Every store manager already knows that there are some regulars who come in frequently and others who buy a lot of product. At the same time, every dispensary or store has a constant push to attract new customers while improving customer retention for past customers. Depending on whether you’re medical or recreational and your location, you may have vastly different new customer and repeat purchase rates.

So how does a dispensary or retail store think about what qualifies their “best” patients or customers? Some stores like to see folks coming in all the time, which speaks to the frequency of purchase (regardless of the purchase amount). Other stores are focused on average order values and like to see customers buying a lot at once (regardless of the frequency of purchase). Other stores still care about customer profitability, drilling into the customers that purchase products with the highest margins. Of course, the absolute best customers are frequent buys with larger orders that have high margins, but there is always some combination of those three factors.

As long as your customer strategy isn’t “hook up Sandra because she’s our friend”, your retail data can help answer these considerations and more with extreme precision to align your team and your operation.

According to Harvard Business Review, keeping an existing customer can be 5x easier than acquiring a new customer.  And Bain & Co found that increasing customer loyalty by 5% can increase profits by 25% – 95%.  That’s incredible and very powerful for your bottom line!

Suffice it to say that if you don’t have a customer retention strategy, it’s time to start thinking about one now.  The better you can be at keeping customers of all types coming back, the more money you’ll make in revenue and profit.  So how do you get started?

(Quick practical note: if you operate a medical dispensary, you are already tracking patients and their orders.  If you operate a retail store, it may be harder to connect a customer to a specific purchase, but if you aren’t already trying then you should start now!  There are various customer loyalty programs and strategies that can allow customers to opt-in to share their data with you so you can be a more aware and more connected provider for your customers.)

The first step is understanding which of your patients or customers are repeat buyers vs. first-time buyers.  This exercise is often called “customer segmentation” or, simply, putting your customers into buckets by certain criteria.  In this case, it can be helpful to look at four specific criteria that impact customer retention:

1. Customer lifetime = today’s date minus the first order date
2. Purchase frequency = average number of orders per month
3. Average order value = total spent divided by total number of orders
4. Last purchase date = <1 week, 1 week – 1 month, 1 month – 3 months, >3 months

The reason these four criteria are important is because it can meaningfully inform how you market and sell to your customers.  Specifically, what you’d say to a long-time customer who comes in every week is very different from what you’d message to a first-timer who came in 3 months ago and hasn’t been back.

Once you have assigned segments to each customer for each criterion, you can drill into their past purchases to get an even more detailed perspective on what they like or don’t like.  Some customers are exclusively focused on flower, while others only consume edibles, and many more have some combination of each product category. Understanding the categories and specific products that your patients and customers already like, or don’t like, can help you personalize your marketing to get them coming back to your store.

Just as important, empowering your budtenders with efficient, actionable insights about your customers enables budtenders to offer hyper-personalized products and deals that match each customer’s preferences.  When a customer feels seen and understood, they buy more and come back more often.

While it’s critically important to improve customer retention, most stores see a natural flow of new customers as well as repeat customers. Everyone knows it’s good to nurture new customers until they become repeat buyers and brand advocates, but how does a dispensary or retail store inform that process with their existing data?

Each customer goes through a natural evolution called the “customer lifecycle”.  It always starts with the first time they become aware of your store, then their first purchase, then some repeat interactions and purchases until the very last time they walk in your store.  Some customers go through that lifecycle very quickly, and others stick around for a really long time, and how you connect with someone in each step of that lifecycle speaks a lot to your brand and your long-term success.

• How effective are you at attracting new customers?
  This is usually done with a combination of marketing (ads, store signs, search engines, etc) as well as promotional deals to get someone in your door for the very first time.  It’s really important to know how someone heard about you so that can focus your resources on the customer acquisition channels that work for your business. And if you offer deals, it’s especially important to know how your discounts impact profitability and whether those deals actually get first-time buyers to keep coming back.
• What do first-timers buy and what happens after the first purchase?
  A customer’s first time in your store they are likely to have a very different purchasing pattern than long-time repeat customers.  Segment your orders for first-time customers only and compare average order values and products against longer-term customers. It’s important to empower and educate your budtenders to provide a meaningful experience with introductions, recommendations, and offers that speak to that customer.  The happier a first-time customer, the more likely they are to keep coming back.
• How often do you get a first-timer to come back?  Why did they come back?
  In the last month, quarter, and year, what percent of your first-time customers came back for a second purchase?  How long did it take for them to come back? Did they come back on their own, or did you have to entice them with marketing messaging or with a deal?  When they come back a second time, do they typically buy more or less than their first purchase? Understanding each of these answers can help your team refine and improve your efforts so your customers keep coming back and buying more.
• What is the expected lifetime value of different types of customers?
  Customer Lifetime Value (CLV) is a very common calculation in most other customer-facing businesses in other industries.  Your CLV is the total amount of revenue across all orders over the entire lifetime of that customer. CLV can vary dramatically based on different types, or personas, of customers.  Most importantly, you never want your Customer Acquisition Cost (CAC), the total amount you spent to bring in a new customer, to be greater than that customer’s CLV because that means you overall lost money on that customer.  Understanding your CLV for different types of customers can inform what your marketing team can spend to acquire and retain customers.

At every step of the customer lifecycle, there is a natural tipping point that keeps the customer coming back.  The answer to each question above, and the strategies to influence each tipping point is hidden in plain sight within your point-of-sale data.  You just need an easy, intuitive data toolkit to unlock the power of your existing data.

There is A LOT of data in your dispensary or retail store, and it can be overwhelming or confusing to know where to start.  We completely understand, and that’s why we’re here to help!

For dispensaries or retail cannabis stores that are just getting started, we often recommend starting with these 3 considerations in order:

1. Individual customer insights (for point-of-purchase upselling)
2. Customer segmentation (for targeted offers and campaigns)
3. Customer lifetime value (for refining marketing and sales efforts)

Once you are tracking each of these 3 core components, you can begin to understand what is driving each of those elements and watch your progress as you make changes over time.

The most important thing is to start with a very narrow focus, say just increasing average order values, so you are fully confident in that area before moving on to the next.  You can think of these data pieces as building blocks in your mastery of sales excellence and know that we are here to help you every step of the way.

If you have any questions or need help getting started, we offer a free data consultation or are always happy to hear from you via our contact form.