The rise of cannabis brands
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The growing importance of cannabis brands is not a new phenomenon. In all new industries, the importance of branding follows a certain path. When introducing a new industry, the priorities are production and sales. However, as the market grows, more companies are entering, saturation becomes a reality, and the focus for companies is shifting to focusing on products and differentiation that are built on branding.
With medical marijuana now legal in 35 to 36 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands, and cannabis legal for adults in 15 states, branding strategies must be pursued for companies in and with the cannabis industry are to become a priority. As Matt K. Hawkins of Seeking Alpha says, “The maturation of the market coupled with more states selling cannabis will eventually lead to national brands.”
It is only a matter of time before legal barriers that have hampered operations in several states collapse. Branding deeper beyond popular foods, vapes, etc. becomes a key investment successful businesses should be planning for today.
3 Critical Factors For Branding In The Emerging Cannabis Industry
As the cannabis industry emerges in new states and grows in established states, companies should consider three key factors in building strong brands: local voice, focus, and education. Let’s take a closer look at the individual details.
1. Local voice sharing
Research published by McKinsey shows that the first step in branding in emerging markets is to unlock and harness the power of word-of-mouth marketing at the local level. The reason is simple. In emerging markets, consumers weigh recommendations from friends and family far more than anything else as they add brands to their considerations lists and make final purchasing decisions.
New market consumers have less experience in the industry and are less familiar with products and brands. Social validation is an important part of the education and buying process for inexperienced consumers in the cannabis industry.
Use digital marketing, social media, and email marketing to generate positive word of mouth about your brand by delivering targeted messages tailored to local markets and the likes, problems, and concerns of specific buyer personalities. At the same time, communicate how your brand, products and services differ from the products and services of your competitors.
My top marketing mantra is: A focused brand is a strong brand. With this in mind, companies should start with a laser-oriented strategy in order to gain market share in a highly focused market.
Gaining votes through local word of mouth marketing is a great way to increase brand awareness in emerging cannabis markets. Taking up this point, the study published by McKinsey explains: “Because of the relatively local word of mouth, companies in emerging markets are likely to generate higher returns if they pursue a geographic strategy than if they spread their marketing resources sparsely.”
This is so true in the cannabis industry because the state nuances of each market (and even the local nuances) play an important role in defining and executing a branding strategy. In other words, a focused and localized branding strategy naturally fits the structure of the industry.
Furthermore, the McKinsey study states: “By achieving a significant market share in a cluster of cities in the immediate vicinity, a company can initiate a cycle: As soon as a brand reaches a turning point – usually at least 10% to 15% market share – word of mouth from additional users quickly builds their reputation and helps them gain even more market share without incurring higher marketing spend. “
The bottom line is that the network effect of word of mouth is strong and provides a solid foundation for when brands start with a focused strategy and strategically expand as they gain market access.
Here, too, a focused brand with focused marketing and sales investments not only helps a brand to successfully gain a foothold in a new market, but also helps the brand to gain market share in an organic and sustainable way.
The cannabis industry is about to shift to a consumer-driven market where consumers ask for brands by name rather than relying solely on pharmacy budtenders (or sales reps for other businesses) in making purchasing decisions.
As in all industries, there will always be stores to get more shelf space, but the brands that consumers ask for by name and demand that pharmacies (or other companies) offer will be the winners in the long run.
In an emerging market, education is a critical component in motivating consumers to ask about brands by name and to remain loyal to certain brands. This includes training not only end-user customers, but also salespeople and all employees throughout the supply chain.
At the pharmacy level, educating budtenders about your brand is vital and should be built right into your consumer education and marketing investments. The aim is to establish a brand presence in the pharmacy as well as greater consumer awareness and brand trust. When you get endorsement from both micro (in store) and macro (broader consumer) brands, sales naturally grow.
Key takeaways on the rise of cannabis brands
Now is the time for brands to build their niches in the cannabis market, take leadership positions, and prepare for local or national recognition and dominance.
Branding ranked second among the top five resolutions for cannabis companies in 2021. With this in mind, define your brand, identify your target audience, implement your targeted branding strategy and prepare to grow your brand in 2021 and beyond.
Want to see how the Cannabiz Media License Database can help you connect with cannabis and hemp license holders to build your brand? Schedule a demo and see how it can help your brand and business grow.