So, you’ve got legal cannabis? Here’s how to market it

Cannabis products range from the plant itself to infused food and beverages to cannabidiol (CBD oil) that contains no THC and does not get the user ‘high’. For this column, I interviewed sellers and promoters on the best marketing practices in the industry for the 4 Ps.

The marketing strategy for cannabis

Approved cannabis programmes have a licensed and regulated cultivation, production and dispensement system. Users sell or donate a plant to an official facility that will cultivate more. Producers then manufacture products. Official dispensers sell them. Cultivators, producers and distributors must each have licenses similarly to what bars and pubs need to sell alcohol.

But that is where the similarity ends.

The uniqueness within a category’s products determines whether companies focus on product marketing or brand marketing. Software platforms do the first by communicating how their offerings are better than the competition. Just see the countless product comparison website pages out there.

Products such as paper towels are rarely that different, so they do brand marketing by focusing not on the product but on the people who use it. Just remember Pepsi’s ‘The Choice of a New Generation’ or ‘Choosy Moms Choose Jif’ peanut butter.

Many in the cannabis industry see producers and sellers focusing on product marketing because the various strains and farming practices in cause different effects on the human body.

“The variety of cannabis has huge untapped potential similar to wine via grapes, beer via hops and other plant-based food is in terms of depth of taste, experience and education,” Ben Little, founder and director of the London innovation consultancy Fearlessly Frank, said. “Cannabis has the same if not an even far greater depth of variety,”

Still, as I noted in a prior column, roughly half of promotional media spend in any category – even in B2B – needs to focus on brand.

“Brand marketing is incredibly important, particularly for companies looking to build multi-state operations,” Lisa Buffo, founder and chief executive of the Cannabis Marketing Association in the US, said. “Cannabis is still a federally illegal and highly stigmatised substance, and good branding is helping to change the stigma and bring more customers to the market.“

For market segmentation, Little said he pictures a Venn diagram of three overlapping circles with medicinal users, recreational users and logistical users who need hemp for packaging, building products and materials.

“At the points these circles overlap lies farming and extraction, research and development and lobbying and learning,” he said. “I truly don’t believe it’s a fad or fiction. It’s a raw product just like coal or corn that will form the basis of an entire industry.”

How to price cannabis

But potential sellers, beware – newly-legal marijuana is not easy money.

“Cannabis pricing is a delicate balance between making enough revenue for businesses to be able to survive the incredibly expensive regulatory requirements placed on them by states and the fact that they cannot deduct business expenses on their federal taxes and keeping the price low enough that it does not incentivize consumers to keep obtaining cannabis on the illicit market,” Morgan Fox, media relations director for the US National Cannabis Industry Association, said.

Increasing legality has not seemingly caused prices to plummet – an act that presumably would lead to many more sales.

According to the Cannabis Price Index published by the German content marketing agency ABCD, the price per gram is $11 in New York City (where it is partially legal), $9 in London (illegal) and $8 in Toronto (partially legal). The prices are not that different in cities where it is completely legal. Boston is $11. San Francisco is $9.

“Regulated cannabis at its current state is not as profitable as one would imagine,” Jerry Velarde, chief marketing officer of professional management company Cannabis One, said. “Some cannabis companies have an effective tax rate of 70%. So, when adding expenses, to generate a potential profit, consumers should understand that the cost is a result of taxes and expenses that a business must endure to ensure a safe product is being produced.”

Cannabis prices in California are reportedly rising as regulators impose more testing, handling, packaging, record keeping and distribution requirements. However, Oregon did have an oversupply this year that caused a decrease in prices.

There are generally three ways to look at revenue: sell a lot at a low price, a little at a high price or a mid-market price to everyone in between. The first is Wal-Mart. The second is diamonds. The third is everyone else. The industry still needs to see where cannabis goes.

“Pricing is all over the place right now, and I feel like the cannabis economy still hasn’t settled into a long-term consistent pricing,” Daniel Stein, founder and chief executive of the agency Evolution Bureau, said. “In the end, weed will probably be priced like whiskey, where some people are fine paying $15 for a bottle of moonshine and others will pay hundreds of dollars for a 30-year-old scotch.”

Place and distribution

In the US, selling cannabis online is generally illegal. Some states allow special deliveries but not through official post. Businesses often have website ordering with in-store pick up. In Canada, customers can purchase from only authorised provincial retailers.

“The challenge is having no access to purchase directly from licensed producers, which limits them to whatever the store they are shopping at is able to acquire,” Meni Morim, chief executive of Canadian cannabis e-commerce company Namaste Technologies, said. “These brick-and-mortar store inventories are limited to what the provincial distributor is able to procure.”

Different US states have various regulations on cannabis stores, but some universal policies are that outlets cannot sell to people under 21 and must have tracking throughout the supply chain from cannabis seed to cannabis sale. All products must be tested, and product packaging needs to show the results.

In Canada, the minimum age is 19, and stores can sell a maximum of 150 grams of cannabis at one time. (The legal age in Quebec is 18.)

In terms of future operating models, Velarde has a prediction: “Selling is done at the dispensary level and promoting is done at the national level. A liquor store sells alcohol products, but Coors promotes its brand nationally. Cannabis will follow the same pattern.”

How to promote the cannabis industry

Marcom plans often begin with whether companies wants to grow the size of the total market or increase their shares of the market. Category leaders focus on the former while smaller competitors want the latter.

There is no single market leader in much of the cannabis industry, so theoretically every single seller should be fighting for more market share. But I believe cannabis is an exception. The market is so small and distribution methods are so limited that businesses should help to promote the category and grow the market in general. Everyone will benefit.

“Education of the general public is paramount and should be an industry effort,” Velarde said.

First, sellers and promoters of cannabis largely agree on the importance of educating the public about an industry with products that are still new and not widely known by most people.

“It is imperative to reinforce the benefits of legal cannabis availability wherever we can,” Morim said. “There is still a conditioned fear and hesitation within a significant portion of the population due to the stigma attached to this plant.

“The profile of an average user is no longer your stereotypical ‘stoner’. Average users are professional people, individuals in chronic pain, parents, cancer patients, the elderly. Any opportunity you have to show that cannabis, while a personal choice, is a viable option regardless of what you look like, where you live, or what you do for a living.”

In the age of Donald Trump and Brexit, many consumers likely need stress relief – and that may be an important marcom message.

“Create distance from the cliches, and hone in on those underlying motivators for cannabis users today. Consumers are interested in the wellness and therapeutic benefits of cannabis,” Emily Moquin, director analyst in Gartner’s marketing practice, said. “Consumers are actively seeking forms of respite and self-care. Marketers should position products to align with the consumer needs of relaxation, anxiety reduction, mindfulness and wellbeing.”

MedMen, California’s largest cannabis retailer, ran the ‘Forget Stoner’ campaign above to dispel the old clichés. Moquin also cited the messaging used by cannabis spray Mother and Clone and cannabis decarboxylator Ardent.

But do not go overboard.

“Go easy on the claims,” Little said. “I think we are getting into a place where the naysayers are given too much ammunition. It’s too early to go crazy with benefits yet people will claim cannabis can do anything from cure cancer to help you sleep. Let science show the way then make the benefits understood and appreciated.”

Buffo recommends the use of publicity campaigns.

“Speaking to the media is a protected first amendment right,” she said. “There are so many restrictions when it comes to cannabis marketing that this has been one of the more effective and credible ways to get a brand name out there. Telling your brand story to journalists is important from both a business and a culture perspective. The market will be limited as long as the stigma still exists.”

How to promote individual cannabis sellers

Sellers who want to promote their stores should first check the advertising guidelines in their country, state or city. For people in Washington, for example, the state’s Liquor and Cannabis Board has this resource.

Second, move beyond the all-too-common branding and focus on local promotion because of the differences in regional and national regulations.

“When it comes to branding, avoid using ‘canna’ or any sort of pot leaf imagery,” Jared Mirsky, founder and chief executive of the Seattle cannabis branding agency Wick & Mortar, said. “Move away from black and green color schemes.”

“Unless you’re a non-cannabis CBD company, it doesn’t make sense to promote your THC-based product nationally. The only exception could be for cannabis brands with a licenses in more than one legal state -- and, even then, local advertising in highly targeted areas is more likely to benefit you.”

Third, remember that cannabis users today do not reflect the Cheech and Chong stereotype and have become more sophisticated. Marketers say customers respond to quality descriptors, taste cues, suggestions and paired activities.

“Consumer appreciation of cannabis has taken on an air of connoisseurship patterned after premium food and beverage categories,” Moquin said.

“Edible cannabis in particular is experiencing an elevated revival far beyond the skunky pot brownie. As with other consumable categories, cannabis users are an engaged group that want to learn more about what they are consuming. Where does it come from? How is it grown? Does that make it better than the alternative?”

Fourth, producers and sellers are also using informational, rating and community apps such as Weedmaps and Leafly.

Cannabis marcom tactics and channels

Cannabis promotion is difficult. US companies often cannot advertise on television or radio. Google and Facebook do not allow such ads. (But other smaller ad networks do.)

Marketers in the industry said print is an alternative – after all, High Times has been publishing since 1974 – but they question its trackability.

Grandesign Experiential, an experiential marketing firm headquartered in San Diego, has worked with an activation to promote the HBO show High Maintenance with CBD lattes as well as CV Sciences’ CBD Oil Trade Show booth.

“While preparing for cannabis industry saturation, companies need to ensure they are doing what they can now to become a leading brand,” Sean Pedeflous, the agency’s director of creative services, said. “This means advertising and utilising marketing tactics that are legal, which can be extremely tricky. It’s the same dilemma as the end of the Prohibition era but with more complexities due to contradictions between state and federal laws.”

One popular method is influencer marketing, but there are caveats. (And remember the tactic’s general pros, cons and best practices.)

According to William Soulier, co-founder and chief executive of the Talent Village influencer platform in the UK, cannabis promotion there is difficult because regulations state that 75% of the audience as well as the influencers themselves must be aged 25 or older. Further, the posts can neither encourage cannabis consumption nor show a person smoking nor the product itself. Soulier also cited MedMen as an example.

“Brands need to get very creative,” he said. “They are doing influencer marketing around cannabis on Instagram and doing so really creatively. Here is an example of how they have used an influencer to talk about their product – but which works within the law. They have been creative, educational and thought outside of the box.”

Email is another method.

“With 99% of consumers checking their email on a daily basis, email marketing is a great way to get promos, weekly specials, offers and more in front of consumers and clients and, better yet, is trackable,” Mirsky said.

Outdoor campaigns are also popular.

“On recent trips to California, I’ve seen a prolific use of billboard media,” Little said. “In London, Elixinol, a well-known CBD brand, ran a high-profile media campaign using digital signage and video boards across key London Underground railway stations.”

Talon, a British out-of-home agency, is now building a cannabis-specific team in San Diego.

“For regulated products like cannabis and CBD, understanding where, when and how you can advertise is the first step,” Tawnie Moore, director of client services for Talon US, said. “OOH is one of the leading ways to market a cannabis brand because it’s one of the only ways to do so!”

Good and bad cannabis marketing

In any industry, there will be good and bad ads. Cannabis is no exception.

Mirsky criticised the above outdoor campaign in California earlier this year by the Ignite Cannabis Company, which was launched by Instagram celebrity and entrepreneur Dan Bilzerian.

“A campaign such as this won’t be sustainable as long as it doesn’t properly represent the industry or today’s times,” he said. “Even though ads such as his worked half a century ago, times have changed. There’s a push towards equality not only in cannabis but throughout global markets. Plus, this kind of advertising is just plain lazy.”

“Bad campaigns originated in California and made their way to Colorado, where some producers packaged their products to resemble popular commercial candy brands like Kit Kat, Hershey and Reese's,” Velarde added.

In contrast, one set of creatives that I personally like comes from Washington cannabis producer ZoZ. The campaigns are much more relevant for what I presume is their target market of millennials and Generation Z.

For that reason, Instagram may be the single best channel for cannabis promotion.

“The cannabis world loves Instagram,” Stein said. “It’s a dynamic, visual story-telling medium. It’s where the cannabis people old and new share experiences, which can include product reviews, events, education and inspiration.”

“Cannabis companies cannot advertise – everything is still organic, so the content needs to be good and compelling. Use Stories to create an ongoing stream, and use the Instagram feed to create a brand story. Use influencers to tap into their audience and reach.”

The future of cannabis

After cannabis became increasingly mainstream in the 1960s and ‘70s youth, many expected the plant to become legal when that generation grew up in the 1990s. Obviously, it did not happen.

But the times might actually be a-changin today. (Neither the US White House’s Office of National Drug Control Policy nor the UK’s National Crime Agency responded to requests for comment for this column.)

“Lawmakers in the US and the UK grew up in time when was cannabis was prevalent and the stigma had faded,” Stein added. “It is pretty easy for them to see that cannabis should not be in the same classification as heroin or PCP. In addition, the opioid crisis in the US has claimed more than 300,000 lives. There is no known record of any overdosing on cannabis.”

“In a very politically divided country, I think that cannabis legalisation may be the only thing that both parties agree on.”

The Promotion Fix is an exclusive biweekly column for The Drum contributed by global keynote marketing speaker Samuel Scott, a former newspaper editor and director of marketing in the high-tech industry. Follow him on Twitter. Scott is based out of Tel Aviv, Israel.