At the beginning of 2022, the economy took a turn for the worse. A number of factors contributed — the end of pandemic economic stimulus programs, product shortages due to supply-chain disruptions, and the Federal Reserve’s interest-rate hikes — but the bottom line is inflation stood at about 8.3 percent in May, far above the 2-percent target the Federal Reserve set when it began trying to avert a recession. Consumers are squeezed between stagnant wages and skyrocketing prices for food, gasoline, housing, utilities, and other essentials. Consequently, retailers are reporting a downturn in sales compared to the same time last year. Investment capital is drying up as margins compress and the stock market exhibits extraordinary volatility.
It’s a stressful time for business operators. Although the cannabis industry weathered the height of the pandemic better than most other consumer-packaged-goods (CPG) sectors and came out even stronger on the other side, it’s not immune from the same challenges facing other industries — and some challenges all its own. While products remain in demand, competition is increasing for the reduced amount of disposable income consumers have to spend. Shoppers are increasingly price-conscious, putting downward pressure on revenue, and few brands have enough cash on hand to maintain a significant burn rate for long. With industry veterans warning of a Darwinesque shakeout looming on the horizon, businesses that emerge from this difficult stretch likely will have supercharged sales teams to thank.
Fortunately, more channels than ever before are available to help companies acquire and retain customers. Capitalizing on them requires a dialed-in, multifaceted strategy designed to bump products and services to the top of consumers’ minds when they have their wallets in hand.
Regardless of the sector in which a business operates, the message from experts is simple: Diversify your sales and marketing channels. Lean into the ones that are working for you now, but encourage growth by adding new methods of reaching customers and maintaining their interest.
Just a couple of years ago, walking into a store or calling a delivery service were the only ways consumers could purchase weed legally. Today, the industry enjoys a multi-platform sales environment, and that has placed new demands on sales and marketing teams to devise a complex funnel with a wide brim and a variety of outputs.
“Sales fuel marketing, and marketing fuels sales. They’re symbiotic,” said Rob Costello, partner at 10K Advertising, a marketing agency whose clients include Stiiizy, Old Pal, and Pabst. “If you build the right ecosystem for them to grow together, you’ll have a happy, healthy business.”
Sales and marketing strategies for reaching today’s consumers can be divided into two categories: offline and online, with key points of overlap and opportunities for integration.
Bricks and mortar
Unlike other CPG sectors, legal cannabis transactions in the real (as opposed to digital) world occur in only one place: dispensaries. As long as the industry remains federally illegal — and likely for quite some time after prohibition ends — dispensaries will continue to function as gatekeepers for everyone else in the supply chain. New consumers want budtenders, not chatbots or reddit forums, to answer their specific questions and guide them toward the right products. Experienced consumers like to see, smell, and possibly even touch products, and the digital world will never offer them that opportunity.
In-store sales techniques have remained fairly consistent; continuing education for staff members will ensure revenues and customer satisfaction remain consistent, too. “You don’t need to do anything crazy, but you have to do the basics well,” said Jason Vegotsky, founder and chief executive officer at Petalfast, a sales and route-to-market platform.
Giving budtenders a chance to sample products is the first step to preserving or increasing sell-through ratios. Imagine a consumer visits a store after seeing a brand’s sleek content on Instagram and asks a budtender about the product. The budtender admits they haven’t tried that brand, but they have tried a similar product and they loved it. Whoops! The sleek brand’s lead became someone else’s customer because they didn’t respect the role budtenders play. It’s easy to have a sale slip away if product brands don’t play smart in the store.
“Sampling is the number-one thing,” said Vegotsky. “You have to give budtenders all the samples you possibly can, and you have to do it consistently because there’s turnover. You can’t just say, ‘Oh, I already gave samples to that store last year.’ Cool. The whole team is gone now.”
Swag like T-shirts, hats, lanyards, and pins help as well. Budtenders are low-wage employees, and some cool, free stuff can keep a brand top of mind when it comes time to make a sale. If a T-shirt costs $5 to make and the budtender appreciates the gesture and thinks more highly of the brand because of it, the investment will produce a return, albeit one that’s nearly impossible to quantify.
Another essential practice for both retailers and brands that want to move products is patient appreciation days (PADs), also called demo days, during which brand representatives establish a presence in a dispensary for a few hours and introduce products to customers and the store’s staff. “Our data tells us at an average PAD, approximately 34 percent of interactions result in a sale of one or more retail units,” said Kevin Lichtfuss, founder and CEO of TrustTree, a brand-support and field-marketing agency that executes demo days for more than fifty brands.
But for Lichtfuss, unit sales during a PAD are only part of the equation. “There are several expected outcomes from PADs: sell-through in the dispensary, educating customers and budtenders, promoting the brand, and establishing and strengthening relationships between the brand and the dispensary staff,” added Lichtfuss. “We strongly believe converting staff into brand ambassadors and enabling them to be as effective as they can be is the ideal outcome of PADs for the dispensary.”
At Hierba dispensary, demo days are only as effective as the brand that undertakes them. “If the brand is dialed in, has the promo product there in advance, and has a rep[resentative] who’s energetic and ready to sell, then they can be very impactful,” said Guillermo Menjivar, owner and operations lead. “But if the brand isn’t trying — and we see that a lot — then in-store demos aren’t worth [the hassle] and can sometimes reflect badly on the brand.”
Consumers are trending toward extreme price sensitivity at the moment, and that is likely to continue as the country flirts with a recession and the industry continues its slog against an illicit market. “Your products have got to be price-competitive,” said Vegotsky. “I don’t care what you believe. This is a deal market, and consumers buy on deal. Nobody is loyal. So if you’re not going to be on-deal, you’re going to struggle to get velocity.”
According to Menjivar, “Deals are essential in our store. “We serve a working-class community that shops on value. A great deal puts the product in people’s hands so they can try it and, if they like it, buy it again.”
The chief drawback to being deal-heavy is the risk of training customers to shop only deals. Lichtfuss believes the tactic can be particularly problematic with buy-one-get-one (BOGO) sales. “BOGO is a tool that should be used sparingly and at the appropriate times,” he said. “On special occasions, BOGOs are a powerful tool to stand out and get your product in the hands of customers. However, pushing BOGOs all the time undermines brand awareness and conditions customers to seek promotions regardless of the brand.”
While each of the above strategies will help drive in-store sales alone, combining any or all of them with an expanded yet hyper-local co-branding strategy can be very effective when retailers and brands seek to establish key partnerships and stable consumer bases in specific areas. Co-branding once meant retailers would buy billboard space and charge brands $500 per month to slap their logo on it somewhere. “There is zero return on investment (ROI) on that for the brand,” said Costello of 10K. “They don’t want to pay for a billboard that markets the store but does little for them other than marginal top-of-funnel awareness.”
10K works with brands to identify key retail partners and develop multichannel local marketing campaigns using the brand’s appeal and positioning to direct consumers toward the store. The result is a campaign that “swarms” customers with messaging across a variety of touch points in both the brick-and-mortar and digital realms.
“A typical twelve-week campaign of this kind might include things like billboards, posters, a street team, non-medicated sampling, email and text campaigns to the store’s customer list, a social media takeover, PADs, and a rotation of in-store deals,” said Costello. “In this scenario, everyone is playing to their strengths: The brand generates the awareness and handles the remarketing and the retention, with the store acting as the point of acquisition.”
Pixels and gigabytes
Even if in-store sales are brisk, dispensaries and brands that embrace the digital realm will find themselves better able to weather economic challenges. Web-based platforms are vital channels for driving sales among consumers who can’t or won’t shop in person, and a multitude of them exist. Each facilitates stronger, more frequent, and more profitable interaction with customers, most of whom expect at least supplemental digital communication.
According to Weedmaps, online orders increased by 55 percent during the first half of 2021 compared with the same period in 2020. Fully capitalizing on the opportunity means running a cohesive sales and marketing strategy that cycles customers and their data through a funnel, maximizing lifetime value and, in turn, generating brand and dispensary loyalty. For optimum success, a digital plan should tightly integrate with efforts in the real world.
An increasing percentage of transactions are beginning online with a brand’s website, which then utilizes a store or delivery service as the point of conversion and fulfillment. The rapidly evolving strategy benefits not only the brand, but also distributors, retailers, ecommerce platforms, and consumers. The simplest way for brands to begin stimulating online conversions is by directing their customers to dispensaries or ecommerce platforms using organic website traffic, social media, and email.
Costello believes all brands should try to identify whether website visitors prefer to fulfill their purchases at a dispensary or through delivery. His clients use an age gate with a ZIP Code tool that funnels visitors to a store locator provided by A Proper High. “Store locators are a really underappreciated and underutilized tool,” said Costello. “Not only do they help with conversion, but they also help identify key retail partners and give you data to expand the relationships through co-branded campaigns.”
Be aware websites, even if they exist only as levels in a sales funnel, must be easy to use and provide something of value to visitors (education, entertainment, discounts, etc.) in order to attract and hold their attention. More importantly, consumers must be able to find the online destination they seek, and most people start their search at Google. A website buried on the second or later pages of search engine results won’t capture that lead, and this means the competitor that invested in content and search engine optimization (SEO) will see the lion’s share of relevant organic traffic.
“It starts with SEO,” said Peter Machalek, chief revenue officer at Greentank Technologies, a vape-hardware manufacturer. “Having online visibility and showing up above the fold on keyword searches for your industry is invaluable.” In an increasingly digital world, investing in a good website is essential, he added.
Direct-to-consumer (DTC) sales is an emerging opportunity that’s likely to grow in prominence as a legitimate channel for building customer loyalty. Brands work with a specialized delivery partner offering a white-label or co-branded solution that embeds checkout functionality into the brand’s website. The delivery service typically processes and then fulfills orders during a designated time window. “DTC gives brands the opportunity to start a conversation with their customers and puts them into a tailored communication flow that delivers different content to different customer segments to increase conversions and retention,” said Costello, who oversees the DTC strategy for several major companies.
He believes experienced consumers and a strong top-of-funnel strategy that drives traffic to a website may allow DTC to grow into a significant revenue source. The customer data collected can be used to support retail partners, promotional merchandise sales, and events.
Third-party service providers like Weedmaps, I Heart Jane, Leafly, and A Proper High engage potential customers using search engine optimization, social media, and email marketing, connecting people with brands and retailers so they can order ahead at stores in their area. Nurturing relationships with the platforms isn’t a bad idea for brands or retailers, since their well-groomed product pages with clear copy help increase top-of-funnel awareness and avoid missing potential conversions.
Everything outlined so far, as important as all of it is, means nothing if retailers and product brands don’t connect. Wholesale is where consumer engagement really begins — and where it will end if the sales team isn’t adept at presenting retail buyers with products that deliver on unmet customer needs or desires.
As it does with consumers, price looms large as the most important variable for wholesalers, regardless of the region or sales channel. Getting this right while keeping some headroom for flexibility with buyers at key accounts is imperative. “It’s important for whoever is leading your wholesale operation to be familiar with the margins and cost of goods,” said Don Sprenkle, founder of Collaborators, a wholesale, data, and field-marketing agency based in the Northeast. “They need to know the floor they can take the price to in order to close an important account. A lot of businesses aren’t empowering their sales team with this kind of information, and it hurts them.”
Relationships still go a long way in this industry, and the need to get focused facetime with one of the most pivotal roles in the industry cannot be understated. “It’s important to remember this is still very much a people industry,” said Sprenkle, who has built sales teams for several multistate operators including Curaleaf and Ascend Wellness Holdings. “A lot of buyers still want to connect in person. Whenever I’m out in the field with my reps, we always do the rounds, smoke them out, and focus on building those personal relationships.”
Sprenkle has found the most success working with sales reps hired away from the illicit market. He said their familiarity with the product, common lingo with buyers, and hustler mentality make them more effective walking into a store than a suit from a CPG company.
What does Sprenkle do when met with a closed door? “I do a little research into what sells at that store and what the budtenders like, then I come around with super-fresh flower samples or pre-rolls that fit that bill and hook up the staff. I’ll even do follow-ups with a box of coffee or some [sandwiches],” he said. “Wholesale is B2B. It’s all relationships.”
Despite Sprenkle’s emphasis on face-to-face interaction, online marketplaces like LeafLink and Leaf Trade are used widely by retail buyers and brands, particularly in emerging markets where supply and demand are in flux and wholesale teams are under construction.
LeafLink, founded in 2016, operates in thirty markets and processes more than $5 billion in annual orders. A hallmark of the business is a financing program with a $250-million credit facility, injecting some much-needed liquidity at the point of transaction.
“Businesses need credit and have difficulty accessing it in our industry, and we have the data to help make those informed credit decisions,” said Alex Feldman, the company’s general manager of insights and marketing services products. “We’ve made significant loans over the past two years that have helped facilitate the speed with which buyers can purchase product and sellers can get cash faster, which they can use for building their brand.”
Distributors play a key role in every industry. By presenting a portfolio of products, they allow buyers to bundle purchases together to streamline payment, delivery, and communication with brands.
California currently is the largest distributor market, led by Herbl, Nabis, and Kiva. Herbl and Kiva are full-service distros, meaning they have an active sales team selling a curated menu of brands. Nabis, on the other hand, acts more like a marketplace, leaving all sales in the hands of the brands.
“In the simplest terms, the distributor gets the product onto the shelf and manages the relationship with the retailer, and the brand gets the product selling,” said Mike Beaudry, founder and CEO of Herbl. “Distributors can work with the brand to alert them to opportunities in the stores, like merchandising, events, and PADs, but the brand has to execute on these to ensure they aren’t log-jamming the store with product they aren’t helping to sell.”
His advice for working with distributors? Support their efforts to move product by providing them with the best collateral you can muster, solicit regular feedback, seek merchandising opportunities, and encourage their sales teams with sales performance incentive funds (SPIFs).
As the industry has flourished, so too has a brimming and ever-expanding directory of ancillary businesses to support its growth. Selling within the industry is significantly more straightforward when you don’t touch the plant, and many ancillary businesses can transport their products or services across state lines. This gives them an ever-widening addressable market as states and countries come online and existing markets add additional licenses.
Business-to-business (B2B) deals tend to be considerably larger and have longer sales cycles than selling a brand into a dispensary. This means constructing a different sales and marketing funnel designed to nurture leads gradually with more information about the product or service.
After a prolonged period without in-person gatherings, B2B events are very much back. Hall of Flowers is among the most high-profile gatherings for wholesale interaction, partially because the event focuses on solely licensed product brands and retailers. Some exhibitors report the atmosphere is particularly conducive to generating leads and moving existing ones down the funnel.
“Hall of Flowers is more impactful for generating interest as opposed to closing,” said Delia Flanagan, sales account manager for A Golden State and PHASES. “Probably close to 80 percent (of attendees) are actually not looking to place orders on the spot. In our experience, it’s better for building relationships and nurturing the relationships already started elsewhere.”
MJ Unpacked has emerged as another brand-buyer nexus, debuting as an off-MJBizCon event in Las Vegas in October 2021 and following up with a May event in New York City. Organizers intend to continue that bicoastal schedule. Expect to see more buyer-focused events pop up in the coming months as the demand evidently exists.
MJBizCon, MJ Unpacked, the National Cannabis Industry Association, the New England Cannabis Convention … The list of B2B industry events is lengthy, each offering a slightly different reason for being and serving different sectors of the industry. Like the strictly brand-buyer events, more inclusive trade shows are effective for capturing new leads and moving existing leads through the funnel.
“Pre-COVID, 70 to 80 percent of our leads came from events and tradeshows,” said Greentank’s Machalek. “Nothing beats getting in front of prospects when they are in a buying or fact-finding headspace. This is when trust is built.”
As expensive and time-consuming as they are, there is little doubt events represent significant opportunities for ROI in B2B sales and marketing. “These live events bring out most, if not all, of the key brands and employees we need to talk to,” said Machalek. “This area brings us the highest conversion rate of any other marketing project.”
In the final analysis, the more facets and channels a company can use to support its sales and marketing objectives, the better its chance of capturing every last sliver of potential market share. As HubSpot founder Brian Halligan said, “It’s not what you sell that matters as much as how you sell it.” Sell your product or service in as many ways as you can.