In the highly competitive cannabis industry, retaining customers is far more cost-effective than acquiring new ones. Yet, many cannabis brands focus heavily on customer acquisition, often at the expense of customer retention. While this approach might bring in new customers, it can lead to significant churn, undermining long-term profitability.
As you plan your next marketing budget, consider reallocating some of your resources toward customer retention initiatives. By doing so, you can build stronger, longer-lasting relationships with your customers, ultimately boosting your brand’s bottom line.
Start with 3 Critical Goals
To increase customer lifetime value (CLV) within the cannabis industry, brands must achieve one or more of the three goals below:
1. Increase Average Transaction Value
One effective way to boost CLV is by increasing the amount customers spend when they buy. In the cannabis market, this could mean encouraging customers to explore higher-margin products or bundling complementary items together. The goal is to enhance the value of each transaction.
2. Increase Sales Frequency
Another strategy is to increase the frequency of purchases. While the first strategy focuses on maximizing the value of individual transactions, this one aims to encourage repeat purchases over time. Regular engagement and compelling offers can keep customers coming back for more.
3. Optimize Operational Costs
The third strategy involves reducing the operational costs incurred to serve your customers. From packaging to customer support, streamlining processes can significantly increase the profitability of each customer. Efficient operations are crucial in a regulated industry like cannabis, where margins are tight.
Put Together Your Action Plan
With your goals identified, it’s time to put together an action plan to reach them. The cannabis industry offers unique opportunities to enhance CLV and improve your customers’ experiences with your brand, but your action plan should begin with the following fundamentals:
1. Communicate Clearly and Often
Clear, transparent, and ongoing communication are essential to building customer loyalty in any industry, including the cannabis industry. Regular, meaningful interactions with your customers can lead to stronger brand loyalty and advocacy.
Email marketing remains one of the most powerful tools for maintaining customer relationships. Consider sending personalized messages for special occasions, such as birthdays, and offer exclusive discounts or promotions. Social media platforms are also perfect for engaging with your audience, especially with the help of influencers.
Another crucial component of communication that is required to build CLV is top-notch customer service. Ensure your support channels — whether chat, email, or phone — are accessible and extremely responsive. In a 24×7 world, cannabis consumers expect support beyond traditional business hours and through their preferred channel of communication.
2. Personalize!
Personalization can have a significant effect on customer satisfaction and loyalty. Therefore, use the customer data available to you to tailor your marketing efforts to each customer. Not only will your response rates and results improve (keeping your customers coming back to buy more), but your customer loyalty and lifetime value will increase because customers will feel like you took the time to understand them and value who they are individually.
For example, you could offer product recommendations in email marketing campaigns based on each customer’s past purchases or interests rather than sending the same generic email message to everyone on your list. You can do this in your email campaigns and through text messages if your email marketing and/or SMS providers offer the applicable tools and features.
3. Create a Sense of Exclusivity
Creating a sense of exclusivity can deepen customer loyalty. Consider launching loyalty programs or offering special deals to your most dedicated customers. Exclusive offers and early access to new products can make your customers feel valued and keep them coming back.
Rewards points that enable customers to earn discounts for repeat purchases provide an excellent way to generate excitement around customers’ loyalty and increase customer lifetime value at the same time.
4. Be Reliable and Consistent
In the cannabis industry, reliability and consistency can set your brand apart. Gaining customers’ trust and keeping it are the keys to maintaining their loyalty. This applies to all aspects of your business and their experience with your brand – from advertising to the in-store experience to what happens when they bring your products home.
Staff training is critical to ensure all of your employees understand the experience they’re expected to deliver to your customers. As the faces of your brand, they need to deliver the appropriate experiences and serve your customers reliably and consistently every day.
5. Use Win-Back Campaigns
Re-engaging customers who haven’t interacted with your brand in a while is vital. For cannabis brands, this could mean sending re-engagement emails to customers who haven’t made a purchase in a few months and offering them a special discount in an effort to win them back.
You shouldn’t let potential repeat customers slip away. Instead, proactively try to bring them back every few months. After several attempts, you can assume they’re not ready to come back (and may never be), but don’t give up without trying to win them back first.
Key Takeaways for Cannabis Brands
Increasing customer lifetime value requires increasing individual customer sales per transaction, increasing how often individual customers buy, and decreasing your business’ costs to serve your customers.
When you accomplish these three goals, you’ll have a strong foundation to build customer loyalty and driving repeat business. Moreover, by investing in retention, you not only improve your CLV but also gain a competitive edge in the rapidly evolving cannabis industry.