When I still worked in corporate cannabis, I had an advertiser reach out to discuss opportunities to work together. During the conversation, the salesperson said, “how hard can marketing cannabis be? Weed sells itself.”
I told him we had one in-house brand that outsold another by five times using the same flower, same cultivation facility, same extraction team and same vertical integration. If cannabis simply sells itself, I asked, why didn’t these products sell at the same rate?
The salesperson didn’t have an explanation. But the answer is simple: It’s the power of branding and strategy.
One business lost revenue for four years because of poor branding; at a point, they were sitting on hundreds of pounds of flower because the original branding, strategy and overall consumer appeal was simply not effective. Fast-forward to a substantial investment in brand development, and the new brand is outpacing its predecessor in sales, has taken home a prestigious High Times Cannabis Cup, was featured in a number of trade publications and penetrated the majority of the Southern Nevada cannabis market.
You can never turn back time, but if this business had invested in branding four years prior, it could have added tens of millions of dollars in topline revenue.
Importance of branding
The importance of good branding — and of maintaining that brand — is not a new concept. Even a company like Coca-Cola, with $37 billion in yearly revenues and a logo recognized by 94% of the world’s population, still spends more on advertising than Microsoft and Apple combined. Coke understands the financial impact a poor brand image can have and, with a healthy respect for that knowledge, continues to invest in maintaining and improving the brand’s identity.
But outside of the spectrum of multi-state operators and strongly funded private groups, much of the cannabis industry can be viewed as startups. And part of operating as a startup is being as lean as possible in every single avenue. You have to maximize your efficiencies while living in the most cost-effective sphere possible, from your overhead costs to advertising dollars and all the way through to your tech stack.
Because of this, far too often, cannabis retailers and wholesalers gloss over the importance of branding and an omnichannel marketing strategy. For those new to it, marketing can seem vague at points and that perceived intangibility can cause leadership teams in investing in anything marketing-related (including branding) to pause. However, with cannabis becoming more competitive, consumers need a reason to believe in your brand.
How does your company’s MAC 1 differ from Brand A’s MAC 1? What story are you telling that is more convincing? And how do you leverage your brand to meet potential objections from purchasing managers and decision makers?
In certain markets (Nevada, for example), you’ll also have to deal with vertical integration. Vertically integrated operators can maintain strong internal sales revenue with considerably higher margins, reaching upwards of 70%. And you’re going to be competing not only against their margin-dominant internal brands but against a wave of competitors that have crafted strategies to penetrate the market and may hold a higher perceived value than your brand.
Stamping a cannabis leaf logo over a Bebas Neue font is likely not going to be your strongest defense against this competitive landscape. Failing to invest in a bespoke brand strategy could potentially cost your company millions in revenue.
At the same time, a thoughtful approach to brand development is equally necessary for vertically integrated operators. There can sometimes be a knee-jerk reaction to taking your retail brand’s identity and slapping it on a mylar to create your “house brand.”
There are a few issues here. First, it makes wholesaling into other shops more difficult. What right-minded operator wants to advertise another dispensary on their shelves? If they’re open to it, I want what they’re smoking.
On top of that, there is simply a greater potential for reaching your target consumers with an emotionally connective, iconic and culturally relevant brand that screams off the shelves, begging to be bought.
While not quite the same, we can gather another salient point from the food industry. According to reporting in Food Dive, which covers the trends shaping the news industry, private label brands have struggled to keep up with brand name offerings during the past year, with research from Chicago-based analysts IRI showing sales of brand names up 3.6% in the prior year compared to just 1.5% for private label brands.
Plus, brand names of substance and connectivity have a higher tendency to be trusted. According to research from consultant firm Invesp, “When buying new products, 59% of shoppers prefer to buy from the brands they trust, and 21% say they purchased a new product because it was from a brand they like.”
Poor branding can lead to a number of avoidable financial headaches. For one, by starting off without a strategic approach to branding, you’ll likely end up spending more money in the long run to fix a multi-faceted set of problems.
A lack of proper brand development can lead to things like inconsistencies in your assets and poor brand recall from consumers. And those are just the superficial issues. Down the road you’ll end up spending even more making everything cohesive, revisiting miniscule edits, updating legacy branding and searching for agencies as a Hail Mary.
Poor branding can also cause your business additional headaches when it comes to recruiting. According to recruiting company SmartDreamers, 72% of recruiting leaders worldwide agreed that the employer brand has a significant impact on hiring, and companies with poor employer branding pay 10% higher salaries. Your brand affects everything, from revenue generation opportunities to staffing and all the way through to e-commerce performance. There can be gargantuan financial gain from doing it right from the beginning.
The bottom line is that one of the most important investments to make in your cannabis business is your brand. There is a substantial cost for poor branding so take the time to build a carefully engineered brand strategy to differentiate your portfolio, build brand loyal consumer advocates and meet all potential objections from decision makers.
And if you’re currently struggling, it may not be you, it could be your brand.
Matthew Janz is co-founder of the Better Brand Collective.