Augmented Reality (AR) used to be something us mere humans only dreamt about. Now, AR is the norm and is seen in thousands of apps that people use every day. In fact, the forecast for the AR market is projected to reach up to $75 billion in revenue by 2023.
This is largely in part due to the fact that many smartphone apps now use AR as their default engagement method. And, with more people than ever using their smartphones to shop, the opportunity to engage through AR is easier than ever.
To give you a better idea of just how regularly we engage with AR, think about the popular apps Snapchat and Waze. Both apps utilize AR in some way – Snapchat uses AR to create the app’s infamous filters, and Waze uses AR to offer pop-up coupons and other promos based on the user’s location.
Another popular type of AR is marker-based AR. This form of AR is when a mobile app lets users scan the “marker” or image for a rendered interaction. Marker-based AR can be especially useful to cannabis businesses and offers a relatively low price point and easy execution.
Here are just a few ways marker-based AR can revamp your cannabis business and take you to the next level.
Education
The canna-curious are becoming one of the largest audiences in relation to the sustained growth of the cannabis industry, and it’s more important than ever to provide valuable information to this demographic to encourage their purchasing decision. Considering the fact that 65% of the world is comprised of visual learners, showing a video will have a far greater impact compared to talking them through a product.
By utilizing marker-based AR, a budtender can quickly activate video content from packaging or marketing material to demonstrate how a product works and its most important features. This provides an easy and effective way to quickly educate customers and entice them to make a purchase.
Engagement
Connecting with customers is more important than ever thanks to the fragmented distribution system in the cannabis industry. Capturing customer information and building relationships is crucial to a brand’s longevity.
AR can support two aspects of the customer journey: in-store and post purchase. Fifty-five percent of shoppers use online videos while they’re in the store making a purchase, and eight out of ten people are more likely to purchase after viewing a brand video.
An AR app that provides customers with support during and after their purchases not only encourages sales but also provides brands with the opportunity to engage with push-notifications and direct marketing, which ultimately encourages additional product purchases. With more people than ever using their smartphones to shop, the opportunity to engage through AR is easier than ever.
Experience
The experience a consumer has with your brand can make or break their brand loyalty. As the Chief Marketing Officer for Philter Labs, Inc., I’m constantly looking for authentic ways to connect with our customers.
We recently partnered with Daily High Club, a monthly subscription box that offers custom glass pieces and must-have smoking accessories inspired by cannabis influencers. For June, Daily High Club featured two fan-favorite influencers: MacDizzle420 and Koala Puffs.
Using marker-based AR, we activated a video montage featuring the influencers that could be viewed directly from their custom piece of glassware. Subscribers were able to engage with the influencers while enjoying the glassware which added a new element to the experience that was both engaging and immersive in a way that was never possible before.
At PHILTER, we’re committed to continue using AR to supplement our marketing strategies. As a proponent of the technology, I truly believe that as brands work to differentiate themselves in the space, leaving a lasting impression will be the catalyst for brands to thrive and grow in an increasingly competitive market while also directly impacting a customer’s lifetime value.
For a long time, cannabis marketing didn’t exist. Then suddenly, it did. Fast forward a few years, and this nascent vertical within the modern marketing sphere remains a unique tangle of federal restrictions, state regulations, platform-specific policies and gray-area confusion, complicated by the sudden classification of businesses within it as “essential.”
So, how do today’s cannabis business owners create a marketing strategy that works in 2020? Below, we take a look at how cannabis marketing has evolved over the last few months before diving into one example of a Seattle-area cannabis retailer that’s risen to the challenge, evolving their marketing strategy quickly and successfully to capture an influx of new customers during COVID-19.
Welcome to the Cannabis Industry’s New Normal
The fact that COVID-19 has fully dominated marketing news, along with every other form of coverage, since its inception goes to show just how much it’s changed things. Multinational corporations have paused their entire ad spends; contracts have been backed out of; multi-year marketing plans have been torn up and rewritten, sometimes more than once. Those who were hoping to get back to their previous initiatives within a month or two have seen the error of their ways—and we’re still (though it doesn’t feel like it) less than half a year in.
The biggest change brought on by COVID has been a shift en masse to all things digital. Whereas before most companies met in person, they now meet over Zoom. Thousand-person conferences have become webinars and virtual networking events, while brand activations are now free trial promo codes. Along the way, traditional marketing methods have increasingly been replaced by their digital counterparts. Today, marketers need to meet consumers where they are, and where they are is at home and online.
In most industries, this shift to digital has been happening for many years already. Digital marketing and advertising methods are highly measurable, instantly adjustable and capable of reaching target audiences more directly and efficiently than traditional media. Even before the pandemic hit, cannabis was already playing marketing catchup: For example, while most industries have been using billboards since closer to their inception in the 1830s, the first cannabis billboards post-legalization only cropped up in 2014.
The shift to digital advertising in the cannabis industry has long been stalled by Facebook and Google, both of which reject all cannabis ads and even most CBD ads regardless of the location and legality of the products. Therefore, cannabis brands have evolved their own unique non-digital marketing playbooks. In addition to the prevalence of print ads, physical billboards, sponsored events and in-person pop-ups, many cannabis brands have come to rely heavily on a tactic unique to the industry: budtender education. In the meantime, most cannabis marketers haven’t been leveraging their digital options in full (or, frequently, at all).
Due in large part to COVID-19, the need for this to change has come into sharp relief. In addition to decreased reach for print publications and out-of-home ad space with fewer people spending time in public, events are no longer feasible, and customers are no longer having leisurely chats with their budtenders as they weigh the benefits and drawbacks of different products for sale. Most cannabis stores are minimizing their in-store visitors as well as offering online ordering, curbside pickup services or cannabis delivery. In April Margaret Jackson, a journalist at Marijuana Business Daily, reported on this trend:
“Many marijuana brands have relied on in-store pop-ups and educating budtenders about their products to reach consumers. But as cannabis customers increasingly order products online for delivery or pickup—and with the expectation that these habits will persist after the coronavirus pandemic is under control—marijuana brands should consider more direct ways to reach their audience to ensure sales stay strong, according to industry officials.”
Marketing Isn’t the Budtender’s Job
We don’t know how long COVID-19 may continue unchecked, but as Jackson notes, these shifts in behavior are likely to outlive the circumstances that first necessitated them. Since online shopping, pickup and delivery have quickly become standard in 2020 cannabis sales, a huge marketing gap has been left between consumers—including an influx of new ones—and the brands they’d probably be buying if those brands had been marketing to them before the pandemic.
“I’ve been saying for a long time that the brands we work with need to start marketing themselves directly to consumers,” says Anna Shreeve, managing partner at The Bakeréé. “It’s not the budtender’s job to do that legwork.”
The Bakeréé operates two retail locations in Seattle, one on the north end of the city and the other on the south. Since opening their first store, the team has focused on sourcing products of the highest possible quality at every price point, as well as emphasizing a wide variety of high-CBD options. Shreeve says the store has worked hard over the years to build a knowledgeable clientele that comes in specifically to find new and interesting products. Still, she notes that many customers go directly to the budtenders for suggestions.
Steve Schechterle, director of marketing at Washington’s Fairwinds, which sells both cannabis and CBD products, recently noted the company’s focus on budtender outreach and training in a webinar hosted by the Cannabis Marketing Association. “It’s where we’ve seen the biggest payoff by far,” said Schechterle. “Since we first noticed this, we’ve created an entire program around training Fairwinds-certified budtenders.”
Fairwinds isn’t alone: Many companies come in to meet dispensary employees, offer swag, answer questionsand show off their newest products. That way, when a customer comes in looking for a recommendation, those products are top of mind. For now, that option is largely gone, and Fairwinds (along with a few other early adopters of digital advertising in the industry) has begun advertising online to drive increased consumer demand and avoid having to rely primarily on budtenders in the long term.
Pivoting a Dispensary to Digital Ads
In the past, The Bakeréé—like many retailers in adult-use states—leaned heavily on event-based marketing, including New Years parties, in-store artist showcases, festival sponsorships and more. While they have used digital advertising for their own business, ad campaigns have primarily supported in-person events, such as through ticket sales for the New Years parties. This year, Shreeve had planned to go big on marketing for 4/20, putting together her own concert lineup that included up-and-coming hip-hop names from across the US. She was about to start promoting that concert with digital ads when the pandemic hit.
This ad for The Bakeréé appeared in The New York Times.
By early April, it had become clear that the 4/20 concert was not happening. Shreeve had already lost $20,000 in deposits on artists and the venue, which reduced the budget available for alternate marketing ideas. She decided to run a digital advertising campaign with a single display ad: The goal was to promote online ordering for curbside pickup.
While display ads are not generally known for their conversion rates, they’re a common place to start advertising cannabis due to their price point (impressions generally cost fractions of a cent) and ease of creation. Display ads can be run using programmatic ad tech, the current standard in digital advertising, which accounts for 70% of ads bought and sold in 2020. In most other industries, search and social ads through Google and Facebook are the go-to methods for digital advertising, but since both are closed to cannabis brands, programmatic is the best way for cannabis businesses to advertise digitally.
Starting with one display ad concept, and then adding a second, The Bakeréé ran their ads on a wide variety of mainstream websites, using demographic and geographic targeting to reach potential customers within a specific radius of each store. They also advertised to customers living near the closest competing dispensaries. The ads themselves focused primarily on promoting the ease of curbside pickup as well as offering a 10% discount on all online orders. Sales began to rise almost immediately.
Though April’s increase may have been due in part to 4/20’s impact on sales and a widespread stock-up mindset in the first month of the pandemic, The Bakeréé saw back-to-back-to-back months of YOY revenue growth at both their locations in April, May and June. From display ads on desktop they added mobile to the campaign, and in June added two 30-second video ads to build on the momentum generated by display.
Overall, The Bakeréé has seen a 13-fold return on ad spend, driving $153,000 in revenue from digital ads in the campaign’s first 90 days. The display ads have generated widespread use of the online ordering system, increased basket size to an average of $95.47, and grown online ordering revenue by 389%.
In the second half of the year, Shreeve says she hopes to expand the campaign to include connected TV and digital audio ads, particularly to support the launch of a new website with updated online ordering capabilities in Q3. And she still hopes to see more of the cannabis brands sold by The Bakeréé start advertising on their own, too: To that end, Shreeve is considering working with vendors to run co-branded advertisements that may help them adopt their own digital marketing initiatives sooner and drive more sales for everyone involved.
Back in late 2016, the Oregon Liquor Control Commission (OLCC) legalized delivery for cannabis products. Since then, dispensaries could offer a delivery option for their customers to purchase cannabis products without leaving the comfort of their home. Up until quite recently, that market was dominated by a handful of dispensaries who also conduct business at their physical location, offering delivery as an option while conducting most sales in-person.
Enter Pot Mates. Founded in 2018 by Hammond Potter, the company embarked on the long regulatory road towards licensing and beginning operations. On April 20, 2020, Pot Mates opened for business, starting their engines to take on the fledgling cannabis delivery market in Portland.
Pot Mates is a tech startup through and through. The founders are former Apple employees. Hakon Khajavei, the chief marketing officer at Pot Mates, founded Blackline Collective, a business and marketing consultancy, which is where he joined the Pot Mates team. The other co-founder of Pot Mates and chief technology officer, Jason Hinson, joined after serving in the US Navy as an electronics technician maintaining satellite communications networks.
With the sheer amount of regulations for cannabis businesses, coupled with the new delivery-based business model, Pot Mates had to focus on technology and automation from the get-go.
Not Just an Online Dispensary
For the cannabis companies already offering delivery in the Portland metro area, their websites seem to mimic the in-person dispensary experience. They offer dozens of products for each category, like concentrates, edibles and flower, making a customer pour through options, all at different price points, which can get confusing for the average consumer.
The Pot Mates logo
Pot Mates does things a little differently. “Our start up process was thinking through how do we make this the best experience possible, how do we get rid of the unnecessary junk and how do we do things that only an online dispensary can do,” says Khajavei. They have flat pricing across the board. In each category, almost every product is priced the same, moving away from the common tiered-pricing model. This, Khajavei says, removes the decision barriers customers often face. Instead of choosing the right price point, they can choose the delivery mechanism and effect they desire uninhibited by a difference in cost.
It all comes back to focusing on the simplest way for someone to buy cannabis. “Shopping online is just very different,” says Khajavei. “Our process focuses on the customer journey and limits the number of products we offer. We have a mood system, where we tag our products from reviews to typify moods that you experience with different products.” All of that requires a lot of back-end technology built into their website.
The Long Regulatory Road
Technology has been a strong suit for Pot Mates since they opened their doors, and well before that too. Making the decision to be an online-only delivery cannabis company pushed them to pursue a very unique business model, but regulations dictate a lot of the same requirements that one might see in dispensaries.
Hakon Khajavei, Chief Marketing Officer
The same rules apply to them when Pot Mates submitted their license application. You need to have a signed lease, extreme security measures, detailed business plans, integrated seed-to-sale traceability software (Metrc in Oregon) and much more. “During the months leading up to getting our license, we were able to iron out a lot of the regulatory details ahead of time,” says Khajavei. A lot of that was about security and tracking their products, which is why technology plays such a huge role in their ongoing regulatory compliance efforts. “We built in a lot of automation in our system for regulatory compliance,” says Khajavei. “Because of our technology, we are a lot faster.”
In the end, their licensing process through the state of Oregon as well as the city of Portland took about nine months. Once they had the license, they could finally get down to business and begin the process of building their website, their POS system, their inventory and reaching out to partners, producers, distributors and growers.
For any cannabis company, there are a number of regulations unique to their business. “We need to report every product movement in house through Metrc,” says Khajavei. “Every time something is repackaged it needs to be reported. We focus so much on our technology and automation because these regulations force us to do so.” But delivery companies are required to report even more. Pot Mates needs to report every single movement a product makes until it reaches the customer. Before the delivery can leave the shop, it is reported to Metrc with an intended route, using turn-by-turn directions. It complicates things when you make two or more deliveries in one trip. Reporting a daisy chain of deliveries a vehicle makes with turn-by-turn directions to regulatory authorities can get very tedious.
As far as regulations go for delivery parameters, they can legally deliver anywhere inside Portland city limits. “It is our job to figure that out, not the customer’s job; so we don’t have any distance limits, as long as it is residential,” Khajavei says. “We programmed customized technology that allows us to handle really small orders.” Without a minimum order policy or a distance limit, Pot Mates can reach a much bigger group of consumers.
Launching in the Midst of a Global Pandemic
Chief Technology Officer, Jason Hinson
Luckily, the Pot Mates team received their license just in time. About two weeks after they submitted their application, Oregon put a moratorium on any new dispensaries.
They went forward with their launch on April 20 this year, despite the coronavirus pandemic impacting just about every business in the world, including their marketing efforts tremendously. With cannabis deemed essential by the state, they could operate business as usual, just with some extra precautions. What’s good for PotMates is that they don’t need to worry about keeping social distancing policies for customers or curbside pickup, given the lack of storefront.
They still need to keep their team safe though. The Pot Mates team began 3D printing washable and reusable face masks, getting more gloves for delivery drivers, cleaning their warehouse thoroughly, cleaning vehicles and making sure employees maintained distancing. Pot Mates is even 3D printing enough masks and donating them to local organizations that need access to masks. “As a cannabis company, we always have to handle things with gloves here and take necessary safety precautions anyway, so our response is more about how we can help than what we need to change.”
Advertising Cannabis in a Pandemic is No Easy Task
“The marketing aspect is where covid-19 really hurt us,” says Khajavei. “There are so many regulations for cannabis companies advertising already. Unlike other products, we can’t just put up advertisements anywhere. We have to follow very specific rules.” So, in addition to the normal marketing woes in the cannabis industry, the team then had to deal with a pandemic.
Pot Mates had to scrap their entire marketing strategy for 2020 and redo it. “We wanted to begin with a lot of face-to-face marketing at events, but that didn’t quite work out so well.” Without any concerts, industry events or large gatherings of any kind, Pot Mates had to pivot to digital marketing entirely. They started building their SEO, growing their following on social media, producing content in the form of blogs and education around cannabis and the local laws.
On an Upward Trajectory
Obviously, the short-term problem for a new cannabis company is reaching people, especially during the COVID-19 crisis. “We have a good trajectory though, we know we are growing our business, but we still have a ways to go,” says Khajavei. It doesn’t help that social media companies have nonsensical policies regarding cannabis. Their Facebook page was recently removed too.
Founder & CEO of Pot Mates, Hammond Potter
But the bigger issue here is kind of surprising when you first hear it: “It’s not even a matter of customer preference, a lot of people just have no idea that delivery is even legal.”
It’s pretty evident that cannabis delivery has not really gone mainstream yet. “We’ve told people about our business in the past and a common answer we get is, ‘Oh my gosh, I didn’t even know we could get cannabis delivered.’” It’s never crossed their mind that they can get cannabis delivered to their home. It’s an awareness problem. It’s a marketing problem. But it’s a good problem to have and the solution lies in outreach. Through educational content they post on social media and in their blog, Khajavei wants to spread the word: “Hey, this is a real thing, you can get cannabis delivered.”
As the market develops and as consumers begin to key in on cannabis delivery, there’s nowhere to go but up. Especially in the age of Amazon and COVID-19 where consumers can get literally anything they can dream of delivered to their front door.
Moving forward, Pot Mates has plans to expand as soon as they can. Right now, they’re limited to Portland city limits, but there’s a massive population just outside of Portland in towns like Beaverton, Tigard and Tualatin. “We are so close to these population centers but can’t deliver to them now because of the rules. We want to work with OLCC about this and hopefully change the rules to allow us to deliver outside of the city limits,” says Khajavei. In the long term, they plan to expand out of state, with Washington on their north border being first on the docket.
To the average person, one would think launching a delivery cannabis business in the midst of a global pandemic would be a walk in the park, but Pot Mates proved it’s no easy task. As the market develops and the health crisis continues, it seems the Oregon market will react positively to the nascent delivery market, but first they need to know it is even an option.
Advertising your cannabis brand isn’t as easy as it should be—but then again, neither are most things about working in the modern cannabis industry. Here’s the good news: Today there are more avenues available for compliantly advertising your cannabis brand than ever before, particularly online.
So why don’t more cannabis brands run compliant digital ads? Generally speaking, it’s an issue of awareness. Since cannabis brands are currently disallowed from running their advertising campaigns through the modern digital advertising mainstays of Facebook, Instagram, and Google, most business owners believe that digital advertising as a whole is not allowed, and thus most cannabis companies are either underutilizing or completely overlooking their digital ad options.
In fact, the rules barring cannabis brands from advertising with Google and Facebook are specific to those platforms. While Facebook and Google—together known as “the Duopoly”—currently account for approximately half of digital advertising dollars spent in the U.S., the other half of the digital advertising pool—including sites like ESPN, HuffPost, Newsweek, Politico, Barstool Sports, and USA Today—is increasingly open to accepting ad buys from compliant digital cannabis and CBD advertisers. More publishers are opening their doors to cannabis ads every day, and many advertising professionals speculate that the COVID-19 pandemic may speed up the process, as publishers begin to look for new streams of ad revenue in order to weather the economic storm.
Where Can Cannabis Be Advertised?
Today, cannabis industry advertisers can easily run ads across hundreds of mainstream websites using programmatic advertising technology. This is true for both cannabis brands and CBD brands, though they use different programmatic platforms to do so: CBD brands (which we’ll address in more detail later) can use mainstream “demand-side platforms” (such as The Trade Desk) to run their ad campaigns, while cannabis brands can use new cannabis-specific platforms (such as Safe-Reach) created to address the unique compliance needs of the legal cannabis industry.
For those unfamiliar with the term, programmatic advertising refers to the automated buying and selling of online ad space using programmatic technology. In a nutshell, advertisers and their ad agencies use demand-side platforms (DSPs) to set the parameters of “bids” for certain ad impressions based on relevant attributes of the ad space and the viewer who will see it. Publishers put their ad space up for auction via supply-side platforms (SSPs), and ad exchanges play matchmaker to sell the ad impression to highest bidder in the time it takes the web page in question to load.
This CBD product ad can be found on Thesaurus.com
Cannabis-specific DSPs work with other cannabis industry leaders to develop sets of data relevant to cannabis advertisers; they then open these data sets within their platforms to help cannabis advertisers reach known cannabis consumers. These known consumers may be, for example, people who’ve downloaded apps like Leafly on their phones.
A key thing to note is that the cannabis ads themselves no longer need to be shown exclusively on these endemic cannabis sites and apps. In the past, digital cannabis advertisers were generally restricted to buying space on industry-specific sites like Leafly, High Times, and Weedmaps, which pushed prices up due to inventory limits and ran through ad budgets quickly. Ad networks like Mantis attempted to compile this inventory to make the buying process more scalable, but because cannabis has been (and remains) the fastest-growing industry in the United States since 2015, it’s no surprise that endemic cannabis ad inventory has been insufficient to meet demand.
Now, the data sets available through programmatic advertising technology allow ads to be shown to the same cannabis enthusiasts across any website, endemic or not. This makes digital advertising far more affordable for cannabis marketers, and allows for more advanced advertising techniques like building look-alike audiences, cross-device advertising, first-party data onboarding, and ad retargeting. These techniques can be used across all modern digital ad formats, including display, mobile, native, video and digital audio.
Still, even those marketers who are already aware that they can advertise digitally outside of Facebook, Google and endemic cannabis sites may struggle with knowing what they can say and show in their digital ads, particularly if they intend to run those ads in multiple locations or across multiple channels. The broadly applicable rules for running compliant digital cannabis ads are what we’ll discuss now.
Rules for Cannabis Ad Compliance
Thanks to cannabis’s continued federal classification as a Schedule I drug, current digital advertising regulations are governed by state cannabis laws, so they vary depending on where your business operates. This can become particularly confusing if you want to run digital advertisements visible to customers across multiple states (which some states allow—for those who don’t, cannabis ad tech will let you keep your ads within state or local borders too).
Both Ivyside and Weedmaps are featured on this page
Luckily, most cannabis bills are crafted to resemble those that have been passed successfully before them, which means that state laws can be boiled down to a handful of broadly applicable guidelines no matter where you intend to show your ads. The current best practices for advertising cannabis are as follow:
No claims of health or medical benefits
No elements that could appeal to children (cartoon characters, etc.)
No false or misleading statements, including those made about competitors’ products
No testimonials or endorsements (e.g. recommendations from doctors)
No depiction of product consumption
No pricing information, potency statements, or promotional offers
Ads for infused products must state “For Adult Use Only”
Using these guidelines, cannabis marketers can more easily create ads to be approved for use in a variety of settings. A few states have their own additional rules: In Florida, a state approval process for ad creative also applies. In Alaska, Arkansas, California, Maryland, Massachusetts, Nevada, Ohio, Oregon and Washington, additional state-specific copy is required in the ad creative.
Note that it’s always important to double-check your state’s most recent requirements, as local rules may change over time. If you’re working with an advertising agency that specializes in the cannabis industry, they can help you with this process; cannabis-specific programmatic platforms like Safe-Reach will also check your ad creative against local requirements as part of their approval process.
Why Advertise Cannabis Digitally?
Prior to the advent of modern, cannabis-specific digital advertising technology, cannabis marketers were light years behind their mainstream industry counterparts in terms of the advertising channels they leveraged to get their message out. Traditional advertising tactics like billboards and print ad buys were popular among cannabis businesses early on due to the lack of digital ad publishers willing to work with them.
The problem with these traditional tactics is one of targeting, measurement, and reporting: It’s impossible to know who has seen your ads, how many of those viewers went to your website or dispensary after seeing them, and what your return on ad spend (ROAS) was. The fact that you can neither know nor control who will see your ad in a print newspaper or on a billboard is why most states have treaded cautiously with their advertising restrictions to avoid ads being seen by minors. In Washington state, for instance, no advertisement is allowed “within one thousand feet of the perimeter of a school grounds, playground, recreation center or facility, child care center, public park, library, or a game arcade admission to which it is not restricted to persons aged twenty-one years or older; on or in a public transit vehicle or public transit shelter; or on or in a publicly owned or operated property.”
This dispensary ad appeared on Variety.com
With programmatic advertising, digital identity data allows advertisers to show their ads exclusively to an appropriate audience—for instance, adults ages 21 and over who live within state borders. Digital advertising also addresses the issues of measurement and reporting, which is why mainstream brands have already shifted en masse to choosing digital over physical ads: You can learn, down to the cent, the return on your digital ad investment, which makes the choice of continuing to advertise an easy one as long as ROAS remains positive. As of 2019, digital ad spending surpassed traditional (TV, radio, print, etc.) for the first time in history, and in 2020, eMarketer estimates that $151 billion will be spent on digital marketing versus $107 billion on traditional. By 2021, 70 percent of all digital ads—and 88 percent of display ads—will be bought and sold using programmatic technology.
As the fastest-growing industry in the United States, cannabis should also be one of the fastest-growing segments in digital advertising, but so far cannabis advertising efforts have been far off pace with the industry’s progress as a whole. However, that is beginning to change as savvy cannabis brands begin to understand and leverage their digital marketing options.
What About CBD Advertising?
The 2018 Farm Bill legalized hemp-derived CBD products in the United States, but did not offer guidance on selling, marketing or advertising them. Most CBD products are thus sold and marketed in a legal gray area, which is only made more confusing by Facebook’s and Google’s policies of rejecting these as “illegal drug” ads (a policy both platforms enforce irregularly). Although CBD brands should still try for approval, and some ads (especially those for hemp-derived CBD topicals) may be approved, CBD advertisers cannot rely on Facebook and Google for ongoing traffic, and ads may be taken down after initial approval regardless of legality.
That said, CBD business owners already have an even more extensive range of digital advertising options available outside of search and social than cannabis brands do. Some websites that do not yet accept cannabis ads will accept CBD ads, and mainstream ad tech platforms like The Trade Desk allow CBD ad buys as long as ad creative meets their internal guidelines for approval. Thus, the de-facto rules and regulations governing CBD advertising today are made by the platforms and publishers running their advertisements. To ensure ad approval on programmatic platforms like The Trade Desk, CBD brands should follow the same guidelines listed for cannabis brands above.
To sum up the current state of digital advertising compliance in the cannabis industry, cannabis and CBD brands should know that there are far more digital advertising options out there than most people realize, and that creating compliant ads is relatively straightforward as detailed above. That said, brands considering an investment in digital advertising should also keep in mind that the current window of opportunity for getting a head start on the competition is already closing day by day as brands begin to realize all the ways they can run compliant cannabis digital ads.
Suggested Readings
Programmatic Advertising: A Close Look at Cannabis (IAB)
White Paper: Digital Ads for Cannabis & CBD (PrograMetrix)
The COVID-19 crisis is plunging the global economy into recession, changing consumer behavior and the world of business. Cannabis businesses are no stranger to operating in a challenging landscape. The constantly evolving legal status, regulatory hurdles and social stigma has forced founders in this space to be nimble and more financially wise with their capital.
While the market has experienced a seismic shift that has already attracted investors to inject capital into the cannabis industry and seen neighboring industries, including tobacco, alcohol and pharma, come into the fray, COVID-19 will change key industry structures and operations. To succeed and cultivate value, cannabis companies must adapt to the new realities of the marketplace to be well positioned for continued growth after the pandemic subsides.
With social distancing guidelines suddenly forcing brick-and-mortar retailers to move their businesses and customer experiences online and disruptions to the supply chain due to international travel and business directions, some businesses will struggle to stay afloat.
As consumer behaviour and online shopping patterns adjust to a new way of living (affecting B2B sales, online ordering, deliveries and manufacturing), leadership and strategic thinking will be paramount.
By understanding where the challenges and opportunities lie, cannabis businesses can thrive. Here are some focus areas and tactics to consider:
Targeted consumer segmentation through social media
When starting a cannabis business, it is key to understand who your core consumers are and what they want from their products. This has become even more acute because of the pandemic with consumers flocking to all sorts of health-focused products including CBD.
With everybody spending more time online, social media use is on the rise. Executing a social media plan to include influencer outreach can increase brand visibility, build a solid consumer base and create brand advocates.
Instagram is essential to a cannabis business building an online presence but it’s important that it doesn’t become a “hard sell, please buy me” channel. Plan and make Insta-worthy content that educates and entertains followers to increase engagement, click-through rates and leads. Brands may want to pair with an influencer on either a gifting or paid-for basis which will mean the brand appears in a potential customer’s feed as they interact with their favourite accounts.
PlugPlay, a California cannabis brand, stays relevant with creative posts like these.
The art is finding key influencers whose audience is one that you would like to interact with. This type of positioning will allow cannabis businesses to reach a new audience or group of people.
Marketing and PR
In times like these, many companies choose to pull back on communication activities and expenditures for fear of spending too much for what they perceive as little return, however, marketing and PR, when executed well, can be the lifeline of any business.
With so much noise in the market about the “next best thing in cannabis”, effective marketing and PR can distinguish brands that are credible and offer a strong value proposition to those that are all smoke and mirrors.
The current needs of businesses and consumers are much different than they were just a few short months ago, so it’s important to understand these needs and spending habits while combatting negative perceptions of cannabis.
As cannabis companies are not able to advertise like mainstream companies, a strong public relations and marketing strategy will enable firms to communicate their identity, build trust, shift perceptions through media coverage, enhance reputations and reach customers, partners and investors.
Cost cutting
Businesses in every sector are cutting costs to keep their businesses afloat. This needs to be done strategically and requires senior leadership teams to explore cost reduction strategies and streamline non-essential costs.
This may mean further consolidation of cannabis companies and supply chains to manage cash flow and maximise resources. Companies may even look to create strategic partnerships with complementary businesses in the industry or push some firms towards mergers and acquisitions.
Business models will evolve as cannabis companies identify inefficiencies and reconfigure their operations and messaging. This could range from assessing their R&D capabilities, agricultural assets, manufacturing chains or route to market.
E-commerce capabilities
Pivoting to e-commerce is nothing new, but getting creative with product offerings and marketing initiatives will set you apart from the typical CBD retailer
The postponement of countless CBD Expos, trade shows and cannabis conferences are creating new demand and opportunities for businesses. To reach prospective wholesale clients, investors and connect to their customer base, firms are entering the digital marketplace. Digital events, Zoom investor pitch panels and email marketing and sampling is on the rise and expected to grow over the coming months.
CBD brands should work in parallel with their retail partners to influence product samples in digital offers and create a touchless transaction. Buying products online is going to become a permanently entrenched habit, even when restrictions are fully lifted so it’s worth looking at how technology can support and enhance sales while offering a smooth customer experience.
Industry Relationships
Everyone in the cannabis industry will be affected by COVID-19 so maintaining positive relationships is vital in these tough times. Calling investors or partners to tell them what is going on with your business or checking in on others in your ecosystem means information can be shared to iron out any issues and help generate ideas to future proof the business. “A problem shared is a problem halved!”
COVID-19 is creating incredible business challenges. As we navigate the new normal, it’s important to adapt and grow. As more products come to market and brands/services develop distinguished offerings, expectations will change so cannabis businesses need to be ready for greener pastures.
In the midst of a global pandemic with schools closing, businesses asking employees to work from home and events being canceled left and right, we have one event that will remain scheduled: The Infused Products Virtual Conference on March 31. The event is complimentary for attendees to register. Click here to sign up for this virtual conference.
On March 31, the event will begin with a presentation from the folks at Cresco Labs: Applying Food Science Principles to Cannabis Edibles. Marina Mincheva, Director of Manufacturing Quality Assurance and Stephanie Gorecki, Director of Food Sciences at Cresco Labs will deliver this talk. They will discuss what a research and development process looks like for creating cannabis-infused edible products, how to then commercialize those products and developing CPG products with input from marketing and quality.
Ellice Ogle, CEO & Founder of Tandem Food LLC, will deliver a talk on the importance of food safety culture in the cannabis space. Kathy Knutson, founder of Kathy Knutson Food Safety Consulting, will follow that talk with a discussion of GMPs, HACCP and how cannabis companies can apply preventive controls. The last presentation on the schedule is The New Canadian Edibles Market, where Steven Burton, Founder & CEO of Icicle Technologies, will discuss edibles regulations in Canada, a current state of affairs of the Canadian infused products market, as well as what US edibles companies can expect when it comes to new regulations.
Now that Canada finally has a date for the recreational market start, the federal government, provinces and other regulatory authorities are beginning to issue guidelines and rules that are going to define the early days of the recreational industry.
These include regulations on retail trade, medical sales and use. However this is precisely where the confusion is growing.
The Government Will Continue To Run The Medical Cannabis System
In a move to protect patients, Health Canada has announced that it will continue to run the medical part of the market for at least the next five years. In good news for medical users, this announcement was made against calls from the Canadian Medical Association for the medical infrastructure developed on Canada’s path to recreational reform to be phased out. The reason, according to the CMA? Many doctors feel uncomfortable prescribing the drug because of a lack of research and a general lack of understanding about dosing.
Both patients and advocates have expressed support for continuing the medical system. This includes organizations like the Canadian Nurses Association who fear that if a focus is taken off of medical use, producers will ignore this part of the market to focus only on recreational sales.
In the future, after legalization, Health Canada will also continue to support more research and trials.
Provinces Are Setting Their Own Rules For Recreational Sales
Despite early statements, the recreational market is still in the throes of market creation and regulation. The laws are also changing in progress, a situation one regulator has described as building an airplane as it hurtles down the runway for take-off.
Athletes in Canada are still banned from using any kind of cannabis.For example, Ontario, the largest provincial market, is also delaying private sector sales in retail shops until next year. It is also moving away from a government-run dispensary model. Government sales will begin in October, but private dispensaries will have to wait until next April to open their doors (and existing operations will have to close their doors while they apply for licenses). This is also a reversal of the regional government’s position that it would only allow government-controlled shops to sell recreational cannabis.
But perhaps the largest unknown in both national and provincial policy outside of retail brick and mortars is in the area of online sales. A major fight is now brewing in many places where the established industry is now siding with the government about unregistered dispensaries (see Ontario) and established if not registered producers are competing directly with the government not only on main street but online as well.recreational users are beginning to sound alarms that they do not want the government to have so much personal information about them
Retailers with a web presence operating in a grey space will continue to pose a significant challenge to the online system now being implemented by the government for two reasons. Product availability (which will be far more limited on the government-run sites) and privacy.
Beyond the lack of diverse products and strains to be initially offered via the online government portals, recreational users are beginning to sound alarms that they do not want the government to have so much personal information about them – and point specifically to the differences in the regulated alcohol industry vs. the new regulations for the recreational cannabis market.
Beyond Market Rules, There Are Other Guidelines Coming
The Canadian military has now issued guidelines for active duty personnel and cannabis. It cannot ban it from soldiers entirely of course, and as it stands, the situation will be ripe for misunderstandings. For example, soldiers are prohibited from consuming cannabis 8 hours before any kind of duty, 24 hours before the operation of any kind of vehicle or weapon and 28 days before parachuting or serving on a military aircraft.
The only problem, of course, is being able to enforce the same. Cannabinoids, notably THC, can stay in the body for up to 30 days for casual users long after the high is over.
Athletes in Canada are still banned from using any kind of cannabis. The reason? They are subject to the Canadian Anti-Doping Program (CADP) under which the use of cannabis will still be prohibited.
That said, the Canadian Hockey League is reportedly now examining how to revise how it addresses the issue of medical use.
Last week, the Bureau of Cannabis Control issued the first licenses for California’s new market. The first license went to Moxie, a cannabis distribution company out of Lynwood.
The search feature for the list of licenses issued so far
As of the publication of this article, the Bureau, the state authority tasked with leading the regulation of the industry, has issued 43 temporary licenses. So far, four laboratories have received licenses, along with a number of retailers, distributors, microbusinesses in both medical and adult-use markets.
The labs to receive their temporary licenses so far are pH Solutions, Steep Hill Labs, Pure Analytics and ORCA Cannalytics. Judging by the number of temporary medical and adult-use licenses awarded so far, it appears the Bureau is trying to issue a similar amount for each sector, distributing the number of licenses between the two equitably.
You can find the list of licensees here, and search between the dates of 12/15/17 to 1/2/18 to get the most up-to-date list of licenses awarded. “Last week, we officially launched our online licensing system, and today we’re pleased to issue the first group of temporary licenses to cannabis businesses that fall under the Bureau’s jurisdiction,” says Lori Ajax, Bureau of Cannabis Control Chief. “We plan to issue many more before January 1.”
According to the press release, temporary licenses are only issued to applicants with prior local authorization in the form of a license or permit from the jurisdiction where the business is. Those licenses will become effective on January 1, 2018. The temporary licenses will work for 120 days, or May 1, 2018, after which businesses will need to have a permanent license to continue operating.
More than 1,900 users have registered with the Bureau’s online system, and more than 200 applications have been submitted, according to the press release.
The various regulatory bodies in California have worked diligently for months now to roll out proposed emergency regulations, setting strict requirements for manufacturers, growers, retailers and testing labs. Manufacturing regulations, including specific labeling, packaging and processing requirements, give a good snapshot of how regulators plan to move forward. Testing requirements could also be significantly firmer, with rules for documentation, sample sizes, sampling procedures, storage and transportation.
Yet when the adult-use sales become fully legal on January 1, 2018, those regulations will not be fully implemented.
Donald Land, a UC Davis chemistry professor and chief scientific consultant at Steep Hill Labs Inc., told The Associated Press, “Buyer beware.” There will be a six-month range where existing inventory will be allowed on the shelves, products that might not meet the standards of the new rules. So dispensaries will get half a year of sales before all products have to meet the new, stricter testing requirements.
In a highly competitive market, dispensaries use wide product selections, competitive prices, rewards and loyalty programs to stay relevant and attract new customers. Many of those tools used to make the retail space more efficient require analytics to stay on top of their performance metrics.
At their SE 7th Ave location in Portland, Oregon, Cannabliss & Co. uses Baker software to better connect with their customers and track sales. According to Kevin Mahoney, manager of that dispensary, they use Baker’s software for things like their online menu, online ordering, text alerts and a rewards program.
Cannabliss & Co. SE 7th Ave location
Located in an historic firehouse built in 1913, Cannabliss & Co. was Oregon’s very first medical cannabis dispensary. Now that they offer both recreational and medical cannabis, their product inventory has expanded, their sales have grown and they have a wider customer base.
After using Baker’s software platform for almost a year now, Mahoney says he has seen great ROI on text alerts and the analytics. The online ordering and menu features have not only highlighted sales trends, but have made budtender-customer interactions easier. “We don’t want our budtender using the menu as a focal point of the conversation, but this allows for us to highlight particular specials or strains on our menu that gets eye attention right when the customer gets in,” says Mahoney. “Moving past the point of sale, it allows another conversation to happen organically, which keeps the customer engaged.”
On average, Baker sees conversion rates close to a 5% range per campaign. “That check in option is phenomenal; we get to see how many people actually came into the store from any given text alert,” says Mahoney. “In my mind, text alerts are preferable to email alerts; they can’t be marked as spam, it is easy to delete or opt out and takes much less time.”
Kevin Mahoney at his SE 7th Ave location
Mahoney says the online ordering feature that Baker offers is a big selling point too. “Having an ordering service is absolutely terrific,” says Mahoney. “They can come in and out in less than five minutes with their full order by using the online ordering portal.” Mahoney says they see a real draw in this feature because it lets customers treat their dispensary like a takeout window at a restaurant.
Baker just launched a software platform designed for delivery service that a dispensary in Bend, Oregon has been using for two months now. With Portland legalizing cannabis delivery services recently, Mahoney is eyeing Baker’s software for his online ordering and delivery. “When the time comes, that is something we are very interested in pursuing.”
Analytics allow users to track the success of campaigns
In August of 2016, Baker secured $1.6 million in seed funding, led by Former Salesforce Executive Michael Lazerow, according to a press release. “Baker has created a solution that is clean and easy to use and can help dispensary owners engage their shoppers like never before – online, mobile, social and in-store,” says Lazerow. “I witnessed first-hand how Salesforce supercharges its customers’ businesses and I’m inspired to see Baker driving the entire cannabis industry forward with this same intelligent approach.” In 18 months of business, Baker has worked with hundreds of dispensaries, helping them build better connections with over 100,000 customers. At Baker, we believe the cannabis shopping experience should be as comfortable and personalized as it has become in every other retail environment,” says Joel Milton, chief executive officer at Baker. “With expertise in cannabis, data and technology we have created an industry-specific tool that allows dispensaries and brands engage with customers and build brand loyalty through a personalized shopping experience.”
Text alerts are customizable and easy to send out
According to Eli Sklarin, director of marketing at Baker, the number one reason why patients and customers choose a dispensary is because of products on the shelf. “We originally started the platform in 2014 so people could order ahead and wouldn’t have to wait in lines at the dispensary,” says Sklarin. “In 2015, we saw more dispensaries than fast food establishments in many cities. Once inventory started to settle down, we saw a need for the dispensary to better connect with their customers.” The three core products that Baker offers are online ordering, connect SMS & email and the check in & loyalty program.
Their entire suite of software options is specific to the cannabis retail space. “Our customizable program is designed to help dispensaries catch customers and keep them coming back,” says Sklarin. “The software can give a snapshot of who their customers are, insights into the overall health of their dispensary, sales per day of the week, monthly promotions and other basic analytics that help them understand their customers.” Things like strain alerts can help retain customers, allowing dispensaries to notify certain groups of customers when products are back in stock. Whether it’s a customer who prefers a particular brand of edibles or concentrates, these software tools can help dispensaries get the right message to the right customer.
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The canna-curious are becoming one of the largest audiences in relation to the sustained growth of the cannabis industry, and it’s more important than ever to provide valuable information to this demographic to encourage their purchasing decision. Considering the fact that 65% of the world is comprised of visual learners, showing a video will have a far greater impact compared to talking them through a product.
