Matt Dell

Customer Segmentation: 4 Ways to Target Dispensary Marketing

Cannabis retailers are long past the era where general advertising– be it physical or digital– proves most effective.

When first-party customer data exists in abundance for dispensaries, segmentation is a critical component to nearly all marketing strategies.

Keep reading for Happy Cabbage's dive into customer segmentation and how dispensaries use their data to deliver targeted marketing.

Why Segment? Because Dollars & Sense

Segmentation determines many aspects of marketing: the type of promotion, message, and plan to carry out a campaign aligned to a specific customer group.

Without it, marketing can’t reach its full potential, producing less-than-optimal results and negatively impacting return on investment (ROI).

Happy Cabbage studied the impact of segmentation on SMS marketing.

We found that dispensaries sending untargeted text campaigns could generally be missing out anywhere from 17 cents to nearly $2.57 of revenue per message.

Considering the volume of customers at any given dispensary, that could be thousands of dollars in lost opportunities.

The value in segmentation for dispensaries lies in getting to know customers better, identifying notable shared characteristics, and personalizing marketing to their needs.

It may not be a fancy campaign or ad. Still, it’s the essential process behind the scenes that helps retailers delivering impact from promotions and ultimately enhance the customer experience.

Keep reading for four segmentation strategies you can use today.

Product & Brand Affinities

Some of the most relevant customer data is on products and brands they keep on buying. Segmenting based on these interests is a crucial step in personalizing dispensary marketing.

For example, you'll likely find groups of customers that typically prefer vapes or edibles instead of flower. Maybe they prefer an in-house brand as opposed to another on the shelf.

Take a look at your point-of-sale system.

Photo of a samplecustomer profile in Flowhub’s point-of-sale system.  

Dispensary POS systems provide detailed overviews of brand and product sales to customers, therefore offering a basis for creating segments based on trends found in the data.

Defining these segments enables dispensaries to alight promotions with the brands and products customers want.

In SMS campaigns, retailers can deploy targeted messaging to smaller customer cohorts, an approach we've shown returns better results in a potentially more compliant capacity.  

Order Frequency & Latency

Another format for dispensary customer segmentation is when and how often they purchase.

Order frequency and latency segments provide insight into the regularity of buying behaviors from certain customer groups.

Organizing these metrics allow dispensaries to understand how many of their customers order every week versus two weeks; or which groups tend to order earlier in the day versus in the evening.

Another key cohort that frequency and latency reveals is the number of lost dispensary customers. These customers hold tremendous revenue opportunities for dispensary owners.

In the case of one campaign, targeting and recapturing 12 lost customers resulted in nearly $1300 of revenue for a dispensary using our Happy Marketers SMS marketing platform.

A dispensary can identify groups of lost customers that haven't ordered in more than 30 days, then deploy targeted marketing based on brand and product affinities.  

Order Sizes & Service Type

Segmenting order size and service (delivery or retail) is also a way for dispensaries to gain a more granular understanding of their customer's behaviors.

Order size is a key metric, especially when it comes todiscounting and revenue.

One problem we see in general marketing platforms– like dispensary loyalty programs– is that order size is often unaccounted for in the discounting process.

Percentage of total sales revenue of discounts based loyalty program.

For example, in our study on loyalty programs, data revealedthat program affiliates didn’t order more per visit and still received discounts, which depreciated dispensary revenue up to 3x.

Essentially, establishing segments based on order size is a necessary follow-up to groups based on order frequency.

Dispensaries, in turn, can effectively discount high-spending customers versus those who may not order as much per visit.

A lasting thought is to segment customer preferences towards in-store versus delivery service. Cannabis delivery boomed during 2020 in the wake of the COVID-19 pandemic.

While states like California may be slowly opening up again, it remains essential for dispensaries to identify customers that are still more comfortable with only delivery.

Targeting preferred service types helps dispensaries achieve personalization– especially when public health is top-of-mind for consumers nationwide.

Advanced Segmentation: The Final Frontier

It’s important to clarify that combining the segmentation approaches above is the most advanced and promising format for dispensaries interesting in proactively using customer data.

You’ve probably recognized that even one customer could fitinto many segments based solely on order size, frequency, brands, or products.

Advanced segments combine customers that exist in the cross-sections of key categories into highly targeted groups.

For example, a dispensary might want to target customers that typically order high quantities of Old Pal every two weeks.

Creating a segment that combines these characteristics would allow them to discover customers in the group and deploy marketing to bring them back to the store.

Here's how to get started with establishing advanced segments:

Fortunately, platforms like Happy Marketers streamline this process entirely, saving dispensaries hours of data maintenance time while providing awareness to new revenue opportunities.  

Happy Cabbage’s Happy Marketers helps dispensaries discover and target their most valuable customers. Keen to learn more? Sign up for a demo today!