As the cannabis industry continues to grow and evolve, businesses are turning toward data analytics to flourish and stand out in a competitive market. In the rapidly maturing industry, a strong grasp of data analytics is essential for setting growth strategies and boosting market differentiation, consumer satisfaction, and other benchmarks.
“Being data driven in the cannabis industry is extremely important,” Madeline Scanlon, Cannabis Insights Analyst at Brightfield Group, said. “Being data driven is making sure that the decisions a business makes are backed by data and insights, and not just going off of a hunch. Data will show you what is going on in the moment and in the future, and for emerging markets, it is really necessary to prevent that trial and error process.”
What is Data Analytics?
Data analytics is the science of analyzing raw data to make conclusions about that information. Many of the techniques and processes of data analytics have been automated into mechanical processes and algorithms that work over raw data for human consumption. Data analytics helps businesses:
- Create Personalized Customer Experiences
- Make Better Marketing Decisions
- Grow Better Marijuana Plants
- Convince Investors to Invest in Your Cannabis Business
The U.S. airline industry embraced data analytics more than two decades ago. Now, airlines are 100 percent dependent on data — from pricing algorithms to loyalty programs to operations management to customer service. Leveraging data for trend analysis and developing offerings proactively, rather than reactively, changed the ways airlines served their consumer bases and paved the way for so many other industries to do the same.
4 Types of Data Analytics
Investopedia breaks down data analytics into four basic types:
- Descriptive analytics:
This describes what has happened over a given period of time. Have the number of views gone up? Are sales stronger this month than last? - Diagnostic analytics:
This focuses more on why something happened. This involves more diverse data inputs and a bit of hypothesizing. Did the weather affect sales? Did that latest marketing campaign impact sales? - Predictive analytics:
This moves to what is likely going to happen in the near term. What happened to sales the last time we had a hot summer? How many weather models predict a hot summer this year? - Prescriptive analytics:
This suggests a course of action. If the likelihood of a hot summer is measured as an average of these five weather models at above 58 percent, maybe you should add some refreshing summer drinks to your menu or sell summer-friendly merchandise like hats and t-shirts with your logo on them.
Data analytics is crucial for any cannabis business to survive and stand out in an overcrowded and ever-growing market. Below are some of the different ways that data analytics can transform your brand:
Create Personalized Customer Experiences
Through data analytics, cannabis businesses and dispensaries can get a better understanding of who their customers are, the types of relief they are looking for with cannabis, and how they prefer to consume the product. According to Scanlon, it also includes higher-level planning like how consumers are talking about cannabis online through social media. How consumers are talking about cannabis can deeply inform different strategies for brands in how you market your products or talk to shoppers.
“It is important to make sure that retailers are getting as much data about their customers as they can up front and through their point-of-sale (POS) systems, which are able to track this data,” Brian Fitzpatrick, Chairman and CEO of Qredible Inc., said. “Once you get that data and find out why customers are coming into your store and buying certain products, you can then compare and contrast different micro trends.”
• Utilizing Trends to Personalize Customer Experiences
In the retail industry today, businesses are looking at macro-level trends with big data reports from companies doing research on the market, but many customers in certain age groups are buying different products for different reasons, and these demographics can change throughout states or even countries.
Because of these differences, especially for an up-and-coming industry such as cannabis, it is important to focus on the micro trends involving your product to get a better understanding of your customer base and their needs and desires. You may find in your area that edibles are more popular for Millennial shoppers, while in another area, this age group prefers tinctures or flower.
• Conduct Surveys to Personalize Customer Experiences
“It is important for us, as an ecommerce business, to have a connection with our customers and make up for the lack of face-to-face interactions,” Shuki Far, CMO and co-founder of Everything420.com, said. “We have tried multiple ways to accomplish this, but we have seen the most success through survey research of our customers. Through this process, we were able to determine that half of our consumers are women and the majority of all customers are frequent or daily cannabis users, which influences products that are featured on our home page and what consumers see in our marketing materials.”
You can do this by sending email surveys to shoppers after they have made a purchase to see how they like the item they bought, if they are interested in anything similar, and why they purchased the product to get a better sense of their needs and desires. You can also utilize your social media platforms to validate or invalidate your survey data. Frequently ask your followers questions to determine if your insights are correct.
Make Better Marketing Decisions
Data analytics can give cannabis brands a much better understanding of consumer behavior, ultimately giving dispensaries the ability to target specific customers and get the right message to them at the right time. As the industry gets more competitive and shoppers have more options to choose from, it becomes crucial as a marketer or retailer that you promote your products at the right time through studying consumer behavior, identifying targets, testing, and studying the results of those tests.
• Understand the Competitive Environment to Make Better Marketing Decisions
This includes researching how many products are out there, the different types of potency levels, how many males versus females are consuming cannabis products, and the health conditions of users. In order to figure out the niche products that have a less competitive market or big growth characteristics, you can offer better prices or promote items effectively to certain customer demographics, according to Roy Bingham, Co-Founder and CEO at BDSA.
“You need to systemize the way you think about developing new products or marketing campaigns so it becomes the DNA of the company. At the moment in the cannabis space, brands are essentially throwing products at the wall and hoping something will stick, and that may work for a while, but as it gets more competitive, that will become too expensive of a process. You need to launch less products and have more marketing resources behind them so this way you can find out what is working,” Bingham said.
• Use Market Forecasting to Make Better Marketing Decisions
This type of analysis allows businesses to use data to make educated guesses about products they expect to be popular in the future based upon market research. Learning about different methods for completing marketing forecasts can help you determine the marketing and product launch approach you want to take.
It also helps you understand which marketing channels will generate the most leads and how sales likely will perform. By understanding how many prospective customers are in each stage of the revenue cycle and how they move through each stage, you can estimate how many new opportunities and customers you will generate in the future.
Grow Better Marijuana Plants
According to Bryan Fried, Chairman and CEO at PANGEA Global Technologies, while it may have been okay to start a cannabis grow with a small greenhouse and employees running around trying to regulate the plants, there is too much new technology and competition in the market to be successful as a small grower. Data analytics can help growers to yield better crops, control the environment of the plant, and create better recipes for strains.
• Save Successful Recipes to Grow Better Marijuana Plants
“You cannot afford to have a lost crop or something that is not up to standards, and the only way to do that is through a data analytics platform that can save recipe metrics so you can replicate at any time,” Fried said. “By saving important metrics of specific recipes in which you find that golden yield, you can then replicate it and tell your customers that it will have all of their favorite characteristics.”
• Data Analytics Can Help Reduce the Chance of Human Error in Grows
Especially in growing environments where the temperature and humidity needs to be controlled 24/7, human error can cost cannabis businesses thousands of dollars and ruin a whole crop. The technology that controls these environments can use data analytics to keep everything stabilized at the proper temperature and humidity levels without the need of human intervention and possible error.
“I can be asleep and get a notification that the humidity levels are out of sync, and I can immediately take the actions to correct those mistakes, but at least I know the problem that I need to take care of before it negatively impacts my business. Any time someone runs through a growing environment, it disrupts the climate, and so this technology can use data analytics to monitor everything without interfering with the growing climate,” Fried said.
Convince Investors to Invest in Your Cannabis Business
Whether you are a new brand looking for funding or need some extra money to expand your business, data analytics can help you to craft a strategy to give possible investors a reason to supply you with the necessary funds. Use data analytics to create a spreadsheet to give to investors that explains how all of the above techniques can help your brand succeed and stand out.
Talk about how you are using data to study consumer interests and how likely your product is to succeed in a competitive market, how you plan on marketing your product in order to capture the right audiences, and how well you plan on caring for your plants so there is less chance of money being wasted on damaged crops. Data can help to give both you and your investors a better view of what you are walking into on a national or state level and a way to make smarter decisions for the success of your business.
Data Analytics Can Help Create a Better Future
Going beyond what data analytics can do for your brand, it can also help inform the political decisions impacting the cannabis industry, according to Bam Deocampo, Marketing Director of Sunset Pipeline. As this might tend to be overlooked, it is important to be data supportive in legislative pushes for the future of the industry. For example, government limitations on store hours, the number of retail spaces allotted per city, and how cannabis companies are taxed all rely heavily on the supporting data.
As data continues to shape the cannabis industry as a whole, it is becoming more crucial than ever for businesses to utilize analytics in order to grow and appeal to new customers.