December 17, 2020
Key Metrics Every Dispensary Owner Should Know
Gianna Gard

When it comes to running a successful dispensary, or any business for that matter, knowing a few key metrics provides you with the ability to make the best decisions for your business based on data you compile during the regular course of business. 

In this article we will look at several of these critical key metrics and how they affect your dispensary and its overall success. 

Referral Retention

Many business owners have conflicting beliefs over which is most important: customer retention or customer acquisition. 

Customer acquisition is the first step in retaining customers and turning them into brand advocates. Regardless of customer experience or engagement, a business that’s starting out should focus their efforts on growing their brand community.  

However, for established businesses, it’s often wiser to focus your marketing efforts on customer retention instead. Here are a couple quick reasons why:

  • It’s Cheaper
  • On average, retaining current customers costs 70% less than it costs to acquire a new customer.
  • It’s Faster…
  • Selling to an already established client is faster because they already know your products, whereas new customers require product education  before a sale is made.
  • It Better Positions Your Business…
  • Strong customer retention efforts can give you the tools to create highly personalized and targeted promotions to maximize your businesses chances of success.
  • Retention = Acquisition

Customer loyalty is worth its weight in gold. Word of mouth advertising is not only free but it is one of the most credible ways to advertise your business.. Our data shows that in the Bay Area cannabis community alone: 

  • Regulars make up less than 25% of the customer base but drive 67% of revenue
  • Average ticket size for regulars is 10% greater than non-regulars
  • Customer lifetime value of regulars is 3x that of non-regulars
  • Regulars are 20% more likely to have placed an order in the past 60 days

Average Transaction Value (ATV)

Often referred to as ATP or average transaction price, the ATV is the average amount a customer spends per order in your dispensary. We calculate the ATV by dividing the total sum of all transactions by the total number of transactions. 

The ATV of your dispensary business is the average dollar amount that a consumer spends in your business in one transaction. 

When we see a decrease in Average Transaction Value in any store it is usually a sign that something isn't right. Unless you have recently decreased your prices then a lower ATV is a signal for you to do some deeper digging. 

One reason for a drop in Average Transaction Value is that your customers preferences have changed and you have not adjusted accordingly. Or it may be a sign that your bud tenders aren't spending enough time with clients to make sure they find what they are looking for. (For more tips on helping your budtenders optimize their performance, click here). 

By studying your sales reports for trends in ATV you can usually spot a problem before it becomes too big.

ATV definition

  • How can data analysis help you with Average Transaction Value?
  • Helps Your Business Determine Product Strategies
  • Helps Your Business Evaluate Pricing Strategies

  • Ways to Increase Your Average Transaction Value
  • Up-Sell Your Products
  • Offer a Great Customer Service Experience
  • Offer Flexible Payment Options

Customer Frequency

The term “customer frequency” describes how often customers visit your online or retail store. It is usually expressed in terms of visits per year and it is in your advantage to know how many times on average your customer comes by your business.

  • Customer frequency is calculated by dividing the number of orders within a certain time frame by the number of unique customers. Combining customer frequency with Average Transaction Value allows you to assess customer loyalty and customer buying behaviors.
  • A decrease in customer frequency most likely means that your customers are going somewhere else to buy their goods. 

Gross Margin Return on Investment (GMROI)

Gross margin return on investment (GMROI) is an inventory profitability evaluation ratio that analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing the gross margin by the average inventory cost and is a highly effective metric when looking at the profitability of your dispensary.

  • The gross margin return on investment shows how much profit inventory sales produce after inventory costs.
  • A higher gross margin return on investment is generally better, as it means each unit of inventory is generating a higher profit.
  • The gross margin return on investment  can show substantial variance depending on market segmentation, the period, type of item, and other factors.

Hourly Productivity

Labor productivity measures the hourly output of a country's economy. Specifically, it charts the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor productivity depends on three main factors: saving and investment in physical capital, new technology, and human capital. 

  • Labor productivity measures output per labor hour.
  • Labor productivity is largely driven by investment in capital, technological progress, and human capital development.
  • Business and government can increase labor productivity of workers by direct investing in or creating incentives for increases in technology and human or physical capital.

Traffic Flow Metrics

A critical metric to watch is your traffic flow in your dispensary. Having a clear vision of when your peak hours are can help you make certain you have enough staff to handle the increased volumes during busy times. And by scheduling fewer staff during the slower times you will keep your bottom line healthy. 

Top Sellers

Every store owner is curious as to what products are selling the best and which ones are making customers happy. By analyzing this metric you can stay on top of your product marketing, inventory ordering and identifying the best suppliers. 

Monitoring your dispensaries best sellers will help you control your inventory by knowing when to transfer new stock from safe to shelf. Using a dispensary POS software system that produces real time reports is a must these days for any cannabis dispensary.

While analyzing metrics reports may not seem very appealing to some, they have a significant impact on dispensary profits. Happy Cabbage Analytics makes it easy for dispensary owners and managers to keep track of data on the go and make decisions that improve the overall bottom line. 


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