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The cannabis market has been in decline across the United States throughout the past year, particularly in legacy markets. According to research by Headset, both the number of transactions and basket sizes have dropped since 2020.
Based on declining cannabis market trends and with a possible recession in the near future, it’s more important than ever for businesses working in and with the cannabis industry to take steps to protect – and even increase – sales. You can do it if you understand the psychology of consumer behavior and invest more strategically into marketing.
The cannabis market is in decline, but that decline is unlikely to last forever. Sales jumped during the COVID-19 pandemic and are still normalizing post-pandemic. That’s not surprising, but regulatory changes in the future could significantly impact how businesses operate as well as positively affect sales.
Therefore, both B2C and B2B brands in the cannabis industry need to consider how investments and strategies implemented during the current market decline will affect their businesses in the future – similar to how brands should navigate recessions. And it just so happens the U.S. is inching closer to what could be a recession, which means the information in this article is incredibly timely.
For businesses, the kneejerk reaction to a declining market or recession is to cut marketing investments significantly. However, this is a mistake. Recovery will happen, and sales will increase in the future. Therefore, the businesses that will win in the future are the ones that stay relevant during the bad times.
In other words, your marketing investments shouldn’t disappear. However, they do need to be more focused on tactics that will increase brand trust, so consumers feel confident that your business will withstand the short-term market decline. Building trust and an emotional connection to your brand are critical investments to protect sales today and in the future.
To increase sales in a declining market, you need to understand your customers, adjust to the new reality, make more strategic investments, and stay agile to respond to new market changes – especially when the market starts to improve.
Think of it this way – when the cannabis market starts to improve, there will likely be more customers that you’ll need to compete for. In addition, many existing and new customers will be interested in trying new products, services, and brands. To ensure your brand will be one that consumers will choose, you need to establish a strong place in the market today.
Here are four tips to help you carve out your place in the market and increase sales:
How are customer behaviors changing due to the cannabis market decline? The first step to increase sales in a declining market is to determine how the following have changed and/or will change for consumers:
The changes listed above directly affect sales for your business. What worked two years ago may not work today or six months from today, so create a document that lists all of the details related to the three bullet points above. This information is critical to make strategic marketing investments that have a chance to increase sales.
When a market is declining or a recession is looming, consumers change, and that means you need to re-evaluate and update your buyer personas. What motivated consumers in the past may not work today.
As an example, Harvard Business School researchers identified four psychological segments that marketers should consider when evaluating how people react emotionally to a negative economic environment:
Think about your buyer personas. Do they take the four psychological segments into account? If not, update them now, so your marketing investments focus on the right messages while the cannabis market is in decline and a recession could be coming.
The Harvard Business School researchers found that the top priority for businesses in a recession are loyal customers, and that conclusion aligns with the data from Headset’s report, which shows the top 10% of cannabis consumers spend significantly more than average customers and “contribute a disproportionately large percentage of revenue to the industry.”
Interestingly, Headset reports that the top 10% of cannabis consumers have actually been tightening their budgets and spending less on cannabis purchases than other cannabis customers in 2022. This is an audience that cannabis brands don’t want to lose. Therefore, it’s critical that marketing investments targeted on the most loyal customers are not cut from budgets.
For both B2B and B2C businesses, referral and loyalty programs should be a high priority, and those programs should reward both big spenders and smaller spenders, particularly those who make many smaller purchases rather than only focusing on customers who make big purchases less frequently.
While you might be tempted to deeply discount multiple products or services to bring in more sales, don’t do it. Prices should reflect your brand promise and the value consumers get when they purchase your products or services.
Don’t cut costs when it comes to promoting your offers. That doesn’t mean you need to invest in expensive promotional tactics though. B2B businesses can leverage email marketing and social media marketing to promote their special offers. Dispensaries and other businesses with brick-and-mortar locations can use in-store promotional materials to increase awareness and uptake of special offers. The key is to invest in promotions strategically.
To develop the right price-based promotions and offers to increase sales in a declining market, focus on these tactics:
Be careful not to discount too much or continue offering discount prices for extended periods of time. Doing so could change consumers’ perceptions of your brand, products, and services and set new expectations for your pricing. As a result, they won’t be willing to pay your full prices when the market improves. More frequent short-term discounts are a better option to increase sales in a declining market without sacrificing your sales in the future.
Just because the cannabis market is in a decline doesn’t mean it won’t recover. It also doesn’t mean that there aren’t consumers who want to buy your products and services. Follow the tips above to target your marketing, offers, and pricing strategies so you increase sales today without hurting your brand or business in the future when the market recovers and grows.
To connect with cannabis license holders across the U.S. and international territories via phone, email, social media, and more, subscribe to the Cannabiz Media License Database. Schedule a demo to see how it can help you increase sales.