Marijuana Marketing Strategies that Build Brand Equity

In those states allowing recreational marijuana use (including the four that passed legislation this past November), existing medical cannabis dispensaries as well as new market entrants may plan to serve both recreational and medical cannabis users to reach the broadest base of consumers and drive sales volume.

These companies may give little consideration to the effect a single, or “parent” brand has on brand equity and positioning. In many cases, serving both consumer segments under a single brand is NOT the best means for capturing market share and establishing consumer loyalty.

Serving the largest consumer base, regardless of the business model employed behind it, is not necessarily the best means to grow revenue. In that regard, the following examines the differences between medicinal and recreational users, identifies the drawbacks of marketing to both groups under a parent brand, and introduces an alternative strategy for consumer marketing by cannabis dispensaries that creates clear competitive advantages.

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Targeted Marijuana Marketing Strategies

Unique Consumer Profiles

Let’s begin by exploring the consumer profiles of recreational and medical cannabis users.

Recreational users are typically characterized as having:

• A strong interest in the psychoactive effects of cannabis;
• A high willingness to experiment with cannabis in a variety of forms;
• An inclination towards new product adoption;
• Sensitivity to product pricing; and
• Greater reception for more than one method of administration.

On the other hand, medical cannabis patients are often:

• Loyal to a particular product or category of products;
• Purpose-driven to treat their condition and improve overall quality of life;
• More personally connected to the dispensary agents/staff, whose product guidance they come to rely upon;
• Concerned with quality, product consistency and predictable effects;
• Three times as likely as recreational users to use cannabis on a daily or almost daily basis; and
• Higher consumers of non-psychoactive products.

As evidenced, these groups are remarkably different. They have very dissimilar objectives which, in turn, is reflected in their purchasing decisions. Therefore, a “one size fits all approach” to serving both user groups is undoubtedly sub-optimal.

The Disadvantages of Marketing to Both User Groups Under the Parent Brand

There are a number of drawbacks to marketing a parent brand to both medicinal and recreational users, that can ultimately weaken the brand, create consumer confusion and reduce pricing power.

Firstly, there is the risk of possible brand degradation.  The credibility of the dispensary agents’ product recommendations to medical patients may be called in to question. This may give rise to a disconnect with the patient base and make efforts to build patient loyalty increasingly more difficult. The dispensary’s unique selling points may become diluted, resulting in product offerings that disregard consumers’ specific needs. Even more, in light of the nascent cannabis industry in so many states, dispensaries may still be looking to develop their brand equity. When these negative associations come in the infancy stages of brand development, this can jeopardize the dispensary’s very existence.

Secondly, brand messaging may become confusing and divergent. For recreational users, there is an emphasis on the social aspects of cannabis consumption. For medical patients, there is a focus on compassion and healing. Advertising dollars spent to convey both of these messages may be unclear and confuse potential consumers, producing a low ROI through marketing channels that are oftentimes quite costly. Additionally, the positioning of the brand at the store itself, when it caters to both groups of users, ignores the need for distinctive retail experiences. As an example, an interior design resembling a head shop may be better fitting for recreational users whereas medical patients may prefer a pharmacy type of layout that endorses simplicity and privacy.

Finally, consumers may fail to recognize the value of the product offerings and resort to the bottom line of price. Competing on price alone commoditizes the product and squeezes margins. These margins may already be tight if the dispensary is not vertically integrated (or, in other words, does not have full control over the plant from seed to sale) and must account for an inflated cost of goods. This perception of product non-differentiation can stunt growth and alienate medical cannabis patients altogether.

An Alternative Strategy for Consumer Marketing

As an alternative marketing strategy, I propose bifurcating the consumer base and creating extensions from the parent brand to best meet the needs of each user group.

Dispensaries that engage in bifurcation, or segmentation, will improve consumer retention, generate enhanced profitability, and maximize market share. For those dispensaries already operating in medical cannabis markets where recreational cannabis programs exist, they can make best use of their established brand by launching product extensions for the recreational market that generate logical and meaningful associations to the parent brand. For instance, let’s say there is a medical cannabis dispensary called CannaPure. When CannaPure decides to enter the recreational market, they may be better off extending their category of products under a line called CannaPure Social. Although there is a clear link between the two brands, they are notably distinct, making them more understandable and compelling for consumers.

Competitive Advantages Realized Through Market Bifurcation and Extension of the Brand

Dispensaries that exploit this strategy of consumer bifurcation and brand extension will realize market-leading competitive advantages including:

• Greater goodwill and loyalty through a closer connection with the patient;
• Enhanced opportunities to strengthen the brand, i.e. for medical patients with credible members of the medical community;
• Improved target compatibility, as dispensaries that segment out medical cannabis patients may be perceived as offering more efficacious treatment than ones that cater to both medical and recreational consumers (of particular significance with the anticipated passing of cannabis as an FDA approved drug within the next 10 years);
• Differentiation through niche marketing amongst a sea of dispensaries serving both consumers under a single, parent brand; and
• Superior performance in marketing campaigns, for example, via a focused approach toward healthcare practitioners and condition-specific ailments.

Best Meeting the Needs of Your Target Market

Here’s the bottom line: In the burgeoning cannabis industry, dispensaries should carefully consider the consequences of marketing to both medicinal and recreational cannabis users under a single brand. Marketing under a single, or parent, brand can negatively impact brand equity and positioning.

Enduring and successful dispensaries will be those that most ably meet their consumers’ needs. Dispensaries can better serve consumers by segmenting the market and shying away from one-size-fits-all branding in favor of more appropriately, and simply tailored brands and offerings.

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