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February 8, 2021

The Best Dispensary Loyalty Program? Data Says Not Having One

Dispensary loyalty programs are of growing popularity in the cannabis industry. However, new data reveals potential complications in their ability to create committed clientele and a worthwhile revenue base.  

 

Happy Cabbage measured the impact of rewards programs on customer behavior and sales.  Keep reading for the data and strategic recommendations for dispensaries in 2021.

 

Do Customers Spend More in Dispensary Loyalty Programs?

 

Loyalty-based rewards programs are said to encourage consumer spending. Our data shows average ticket sizes consistent with this claim.

 

The average dispensary purchase in loyalty programs was $134.66. General discount purchases averaged $100.37 and no discounts were $89.71.

 

charts on dispensary loyalty programs comparing average ticket sizes between dispensary program discount types
Average ticket sizes across loyalty, general, and no discount programs. The average ticket size in dispensary loyalty-based programs is greater than those in general or no discounts.

 

Loyalty programs offer more exclusive deals and discounts to participants, which helps explain larger ordering trends. Consumers walk out with more products. Who wouldn’t want that?

 

But whether loyalty-based rewards programs encourage customers to come back to the retailer remains in question.  

 

Customer Frequency & Dispensary Loyalty Programs

 

While cannabis consumers generally spend more per visit at dispensaries with loyalty-based rewards programs, it does not mean they purchase more frequently.

 

These programs may not make much of a difference when it comes to measuring and increasing customer frequency.

 

Happy Cabbage found that customers in dispensary loyalty programs on average returned to make their next order after 19.41 days. Non-loyalty program customers averaged about 19.1 days.

 

charts on dispensary loyalty programs comparing total sales revenue percentages between dispensary program types and non-loyalty programs with number of days between orders
Average number of days until next order and customer program type. Loyalty Program customers ordered on average 19.41 days after their previous order. This was 0.40 days greater than customers in non-loyalty-based rewards programs.

  

Customer frequency similarities between these cohorts lead to an essential question about loyalty rewards and customer commitment.

 

Are dispensary loyalty programs worth implementing if they don’t also encourage more visits to the dispensary?

 

Our data continues to suggest otherwise.

 

Rewards-Based Discounts & Dispensary Revenue

 

Given that there is little difference in customer purchase frequency based on loyalty program affiliation, we must look to sales revenue to assess their value.

 

Happy Cabbage measured the proportions of loyalty and regular discounts in total point-of-sale (POS) revenue.  

charts on dispensary loyalty programs comparing total sales revenue percentages between loyalty programs and non-loyalty programs
Type of discount and total point-of-sales (POS) revenue. Regular discounts contributed greater to total sales revenue than loyalty-related programs.

 

 

While loyalty-related discounts amounted to 5% of total sales, regular discounting was worth $5M or 16% on average.

 

Even in dispensaries with point-based loyalty programs, non-loyalty-based discounting was $2M or 13% on average (compared to 5% for point-based loyalty discounts).

 

It seems loyalty discounts that lead to static consumers purchase rates could potentially detract from overall dispensary growth.

 

No increases in order frequency negate the value of loyalty-based discounts in higher ticket sizes because they due to not contribute more to overall dispensary sales.

 

Furthermore, our findings indicate that implementing loyalty rewards systems could depress dispensary revenue up to 3x.

 

This data offers insight and a potential direction for dispensaries considering loyalty program strategies.

 

Personalization Over Loyalty-Based Strategies

 

Our findings suggest that customer frequency is a decisive factor in retail revenue growth.

 

Therefore, it seems better to implement tactics that help create more regular clientele instead of loyalty-based rewards that predominantly incentivize single-time purchases. Dispensary loyalty programs are generally referral,visit, or points-based and do not personalize loyalty to customer interests. They focus on the retailer instead of the consumer.

 

In place of using these systems, dispensaries should focus on marketing that personalizes customer experiences, which has shown to increase both buying frequency and spend.  

 

Happy Cabbage recommends cannabis SMS platforms like Polaris, which help retailers deliver personalized text messages to customers based on targeted interests.

 

TLDR? Here Are The Key Points:

 

1.   Cannabis consumers in dispensary loyalty programs generally spend more than those that don’t.

 

2.   There is likely no significant difference in customer frequency based on loyalty program affiliation.

 

3.   Dispensary loyalty programs can negatively impact overall sales revenue up to 3x. This could be due to static purchase frequency in loyalty-discounted groups.

 

4.   Dispensaries should consider personalized marketing strategies like SMS campaigns to increase customer frequency and spend.

 

Happy Cabbage’s Polaris helps dispensaries increase revenue through customer recapture and personalized marketing. Sound good? Click here for a free demo!

 

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