also new, and most consumers are unfamiliar with the available products. All of this works against subscription models.
Notwithstanding the challenges, someone will crack this nut. When that happens, it’s gonna be huge. Who knows…maybe it will be you.
Loyalty Programs Improve Retention and Increase Revenue
Cannabis retail is challenging. The competition is stiff. The margins are thin. A strong loyalty program that improves customer retention is the single best strategy to increase revenue.
If you still have questions, you can always reach out to deeproots partners. Their team of seasoned cannabis professionals have real-world experience in cannabis retail and retention and can help you find the best loyalty platform for your dispensary’s needs.
JP Donahue is a former corporate litigator turned successful writer, with over 25 works produced for major film and TV studios. He’s also a founding partner of Tropicanna, one of Orange County’s top cannabis retail brands. Leveraging his experience in both Hollywood and cannabis, JP advises dispensaries on branding, marketing, and operations. He’s a Jiu Jitsu Black Belt, certified Yogi, meditator, dog father, and a member of the New York State Bar and Writers Guild of America West.