How Cannabis Businesses Can Lower Their Cost Per Customer Acquisition

Cost per Acquisition

Return on investment, cost per click, customer satisfaction rate, cost per acquisition and plenty more of these are used to monitor the success of a business. It’s not as simple as profit and loss, if you made money or lost money. New businesses have an uphill battle and they need to be aware of the costs that come with doing business. The overall costs including marketing, labor, materials, rent and so forth have to equal less than the profits you made from selling your services and products. However, it may take some time to accomplish that, especially for a business in the cannabis industry. 

The cost per acquisition in the cannabis industry is very difficult as it varies by state as well as city. Some areas, the CPA can be less than $10 a person, while in other areas that cost can be over $100. Why is there such a staggering difference? There are lots of reasons and this is where new business owners really have to do their homework, especially before they commit to opening a new business in an area that could suffocate it within months. 

 

How Cost Per Acquisition Varies Per State 

For cannabis businesses, understanding the cost per acquisition means starting with the state you are in, not necessarily the marketing services you are utilizing. The reason for that is because each state has different rules and regulations for how consumers can purchase and use the products in their state. In states where the products are only accessible via medical licenses, dispensaries have more restrictions and cost per acquisition, but less competition. 

However, in states where cannabis is completely legal, competition is what drives the CPA up and is a big problem for smaller dispensaries. They can make due with the loyal clientele they currently have, but growing and expanding is proving to be difficult. This is where creative marketing comes into play as it can help lower the cost per acquisition and expand your customer base. 

 

Why Lowering Your CPA Is Important 

It may seem obvious why lowering your CPA is important. However, what business owners often overlook is the fact once you’re up and running, your CPA is going to be the top indicator on whether or not you are going to have long-term success or, you need to make some serious changes. Imagine your profits from an average sale are $10. Not much, but you are making enough in volume to justify the small margins. Your competitor is seeing the same profit margin and like you, their CPA is at $50. 

That means every new customer you bring in costs you $50 and you are making an average of $10 profit on each of their purchases. Those numbers are actually not bad, but the problem for you comes up when your competition figures out how to lower their CPA to $40. That means they are making double the profit per sale that you are, giving them an opportunity to grow and expand faster. 

 

Where Dispensaries Miss Clients 

Dispensaries struggle with bringing in new clients and one of the reasons for that is poor information, despite great customer service. That may sound confusing but think of it a different way. If you are a customer of a dispensary, you will get amazing customer service. Your favorite dispensaries will have great communication, send you tons of promotional offers each month, be there to answer your questions and may even throw in some added perks here and there. 

But what if you’re new to the cannabis experience and have never bought from a dispensary before? Where do you go to get answers? These places focus on their customers, not necessarily potential customers. It’s not because they are not aware of this mistake, it’s because they’ve put all their energy into providing great service for their existing customers. However, by limiting communication and information for those who are not familiar with the products, you risk turning away new customers each day. 

 

How To Lower Your Cannabis Cost Per Acquisition 

Lowering your cannabis cost per acquisition is important, but it requires time and the ability to adjust your current marketing efforts. Keep in mind, if you can lower your CPA, it gives you a chance to not only make a higher profit margin on each customer, but it also gives you the opportunity to lower your costs so that you can grab even more customers from the competition. Here’s how you can get started: 

  1. Improve email marketing: The best way to lower your current costs on marketing is to expand your email marketing. There is no other marketing service available for cannabis businesses that can generate immediate interest and promote quick sales. The reason is because of timing and reach to consumers. How else can you create a promotion for this weekend, send out the information to 10,000 recipients and expect traffic and sales on the same day? 
  2. SEO: One of the most cost-effective digital marketing strategies to utilize in the cannabis industry is search engine optimization. This service allows you to rank on Google under valuable key terms. When consumers go onto search engines they are looking for information, not only about where to buy cannabis products, but also to learn about the products, the options available, proper usage and more. If your website is providing this information for new customers, you will get their interest and be able to 
  3. Educational content: Along with SEO, educational content can do a lot for lowering your cost per acquisition. Let’s imagine there’s a new consumer on the web who wants to start learning more about cannabis and what it can do for them. They do not know what to even look for, let alone where to begin on what they can order. Posting educational content, hosting free webinars and utilizing other resources to educate the audience is one of the most reliable and effective ways to lower the cost per new customer. In fact, customers who are brought in via education rather than promotion often are more loyal because they are not necessarily looking for deals but a reliable company they can trust. 
  4. Giveaways and referrals: Want to capture emails of 10,000 cannabis consumers who are not your current customers? This is where giveaways and referrals are one of the best options for your online marketing. Tell your current customers to share your brand, offer new customers incentive to join and reward them at the same time. Let your customers become your sales staff. 
  5. Delivery: This option is difficult for each business depending on the size, reach and resources. However, if you can offer a reliable delivery service, it will open you up to thousands of new consumers in your area. 

Cannabis consumers want great deals and friendly service. However, the thing they demand the most is high-quality products and the ability to acquire them as easily as possible. If you can give them quality and easy delivery, you can charge a bit more for your products because customers will be fine with that because they know they are getting their money’s worth. 

 

Why Cannabis CPA Is High

One of the main reasons your CPA may be high has to do with the fact that you may be in a state that allows cannabis products to be used recreationally. If that’s the case, you are going to struggle with having to keep prices low, especially when you go after new consumers. However, if you can improve the customer service and experience aspect of your business, higher prices may not be as big a problem. Here are some other areas to look at for why you are dealing with a higher cost per acquisition: 

  1. Competition: Yes, you will have lots of competition in your area and in your state as well. Keep in mind, a big part of your competition will also be from products similar to yours but maybe not as strong. CBD, HHC and other products have their own audiences as well. If your competitor offers cannabis products at the same price that you do, but offers CBD as well, that may give them an advantage when consumers are comparison shopping. 
  2. Marketing limitations: Regardless of what state you are in, the platforms you can market on will limit your abilities because you are in the cannabis industry. You may not be able to run promotions on social media or post banner ads throughout the web. Learning what your marketing limitations are is important because it tells you not only why the cost per acquisition is so high, but potential ways to lower it. 
  3. Regulations: Along with marketing limitations, there are also regulations on what can and cannot be said about these products. These regulations are mostly set in place by the payment processors and have to be followed. They can include what type of claims you can make about your products, how you can educate people on the quality of cannabis products and more. By not being able to give consumers direct information about these products and their potential benefits, you are limited in how you can inform them of why they may want to consider trying them. 
  4. Cost: Inflation has hit everyone and every industry. What you are paying now for your products, rent, labor, packaging and more has certainly gone up compared to what you would have been paying even two years ago. You have to realize that if your costs are going up, you may have to raise your prices as well. 
  5. Selection: Some companies make the mistake of just trying to get their business started and get out there with a handful of products. This is never a good idea because even though you may be making sales now, you are losing dozens of customers a day who find your selection to be too limited. Expand your selection as much as possible before advertising. 

Your competitors are hunting for the same consumers you are. Yes, lowering prices may get them in the door, but it will not keep them long-term unless the products and service are of the quality they expect. Eventually, as your consumers get more experience, they may want to try new brands and options that are available. That’s why the bigger the selection you have, the longer they may stay with you. 

 

Best Digital Marketing Services For Cannabis Businesses 

Digital marketing is one of the best ways to build a cannabis business, especially with an online presence. The goal for each campaign needs to be to introduce your brand to thousands of potential new consumers, while also re-introducing your brand to others who are familiar with you and perhaps have not purchased from you in a while. 

  1. Email marketing: Again, email marketing is a fantastic digital marketing service for the cannabis industry. Businesses have thrived strictly based on how well they built and maintained their consumer lists. This is why you need to invest time and money into not only building a list, but constantly utilizing it and updating it to the best of your ability. This will help you to easily expand your customer base while also getting immediate interest and traffic on your promotions. 
  2. Search engine optimization: Companies outside of the cannabis industry utilize search engine optimization because it generates fast, reliable and affordable traffic. In comparison to other marketing options, SEO is considered the most cost-effective way to not only generate new traffic, but to get the highest quality traffic possible. The reason for that is because consumers who look for information via search engines tend to be more serious about taking an action as they are not just browsing through. 
  3. Social media: While there are major limitations on social media marketing for cannabis companies, there are ways for you to grow and expand your brand on these platforms. Remember, each platform is different and that means you have to be aware of the type of content you can publish, what you can promote and more. Following the information and guidelines can help you utilize these platforms and grab whatever traffic you can. 
  4. Blogs: Cannabis companies love to blog for one simple reason, there is so much that needs to be discussed and this is the perfect platform to do so. The more information you can share with potential consumers, the more informed they will be. 
  5. Guest blogging: If you have the ability to reach out to other companies, especially ones that inform people about these products, you could find affordable and reliable customers. Consumers visit these sites for information but also to learn more about which companies to buy from. By blogging on these sites, you are providing them with free, informative content, but you are also introducing your brand and information to tens of thousands of new consumers. 

The cannabis industry has grown and expanded over the years. However, so many companies are focused on just generating new customers. Use some time to build your brand, your online presence and your content. These things could generate sales for you for years and require less and less of an investment as you get going. 

 

How To Improve Your Marketing Content 

Marketing content can be anything from what you put on a flier to what you put in your blog. The better the quality of your content, the more traction it will generate for you, especially over time. A blog that gets 100,000 views per year and is 3 years old will still generate more traffic for you than anything new you publish today. That’s why you want to invest in the content you are producing now and make sure that it is top of the line. 

You should be sending out an email every week. Two emails per month should be promotional, giving consumers a reason to come to your site and buy from you. One email should inform consumers of new products, big events coming up and giveaways and another email should focus on information. The information emails can work with your blog and other content you are publishing each month as well. 

By following that format, you are generating weekly content that gets some type of engagement and interaction from your consumer base. It also sends traffic and potential sales to your site as well as helps you to expand your reach with new consumers who sign up. 

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