December 23, 2020

Do Dispensary Rewards Programs Create Loyalty?



When looking for the best Dispensary Loyalty Programs, there are a number of items that need to be considered before deciding which dispensary rewards program you will implement as part of a comprehensive dispensary digital communication strategy.

Dispensary Loyalty Programs - Do They Work?           

Dispensary rewards programs have been downplayed at times by the media as merely low-cost promotional vehicles that provide no real value and have even been called a short-term fad.

And yet these dispensary brand loyalty programs have been in use for over a decade, with more and more dispensaries climbing aboard the rewards program bandwagon. Consistently, we are seeing marijuana dispensaries  spending thousands of marketing dollars in developing and implementing dispensary loyalty programs.

This interest from cannabis dispensaries is well justified. Dispensary Rewards Programs have been proven to build clients’ loyalty, and most forward thinking dispensary owners now appreciate how valuable that loyalty can be. 

A dispensary’s most loyal clients are also its most profitable.

Every year that a customer continues their relationship with a dispensary, the cost to serve them diminishes. Over a sufficient length of time these loyal clients become business builders by buying more cannabis products, paying premium prices, and providing a source of referrals.

However, dispensary rewards programs are still often misunderstood. Too often dispensary owners use their dispensary messaging platforms for merely short-term promotional giveaways and monthly specials. When approached in this regard, dispensary loyalty platforms can create some real value by motivating a client to try a new product, but unless these programs are designed to actually build loyalty they will fail to provide full value to the dispensary owner. 

A properly designed dispensary messaging platform, as part of a larger dispensary loyalty strategy, will accelerate the customer loyalty life cycle, and can encourage new clients to behave like they have been buying there for years.

Every dispensary needs to find ways to share value with its clients proportional to the value the clients’ loyalty creates for the dispensary. 

The main goal should be to design a system where clients are continually educated about the benefits of loyalty and they must be motivated to seek them. This requires a sustainable approach to a cannabis dispensaries marketing plan.

The Rules of Dispensary Rewards Programs

Since dispensaries began, owners have found ways to build customer loyalty. Many smaller dispensary owners often get to know their clients personally and offer them rewards or special attention by notifying them of upcoming sales events or giving them a free product at the end of a transaction. These owners know that by delivering increased value to clients turns them into loyal clients and that these clients only become more profitable over time.

But as dispensaries increase in size and complexity, their ability to uncover which clients are the most profitable becomes more and more difficult. Staff turnovers only make the problem harder to solve as personalized client relationships disappear with the staff exiting. 

Forward thinking dispensaries, when looking to increase market share and efficiency, often compensate for the loss of these personal relationships through the use of cannabis analytics, data-driven messaging, and database marketing in order to detect which clients are the most valuable.

For those investments to provide a decent return dispensaries must also keep in mind certain principles of effective value sharing.

All dispensary clients are not created equal.

Realizing the benefits of customer loyalty requires the admission that not all clients are equal. In order to maximize profitability, a dispensary must give its best value to its best clients. That is, clients who generate superior profits for a dispensary should enjoy the benefits of that value creation. As a result, they will then become even more loyal and profitable.

Unfortunately, most dispensaries inadvertently treat all clients as equal, providing them with products of equivalent value regardless of how much they spend or how long they’ve been clients. A dispensary that offers average-value products and services to everyone ‘carte blanche’ wastes resources by over-satisfying less profitable clients while under-satisfying the more valuable ones. The outcome is predictable and high profit clients defect, and less desirable clients stick around

Value created must exceed the cost of value delivered.

Many dispensaries launch rewards programs without thoroughly assessing their own needs. They haven’t considered the link between the value delivered to clients and the value created for the dispensary. A marijuana text loyalty program should not give something for nothing: The profits will be minimalized, and the costs will stay real.

Customer behavior should drive value sharing.

Rewarding—and thus reinforcing—desirable behavior may seem like an obvious tenet of program design, but the marketplace is full of dispensaries that reward the talk instead of the walk. One dispensary, for example, recently launched a dispensary brand loyalty program that gives new clients 500 bonus points redeemable for products. That initial bonus puts clients well on their way to earning  a new bong, so the initial value of the offer is very high. Yet there is nothing to prevent clients from signing up, redeeming their points, and then moving on to another store, which does nothing to benefit the dispensary over the long run.

No dispensary can make money on clients who are chronic switchers.

Such promotions are common today in consumer product businesses, and  this strategy has created a segment of chronic switchers, who routinely shop for the lowest prices they can find. A dispensary will want to avoid those types of clients: because the economics of cannabis brand loyalty guarantees that no dispensary can make money on them.

Long-term perspective is critical 

One time marijuana promotions can cost a great deal of money and do not, typically, generate brand loyalty. They do change client behavior, but often in ways that are not beneficial in the long run. Positive results are washed away as soon as competing dispensaries launch their next promotions.

Many dispensaries have used draws, for instance, to increase response rates from potential new clients. A store display might present clients with a chance to win a free ounce of cannabis or preroll. Such offers generate short term excitement but once the lottery ends and most clients turn out to be losers, defect. In the short run, the dispensary hits its numbers, but, in the long run, it is no better off.

The full potential of value sharing through rewards is realized only when clients change their habits to become sustainably loyal. And that shift occurs only when the dispensary has developed and communicated a proposition that clearly has long-term benefits for the consumer. - Harvard Business Review 

Offers must target attractive clientele.

Progressive dispensaries understand the benefits of targeted marketing, data-driven messaging, and the need for a segmented approach to developing products and value propositions. 

In order for a cannabis rewards program to be a profit center the payout must be linked to desired consumer behavior. 

Investing in cannabis analytics they are able to generate elaborate demographic or psycho graphic segmentations. A well-designed marijuana rewards program targets the most valuable client segments, while at the same time, saves the dispensary money by discouraging clients who will be less valuable. 

Watch for the next article in this series where we examine the strategies behind successful cannabis loyalty programs,  dispensary digital communication, and sms text messaging for dispensaries.

If your dispensary is interested in having a conversation around generating customer loyalty give the team at Happy Cabbage Analytics a call.


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