Due to federal and state limitations on marketing cannabis products in the United States, cannabis businesses are restricted in their ability to promote their business and gain new customers. Even in states where cannabis is legal, there are lots of regulations that make it difficult for dispensaries to use traditional paid advertising methods. Because it can be harder for dispensaries to reach new customers and promote their business, it is even more important for them to retain their hard-earned customers and find creative ways to stay in touch with them. 

One way to stay in touch with consenting customers and work around these laws is to establish a loyalty program. Loyalty programs offer incentives such as rewards, discounts, and access to special deals to attract and retain customers. They are a great way to build relationships with first-time customers, encourage spending and incentivize new ones to shop at your store.

What are the Benefits of a Loyalty Program?

As cannabis continues to get legalized across more states, and United States eyes the possibility of federal legalization, it is even more important for businesses to differentiate themselves in the crowding space. Businesses looking to provide great customer service and build a stable following turn to loyalty programs. Loyalty programs are a great way to gain and retain customers while encouraging them to purchase more and more frequently. Offering perks and discounts costs money, but when implemented correctly, the benefits heavily outweigh the costs. Here are some additional benefits of establishing a loyalty program:

• Loyalty programs are a great way to get your customers’ contact information including phone number and email address. This allows you to stay in touch with them after they leave your store.
• Cannabis businesses are not able to use any language in their marketing and communications to encourage customers to purchase more products. Loyalty programs are a great way to get around this as people tend to spend more money when they are incentivized with points and perks. 
• Staying in touch with your existing customers is important to customer retention. Loyalty programs create a reason to get in contact with customers and allow for better and more frequent communication. 
• Offering a loyalty program right at the beginning will help create long-term relationships. It can provide valuable data on customer behaviors and help businesses figure out what kind of offers and promotions drive sales.
• Loyalty programs are also accessible to out-of-state shoppers that do not reside in areas where marijuana is legalized.
• Acquiring a new customer not only takes additional time and effort, but is also more costly than retaining an existing customer. The cost of a loyalty program often has a much greater return.
• Loyalty programs are shown to increase the frequency of visits and customers’ basket size.

How to Implement a Loyalty Program for your Business

Know your State Regulations

The regulations surrounding cannabis legalization vary by state. Familiarizing yourself with federal and state laws before implementing any marketing activity should be an important first step. Some states have limited restrictions on marketing cannabis products while others may prevent businesses from holding onto any contact information. Getting the customer’s direct consent before sending them any communication is a good way to ensure compliance before opting them in for a loyalty program.

Decide on the Type of Loyalty Program

There are different types of loyalty programs to pick from, and not all of them will be a good fit for your business. Here are some of the main types that you may want to consider:

Visit-Based

A visit-based loyalty program tracks the number of different purchases a customer makes. This model is often used for coffee shop-type businesses where the cost of products doesn’t differ drastically. In this type of model, customers are often rewarded with a free product or discount after a certain number of visits. Although it is easy and low-cost to implement, the downside of this type of program is that it doesn’t create as much loyalty as some of the other ones. It is also not great at capturing customer data. Furthermore, the value offered by the reward may not be perceived as high as some of the other programs.

Points-Based

Another type is a points-based loyalty program that allows customers to collect points based on how much they spend. For example, customers are awarded 1 point per each dollar they spend. When they reach a certain number of points they get a reward or discount. This model rewards customers for spending more money and is a good way to drive up spending. A points-based program is more applicable to businesses that have a vast range of price points and appropriately rewards high-spending customers. Another benefit of this program is that it allows businesses to track customer data. On the downside, this model costs more and requires more planning to implement. 

Tiered Loyalty Program

A tiered loyalty program rewards customers for reaching certain milestones. The milestones are reached by spending more money and they offer exclusive perks and rewards. This type of design encourages spending while creating value for customers. The rewards don’t have to be discounts and free products only, and can also include more experiential offers. These type of benefits build loyalty and increase customer satisfaction. It also makes customers feel special for being a member of the loyalty program. This type of program is a great way to reward higher-value customers. But one important downside is the time, effort, and money it takes for the business to create rewarding experiences for higher-tier customers that make it worth it for them to be a member. 

Referral Programs

Referral programs encourage your existing customers to recruit others and reward them for doing so. You may offer them certain incentives like discounts or free products. Word of mouth is a great way to get your name out and gain new customers. While cannabis businesses are limited in their marketing option, there are no regulations against your customers spreading the word about your business. A good way to encourage new customers to visit your store is to offer both the referring party and the referee a reward. Although a referral program may not be enough on its own, when implemented with others it may be very beneficial.

Combination Programs

Businesses don’t have to be limited to these existing loyalty programs. As loyalty programs are becoming more common, a good way to stand out from the crow is using a combination of the different models to design your own unique program. For example, using a combination of the points-based and tiered programs is proving an excellent way to retain customers for some businesses. Although it may take some trial and error to find the right combination for you, offering a different experience is one way to stand out from the crowd.

How to Communicate your Loyalty Program to your Customers

As important it is to have a well-designed loyalty program, it is also important to have a way to communicate it to your customers. Constant communication is essential to ensure that your customers don’t forget about the loyalty program. 

A great way to encourage loyalty program members to return to your store is to send them reminders about how close they are to the next reward or encourage them to claim their current reward. Members can also be sent information about new products and offerings. Reaching out to them about an opportunity to sample a new product is another great way to capture their interest. Make sure to track data on what kind of communication gets more engagement and brings the highest ROI.

Here are some of the best ways to communicate with your loyalty program members:

Text Message Marketing

Text messages are a vital part of a loyalty program. Text message marketing is a great way to stay in touch and send your loyalty members special promotions, as more people read and respond to text messages over other communication methods. Collecting customers’ phone numbers also makes it easier for them to opt-in for your loyalty program by responding to a prompting message. 

When using text messaging as your form of communication, make sure to follow any local and federal regulations. For more information about SMS Marketing and regulations, read our article [link to SMS article]. Ensuring that all of your contacts have double opted-in and have the option to unsubscribe at any time are two important steps that you can take. 

Email Marketing

Another commonly-used method to stay in touch is to send specialized emails to your customers. You can use this method of communication to let them know about their points status, special offers, and new products that you carry.

Loyalty programs may take some effort and money to design and run, but they are a well-proven way to retain customers, attract new ones, and increase customer spending. If you are thinking about using this method, try to implement it sooner than later. Launching a loyalty program right at the beginning is a great way to earn your customers’ trust.