Today’s cannabis retail landscape—defined by striking consumer brands and increasingly mainstream marketing strategies—is nearly unrecognizable compared to the industry’s earliest innings. However, as more adult-use states reach a point of market saturation, cannabis brands must learn to holistically reach their target audiences to maintain and grow market share.
On the surface, industry sales appear to outpace record performance from previous years. But in reality, annual sales are rising at a decreasing rate. Projected domestic sales are expected to surpass $33 billion in 2022, which translates to 32% year-over-year growth—down from 40% and 46% retail growth in the previous two years.
New and established brands can no longer rely on awareness to drive sales, especially in mature markets where consumers are inundated with choices. This is where performance marketing can provide forward-thinking brands with a competitive advantage. These integrated marketing approaches—which are still relatively untapped in the cannabis space—create novel customer conversion opportunities tailored to each brand’s needs and strengths.
Industry fragmentation
Much like the industry’s business landscape and ongoing legalization movement, cannabis marketing is still remarkably fragmented. Until recently, most brands could only choose between branding or digital advertising agencies to fulfill their marketing needs. However, both options primarily focus on top-of-funnel marketing, which drives consumer awareness, not conversion.
Brands must now simultaneously target each level of the marketing funnel, particularly the middle and bottom stages that can make or break lifelong consumer relationships. This is especially important considering how heavy and frequent consumers, who are mainly interested in promotions and demonstrate minimal brand affinity, account for roughly 60% to 70% of all cannabis consumption. Thus, cannabis marketers are vying for a fraction of the total consumer market, despite rising adoption rates.
In response, cannabis companies are prioritizing initiatives that bolster their ability to eventually own the entire customer journey. While this reality isn’t feasible yet, companies can proactively enhance their brand positioning through foundational performance marketing strategies. This often entails researching target customers’ preferences, clearly articulating the brand’s value proposition, and setting applicable behavioral triggers for all SMS and email marketing messages. Adopting these methods early on can alleviate existing marketing gaps and allow brands to pursue multiple inroads to long-term customer acquisition.
Own your customer journey
Mainstream retail brands have the luxury of leveraging numerous social media platforms to direct consumers to their dedicated ecommerce pages. Due to cannabis’ federal status as a Schedule I substance, regulated brands are limited to a handful of compliant advertising channels—one of the most effective being third-party menus and marketplaces such as Weedmaps, Jane, Ginger, Proper and springbig.
Placing targeted ads on popular cannabis ecommerce drives conversion by reaching customers already on their way to the bottom of the marketing funnel. Still, a considerable amount of legwork is required to lead customers to the checkout page. This is where cannabis-specific performance marketing agencies can identify the optimal combination of conversion strategies spanning email and SMS, influencer marketing, media buying and retargeting organic social media to reach future customers at every turn.
Performance marketing is not a one-size-fits-all solution, which is why brands also turn to these agencies to overhaul branded content and visual assets. Doing so ensures that static images, user-generated content and blog posts purposefully address target customers’ lingering questions or concerns.
Creating synergies between branding and digital marketing tools lays the groundwork for brands to eventually establish an ironclad direct-to-consumer pipeline. The current retail model, which primarily caters to canna-curious consumers gaining a basic understanding of products at their local dispensaries, no longer supports individual brands trying to cultivate lifelong customers.
In fact, the number of choices and promotions available at dispensaries can impede customer stickiness among more experienced consumers. This potential flight risk is one of the reasons we’ve seen conspicuous brands like Nike recently pull products from longtime distribution partners.
Ultimately, the rise of cannabis performance marketing has empowered more brands to meticulously track critical KPIs—including cost per impression, clickthrough rate, conversion rate and customer lifetime value—from engagement to conversion. Having a clear understanding of these KPIs also allows cannabis companies to decisively determine their media buying strategies on industry-specific and mainstream publishers.
For now, brands are largely benefitting from placing ads on outlets where mid-funnel consumers are conducting extensive product research, such as mg Magazine, Fresh Toast, Cannabis.net and Benzinga.
Honing effective media buying practices enables brands to swiftly deploy effective campaigns once mainstream lifestyle outlets like Condé Nast allow cannabis businesses to join their advertiser network. In the near future, brands can generate additional customer touch points and seamlessly navigate what many industry stakeholders consider the holy grail of advertising opportunities.
Prioritize initiatives with conversion and loyalty in mind
Granted, not every cannabis company is ready for these advanced marketing solutions from the outset. The success of performance marketing campaigns still hinges on a brand’s innate ability to keep customers informed and engaged.
Performance marketing may have the power to drive customer traffic from the top of the sales funnel to conversion, but brands are also responsible for truly understanding their target demographics while providing educational and entertaining content that directly speaks to mid-funnel customers still considering the brand’s value proposition.
While the industry has yet to see a specific brand fully own its customer through dedicated direct-to-consumer channels, companies at all stages of growth can prepare for the next retail boom by strategically investing in branded webpages and omnichannel engagement initiatives. Coveted brands like Cann and Cookies have mastered this technique by generating hype through exclusive product launches and collaborations, distinctive social media content and community-building initiatives that purposefully cater to their core customers’ concerns and tastes.
When paired with a cannabis-specific performance marketing partner, these strategies position brands to drive high ROI from the get-go and effectively overcome the myriad of industry-specific marketing challenges. Soon enough, cannabis brands can finally achieve the mainstream gold standard of directly interacting with and retailing to everyday consumers.
