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Cannabis Retail Loyalty Program Guide for 2024

Jan 02, 2024

Why do customers continue to choose your store(s) over your competitors? The average cannabis consumer visits three recreational cannabis retailers, meaning you are competing for a portion of their cannabis budget. On average, cannabis customers shop approximately 8 times a year. When their loyalty is divided among three retailers, you begin to fight for an even smaller part of the budget.

But how can you encourage your customers to become loyal to your specific retail location? More importantly, how can you increase their frequency of visits to 10 or 11 times a year, not just 8?

There are three ways to grow your cannabis retail business: increase the number of new customers, increase the amount they spend during each visit, and increase the frequency of their visits. By focusing on your loyalty program, or creating one if you don't have it yet, you can account for both spending and visit frequency. If you're not doing this, you may be spending on acquiring new clients without fully utilizing that investment, as the new customers may not return.

But let's think about the initial question: why do your customers keep coming back? Convenience alone is not sufficient, as they can easily choose a shop that is slightly closer or on a different route home. You want to understand what motivates your customers to go out of their way, even deviating from their usual path, just to visit your store. This is the type of loyalty that successful cannabis retailers aim for.

This blog is your guide to starting, or improving, a loyalty program to increase the profitability of your cannabis retail business.

What are customer loyalty programs?

In retail, customer loyalty programs are key strategies for deepening customer relationships. These programs are more than just rewards; they're a blend of incentives and exclusive offers designed to recognize and appreciate returning customers. By offering personalized experiences, a cannabis loyalty program not only drives repeat purchases but also enhances the overall customer journey.

What Makes a Cannabis Loyalty Program Successful?

Understanding the nuts and bolts of a successful program is step one. They're not just about giving points or discounts; it's about creating a sense of belonging and value for the customer. This involves leveraging data and insights to tailor experiences and offers, ensuring that each interaction feels unique and targeted.

Let's dive into the practical aspects. For instance, using customer purchase history to offer relevant rewards, or providing early access to new products for frequent shoppers. These actions cement customer loyalty and can significantly uplift retention rates.

Remember, the end goal is to build a sustainable, mutually beneficial relationship with your customers. It's not just about the immediate sale; it's about fostering loyalty that drives long-term business growth.

A successful loyalty program will enhance customer loyalty, increase customer retention rates, and encourage repeat purchases.

What are the benefits of a successful loyalty program?

  • Increased Customer Retention: Encourages customers to return, boosting retention rates.
  • Higher Frequency of Repeat Purchases: Motivates customers to make repeat purchases more often.
  • Enhanced Customer Relationships: Builds stronger, more personal connections with customers.
  • Personalized Customer Experiences: Uses customer data to offer tailored rewards and experiences.
  • Data-Driven Insights: Gathers valuable data on customer preferences and buying habits.
  • Customer Engagement and Interaction: Fosters ongoing engagement through exclusive offers and communications.
  • Competitive Advantage: Differentiates the business from competitors without a loyalty program.
  • Positive Brand Perception: Enhances the brand’s image by showing appreciation for customers.
  • Increased Sales and Revenue: Drives sales by encouraging more frequent and larger purchases.
  • Customer Feedback Opportunities: Provides a channel for receiving direct feedback from loyal customers.
  • Cost-Effective Marketing: Acts as a marketing tool that can be more cost-effective than traditional advertising.
  • Long-Term Business Growth: Contributes to the overall growth and sustainability of the business.
  • Early Access and Exclusive Offers: Attracts customers with the allure of exclusive deals and early product access.
  • Creating a Sense of Belonging: Gives customers a feeling of being part of a special group or community.

Problems with Current Customer Loyalty Programs

At Vetrina we know customer loyalty programs have been a cornerstone for building customer relationships. However, as cannabis retail evolves, and consumer behaviour evolves alongside them, many of these programs are falling short. It's important to understand and fix these issues to make sure your loyalty program doesn't just exist, but succeeds and truly helps your business grow. Here are common problems we see with existing cannabis retail loyalty programs:

  1. Over-Reliance on Points Systems: Many programs are overly dependent on points. While points are a familiar feature, they often lack the uniqueness and engagement needed to stand out in a crowded market.

Take Action: Get clear on what makes your program different. How does it actively shape customer behaviour instead of just reacting to purchases? Consider proactive features that engage customers in new and meaningful ways.

  1. Inadequate Use of Customer Data: There's a lot of talk about data, but are you leveraging it effectively? A well-designed loyalty program should help you gain deeper insights into your customers' preferences and behaviours.

Take Action:

Basics: Start by understanding who your key customers are, what they buy, and when. Notice shifts in purchasing patterns to identify opportunities for win-backs or targeted promotions.

Advanced Analytics: Dive into more sophisticated data like shopping habits within different price bands, cost of customer acquisition, and basket composition. Which products or brands are frequently purchased together? This level of detail can transform your strategy.

  1. Failing to Guide and Understand Customer Behaviour: Your program should do more than record transactions; it should guide and influence customer decisions. This involves creating compelling reasons for customers to engage with your brand beyond the point of sale.

Take Action: Keep an eye on changing behaviours. If a regular customer's pattern shifts, your program should be the first to flag this change. This can lead to timely interventions like personalized offers or win-back campaigns.

While points and basic rewards are the foundation of many loyalty programs, they're no longer enough. Your program should be a dynamic tool that not only rewards but also understands and influences customer behaviour. By focusing on these aspects, you can transform your loyalty program from a passive points system into a powerful driver of customer engagement and business growth.

Examples of Popular Loyalty Programs

Membership-Based Programs:

These programs require customers to sign up for a membership to access rewards and benefits. Membership often comes with exclusive offers, special services, and a sense of belonging to a select group. The key is balancing the exclusivity and accessibility of rewards to maintain high perceived value and motivation.

  • Reward Redemption Balance: Finding the right balance in how rewards are redeemed is important. If rewards are too easy to get, they might not feel as valuable. On the other hand, if the criteria for redeeming rewards are too difficult, it can be discouraging.
  • Customer Priorities Evaluation: Assess if a user-friendly rewards program matches your desired customer behaviour. Strike a balance between being achievable and valuable.

Accrual Systems:

Accrual systems are about customers earning points, credits, or similar things over time based on their purchases or interactions. They can then use these points to get rewards, discounts, or special offers. These systems are designed to encourage customers to stay engaged and reward their loyalty.

  • Types of Rewards: Rewards should be appealing and easy to remember. Successful cannabis loyalty programs combine practical incentives like points with enjoyable rewards.
  • Memorable vs. Forgettable Rewards: Rewards given should be memorable (sticky), and a successful loyalty program will aim to skip generic (forgettable) rewards. Memorable experiences tend to have a longer-lasting impact on customer relationships. Let’s look at a specific example:

Case Study: American Express

American Express Incentive Services is a prime example to consider and learn from. It has a different way of conducting its loyalty program. They divide rewards into two categories: 'sticky' (memorable) and 'slippery' (forgettable). This is important because it helps them create rewards that truly connect with customers and strengthen their bond with the brand.

  • Sticky Rewards: These are rewards that create lasting memories and a strong emotional connection. American Express exemplifies this through its specialty cards like In: Chicago and In: LA. These cards offer users exclusive access to unique dining, drinking, and entertainment experiences. Such rewards go beyond the ordinary, providing customers with special moments that they associate with the American Express brand.
  • Prioritizing Memorable Experiences: By focusing on creating unforgettable experiences instead of ordinary rewards, American Express sets itself apart in a competitive market where customers are frequently overwhelmed with similar points-based programs. This approach strengthens the brand's connection with customers and enhances the effectiveness and significance of the loyalty program.

In this way, American Express's loyalty program transcends the traditional accrual system by incorporating elements that are not just transactional but experiential, enhancing the overall value and appeal of the program.

Redemption Mechanics: How Your Customers Redeem Points and Rewards

This part of loyalty programs deals with how customers can use or redeem the points or rewards they have earned. It includes setting redemption thresholds and deciding on the types of rewards, like discounts or special experiences. The goal is to make redemption attractive and easy, so that customers keep participating. It is an important aspect of any successful cannabis loyalty program, because a confusing or overly complicated redemption process can lead to customers not using their points as much, having a less positive experience with your brand, and ultimately preventing your program from achieving its objectives of increasing spending and frequency.

Take Action:

Impact of Redemption Thresholds: Before setting limits, consider how the threshold for redeeming points affects customer behaviour. For example, a 100-point redemption threshold is more accessible than a 200-point threshold.

Point and Cash Redemption: Combining point redemption with cash, like offering $10 off a $50 purchase, enhances the perceived value and makes the experience more rewarding for the customer.

Advanced Program Strategies:

Advanced strategies involve incorporating innovative elements like gamification and behavioural prompts. Gamification adds an element of fun and competition, often with immediate rewards to keep customers engaged. Behavioural prompts, like offering diverse buying options, aim to guide customer purchasing patterns in line with business objectives.

Take Action:

Gamification: Incorporate elements of gamification to increase engagement and usage. Offer immediate, tangible rewards at the start, such as a signing bonus.

Encouraging Diverse Purchases: Reward customers for diversifying their buying habits. For example, offering a free product in a category they haven't tried can align customer behaviour with retail goals and encourage exploration.

Behavioural Prompts: Use unique rewards as prompts to increase the likelihood of future similar purchases. This approach is akin to unlocking a new level, guiding customers in a direction beneficial to the retailer.

Loyalty Program Trends for 2024

In 2024, loyalty programs in cannabis retail will undergo significant changes. One major issue we are addressing with clients is the widespread "sea of sameness" among existing programs.

Sea of Sameness: Studies have shown that most consumers see a lot of loyalty programs as being the same. This lack of difference shows a need for more creative approaches in designing loyalty programs.

Engagement vs. Membership: Many people join multiple loyalty programs, but not all actively engage with them. This shows that simply having a loyalty program is not sufficient; it must be interesting and different to encourage active participation.

Expanding Rewards Beyond Transactions: Loyalty programs are no longer focused solely on transactions. Brands now understand the importance of going beyond simple transactional benefits to create a more interactive and enjoyable customer experience.

Developing an Attractive Offering: In 2024, the goal is to create a value proposition that really connects with customers. This means understanding what they want and customizing your loyalty program to meet their needs.

Adding Memorable Experiences: To make your loyalty program stand out, combine rewards for purchases with special experiences. This way, brands can form stronger emotional bonds with customers and transform ordinary interactions into memorable moments.

The change in loyalty program strategies for 2024 is clear: shifting from generic rewards to providing personalized, one-of-a-kind experiences that meet the changing preferences of customers. This approach is crucial for brands aiming to differentiate themselves and cultivate authentic, lasting customer loyalty.

How to Create a Successful Loyalty Program in 2024

Phase 1: Design Your Loyalty Program For the Customer Journey

Now that you understand the new trends in loyalty programs, the next important step for cannabis retailers is to use these insights to build a successful one. At Vetrina, we help clients tackle the process from start to finish, and we know that in 2024, the key to creating a successful loyalty program is to design it to match the customer journey, meeting the specific needs and behaviours of your customers at each stage. By doing this, cannabis retailers can create a program that not only connects with their customers but also stands out in a competitive market.

Here’s is what you should consider when designing your loyalty program:

Consistent Value Throughout: A successful loyalty program in 2024 should provide consistent and valuable benefits throughout the customer's journey. From the first interaction to after the purchase, the program should feel rewarding and engaging.

Understand Customer Needs and Stages: It's important to know and cater to the unique needs and motivations of customers at every stage of your interaction with them. This approach guarantees that the loyalty program stays relevant and impactful.

Strategies to Attract Customers: In the first stage, attract potential customers by offering rewards for actions like signing up for emails or following your brand on social media. This initial interaction sets the groundwork for a stronger connection.

Engaging Customers in the Consideration Stage: In the consideration stage, share helpful content like blog posts, informative articles, videos, or infographics. These resources help build trust and show your expertise.

Decision-Making Support: Help customers make decisions by providing free trials or samples. This strategy can be very effective in encouraging customers to make a purchase and experience what your brand has to offer.

Incentives for Buying: When customers are ready to make a purchase, offer them attractive rewards such as discounts or free shipping. These incentives can be the extra motivation they need to turn their interest into actual sales.

After a Purchase: Encourage customers to leave reviews or refer your brand to others. Rewards for these actions can make customers happy and turn buyers into brand advocates.

Engagement Throughout for Lasting Loyalty: Engaging members consistently at every stage is important for creating long-term loyalty. This complete approach increases overall satisfaction, promotes repeat business, and encourages advocacy.

In 2024, creating a loyalty program that seamlessly integrates with the customer journey is key. By providing targeted benefits and engagement at each stage, brands can cultivate deeper, more meaningful relationships with their customers.

Take Action:

  • Provide Consistent Benefits: Offer valuable benefits at every customer journey stage.
  • Analyze Customer Needs: Regularly assess and cater to customer needs at each interaction stage.
  • Attract with Initial Rewards: Use sign-up rewards and social media engagement incentives to attract new customers.
  • Share Helpful Content: Distribute informative content (blog posts, articles, videos) during the consideration stage.
  • Offer Decision-Making Aids: Provide free trials or samples to assist in the decision-making process.
  • Give Purchase Incentives: Implement attractive rewards like discounts or free shipping at the purchase stage.
  • Encourage Post-Purchase Actions: Motivate customers to leave reviews or referrals with post-purchase rewards.
  • Maintain Consistent Engagement: Ensure ongoing engagement at all stages to foster lasting customer loyalty.

Case Study: Sephora's Beauty Insider Loyalty Program

Sephora's Beauty Insider program is a great example of how to engage customers throughout their entire shopping experience. It sets a high standard for successful loyalty programs.

  1. Stage 1: Creating Awareness: Sephora starts by sharing beauty tips and product announcements on social media and email newsletters. This helps grab the attention of potential customers and positions Sephora as a trusted source for beauty information. They also use social media and work with influencers to create lifestyle content, teach users how to use their product in an entertaining way, and even have their well-known Sephora Squad. Of course, cannabis retailers and brands have to follow regulations, but the first thing they need to do is get noticed.
  2. Stage 2: Consideration Stage: During this stage, Sephora offers detailed information about products, real reviews, and helpful tools like a virtual makeover. These resources help customers explore and evaluate products thoroughly, which assists them in making decisions.
  3. Stage 3: Purchase Stage: Sephora's website makes shopping easy and encourages customers to move smoothly from browsing to buying.
  4. Stage 4: Engaging After Purchase: After making a purchase, Sephora's program keeps customers engaged by giving them points that they can use for future purchases. They also send emails with tips on how to use the products, making customers happier and more likely to buy again. They have special gifts for birthdays, tiered benefits based on spending totals (points),

Sephora's Beauty Insider program thus offers a comprehensive approach to customer loyalty, touching on every phase of the customer journey with targeted strategies that enhance the overall experience and foster lasting customer loyalty.

Phase 2: Increase Engagement with Your Loyalty Program by Designing a Tiered System

For cannabis retailers looking to create a successful loyalty program in 2024, incorporating a tiered structure can be a game-changer. This approach not only aligns with consumer shopping habits but also adds an element of progression and exclusivity that keeps customers engaged.

According to the 2023 Loyalty Programs Data Study, a significant 34% of customers show a preference for tiered loyalty programs. This highlights the importance of structuring your program to match evolving consumer expectations. In tiered programs, members achieve specific statuses at set milestones, which broadens their engagement. The structure of achieving and moving up the tiers keeps the experience dynamic and interesting.

The study further reveals that a staggering 74% of consumers are more likely to engage with brands that offer tiers based on annual spending. This indicates that customers are motivated by programs that recognize and reward their spending levels.

Each tier in a well-designed program should unveil progressively enhanced benefits. These can include a mix of discounts, coupons, free items, gift cards, or even exclusive VIP experiences. Such benefits not only boost member interaction but also enhance the perceived value of being part of the program.

Attaining a new tier status in these programs creates a sense of accomplishment among members. This feeling of achievement is a powerful motivator for continued engagement and loyalty.

Members often value the exclusivity that comes with higher tiers in a loyalty program. This exclusivity can drive members to maintain or improve their status, thereby fostering long-term engagement with your brand.

A tiered approach can significantly enhance customer engagement and loyalty. By offering a program that rewards customers based on their spending and interaction with your brand, you create a more personalized and rewarding experience that resonates with their needs and preferences.

Take Action:

  • Survey Consumer Preferences: Assess customer interest in tiered programs.
  • Set Milestones: Define clear milestones for tier progression.
  • Structure Tiers: Create tiers based on annual spending.
  • Enhance Benefits: Offer escalating benefits for each tier.
  • Celebrate Achievements: Recognize when customers reach a new tier.
  • Promote Exclusivity: Highlight the exclusivity of higher tiers.
  • Monitor Engagement: Track customer engagement with the program.

Case Study: Sephora's Tiered Loyalty Program

Sephora's Beauty Insider loyalty program serves as an excellent model for cannabis retailers looking to implement a tiered loyalty program effectively.

  1. Tiered System Based on Spending:
    • Sephora's program categorizes members into different tiers based on their annual spending. This tiered structure aligns with the consumer preference for loyalty programs that recognize and reward spending levels, as indicated by the 2023 Loyalty Programs Data Study.
  2. Milestone-Based Member Status:
    • Members progress to higher tiers by reaching set spending milestones. This progression not only creates a dynamic and engaging customer experience but also fosters a sense of accomplishment as members achieve new statuses.
  3. Enhanced Benefits for Each Tier:
    • Sephora enhances the allure of its higher tiers by offering increasingly valuable benefits, such as greater discounts, exclusive gifts, and VIP experiences. These tier-specific rewards heighten the perceived value of the program and motivate members to maintain or improve their tier status.
  4. Point Multiplier Events:
    • An interesting twist in Sephora's program is the introduction of point multiplier events. During these events, members in higher tiers earn more points for the same level of spending. For instance, they might earn 2x, 3x, or even 4x points, which emphasizes the value of reaching higher tiers.
  5. Integrating Interactive Activities:
    • Sephora has also announced the return of their virtual, interactive event with opportunities for additional point accrual. This integration of non-transactional, emotionally engaging activities adds a new dimension to the program, encouraging broader participation.

For cannabis retailers, Sephora's approach illustrates how a tiered loyalty program can effectively engage customers. By offering tier-based rewards and integrating unique engagement opportunities, retailers can create a loyalty program that not only rewards spending but also enhances the overall customer experience.

Phase 3: Considering Accrual Rates for Points in Your Loyalty Program

As you finalize your loyalty the details of your program for 2024, an important element to consider is the accrual rates for points. This refers to the rate at which customers earn points through their purchases, a factor that significantly influences both customer engagement and profitability. Here is what you need to consider:

Impact on Engagement and Profitability:

  • Boosting Customer Engagement: Higher accrual rates can dramatically increase customer engagement. When customers accumulate points faster, they feel more invested in the loyalty program, which can lead to repeat business.
  • Encouraging Product Exploration: With faster points accumulation, customers are more likely to explore a broader range of products in your dispensary, enhancing their overall experience and the diversity of your sales.

Data-Driven Insights from Accrual Rates:

  • Valuable Customer Data: The way customers earn points offers invaluable insights. By analyzing this data, you can identify which products resonate most with your customers and contribute to rapid point accumulation.
  • Refining Offerings and Marketing: This data allows dispensaries to fine-tune product offerings and marketing strategies, aligning them more closely with customer preferences and behaviours.
  • Smarter Decision-Making: A data-driven approach informed by accrual rates leads to smarter business decisions and more personalized customer experiences.

Carefully considering the accrual rates in your loyalty program is not just a matter of rewarding customers; it's a strategic tool for enhancing customer satisfaction, refining your product offerings, and making informed business decisions. By striking the right balance, you can maximize both engagement and profitability in 2024.

Investing in a well-crafted loyalty program can bring substantial benefits to your business when done strategically. At Vetrina, we assist clients in updating their current programs to align with trends and data or building loyalty programs from scratch. A well-designed loyalty program helps retain customers and decreases the likelihood of them switching to competitors. By providing unique and appealing rewards, you create a compelling reason for customers to stay loyal to your brand.

Such programs are effective in encouraging customers to allocate a larger share of their spending to your business. By enhancing the perceived value of purchasing from you, customers are more likely to increase their spending.

A key objective of any loyalty program is to motivate customers to shop more often. If a customer typically shops eight times a year, a successful program can push this to nine or ten times, significantly boosting your revenue.

Finally, the data collected through a loyalty program offers invaluable insights into customer preferences and buying patterns. This information allows you to tailor your offerings and marketing strategies more effectively, continuously improving your approach to meet customer needs.

In essence, the effort put into developing a robust loyalty program is not just about immediate gains; it's about fostering long-term relationships, understanding your customers better, and strategically positioning your brand for sustained success.

If this blog has you wondering why customers choose your retail location, and how you can encourage them to shop more often and increase their basket size, click here and let’s connect.

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