The Importance of Loyalty Programs for Dispensaries

Cannabis legalization continues to spread across the country. To flourish in the fast-rising cannabis industry, dispensary owners need to attract new consumers and, more importantly, retain them. Loyalty reward programs, a staple of customer marketing strategies, can help achieve that goal.

Of course, there are typical prerequisites like exceptional customer service, high-quality products, and competitive product prices. Nevertheless, cannabis loyalty programs are a proven strategy for consumer acquisition and retention.

The approach offers perks such as special discounts, reward points, and new product notifications to repeat customers when they frequent your dispensary. It also serves as a powerful incentive for customers to return to your store and refer other consumers to your business. Of course, these perks aren't free, but the benefits far outweigh the expenses for loyalty program operators.

In this post, we'll cover everything about loyalty programs for dispensaries and how to successfully implement one. Read on for more insight.

What Is a Customer Loyalty Program?

An effective loyalty program offers special discounts, incentives, and deals to repeat customers. The concept behind this strategy is to encourage customers to make more purchases at your dispensary and not from your competitors. That way, consumers develop loyalty to your brand. 

The better the incentives, deals, and discounts, the more your customers will frequent your cannabis dispensary. And as a result, your business's ROI will increase significantly. According to a report from Edelman, repeat customers who frequent your dispensary over time will spend 67 percent more compared to new or one-off clients. 

Any successful relationship occurs when the respective parties feel that they are benefiting from the said relationship. With the promise of loyalty points and rewards, customers are likely to spend more at your dispensary. They feel that their cash is valued more, and they are bound to demonstrate their appreciation.

On the other hand, dispensary owners benefit from increased sales and revenue. They also enjoy a set of regular and loyal customers who wouldn't have qualms about purchasing an additional item.

Research Backs Up Loyalty Advantages

To appreciate the effectiveness of loyalty programs in spurring shopping habits, here are a few statistics worth mentioning. According to research findings from Seattle-based cannabis analytics company Headset:

  • Fifty percent of cannabis dispensaries in Washington State have implemented a loyalty program.
  • Retailers using loyalty programs recorded an average basket spend of $37.18 within a 90-day period. In contrast, dispensaries without a loyalty program recorded an average basket spend of $32.81. This marked a 13 percent difference in increased spending by loyalty shoppers.
  • Loyalty program shoppers also had more products per basket, with the items priced slightly higher compared to other shoppers. That means loyalty programs spur larger transactions among customers.

Let's further delve into the importance of loyalty programs for dispensaries. 

Six Ways Loyalty Programs Can Help Your Dispensary Operations

Retain Existing Customers

Customers are free to shop from one dispensary to another. But you can make those customers loyal to your brand by rewarding them every time they make a purchase. Loyalty rewards, including discounts and exclusive deals, can convert your customers into brand loyalists.

They make customers feel appreciated and may end up spending even more than they intended to. A 5 percent boost in customer retention can add to the profitability of your dispensary operations by up to 75 percent. That's according to findings from the Bain & Co. consulting firm.

Handing out free merchandise and exclusive deals may cost you a bit, but it pays for itself handsomely in the long haul.

Better Leads/Prospects

Typically, customers have to sign up to enjoy the discounts and incentives you're currently offering in your dispensary loyalty program. To do this, they may need to enter their phone number or email address. 

The act of signing up means the potential customer is interested in your product, so it's easier to market and convert them into actual customers. Because you have their contact details, you can easily talk to them via push notifications. This is an effective way to generate better prospects or leads. 

Brand Recognition

When customers sign up for your loyalty reward program, you have the opportunity to market and promote your offers directly to their phones through emails and texts. The approach helps place your brand right in front of the eyes of the customer.

Soon, they become accustomed to your brand, especially when you maintain consistent communication. The familiarity and trust built over time will help close the sale. They may also spread the word around, mentioning your products and services to friends and colleagues.

Distinguish Yourself From Your Competitors

How can you stand out from the competition, especially in the cutthroat cannabis marketplace? A loyalty rewards program can help your dispensary stand out in the eyes of consumers. Think about what unique deals you can offer. Creative offers will attract the masses, and your word will spread like wildfire. 

Access to Customer Data

While customers enjoy the rewards and deals, the dispensary owner benefits from access to valuable customer data. From the raw customer data, you can study:

  • Customer spending habits
  • Product trends
  • Spending patterns within different demographic groups

This will give you an upper hand when it comes to customizing your products to match the needs of your customers. You can also decide which products to stock and the prices to set. 

Increase Customer Spending and Your Company's ROI

The incentives and offers encourage customers to spend more at your dispensary. According to the Pareto Principle, 20 percent of your customers contribute to 80 percent of your business revenue. Based on this principle, your loyalty-program shoppers contribute the majority of your revenue.

Therefore, the incentives and VIP treatment seek to build lasting relationships between your business and your loyalty program members. And keeping loyalty program subscribers happy is paramount because they make frequent and larger transactions. So, don't fret that focusing on the select few will lead to reduced sales. 

The Features of a Good Loyalty Program

Studies reveal that 53 percent of consumers ditched loyalty programs last year. That means a loyalty program that offers small discounts but bombards members with ads won't cut it. Before you structure your loyalty program, you need to think about your dispensary's priorities or goals.

The following are some features that can be added to any cannabis loyalty program:

Store Visits

A visit-based loyalty program offers deals and incentives to customers based on the number of visits, regardless of the size of transactions. Here's an example of a visit-based loyalty program: On every third purchase, you get a 15 percent discount. Rewarding customers based on store visits is a good option. That's if your priority is attracting a large customer base and converting them into frequent customers.

Dollars Spent

A spend-based loyalty program is based on the amount of your transaction. This means that customers enjoy exclusive deals depending on the amount of money they've spent at the store. The bigger the transaction, the greater the discounts. 

Often, this type of loyalty program is centered on a points system. For example, every $1 spent at the dispensary equals 1 point. You can redeem the points for in-store purchases. And since your customers want to accumulate more points, they are more likely to pick up an additional concentrate or tincture.


This is a common feature among many cannabis loyalty programs. When you sign up for the company's newsletter or mailing list, you receive a first-time discount coupon code. The coupon code applies to your next purchase.

Rewarding customers based on sign-ups helps you collect customer contact information. You can then use it later to promote your products and offers through email or text marketing.

Membership Tiers

A tiered-based loyalty program categorizes customers into membership tiers depending on the amount of spending on purchases. It focuses on long-term loyalty. The tiers can be categorized as:

  • Gold
  • Platinum
  • Bronze

The higher the spending, the higher the membership tier. The concept is to encourage customers to spend more at your dispensary, so they can graduate to the next membership tier in your loyalty program. 

As customers move up across the tiers, they enjoy access to even better rewards and discounts. So, if they work hard by spending more, they can reach the topmost membership tier. Joining new membership tiers also brings a sense of prestige amongst customers. 

Text Message Marketing and Seamless Integration

Having your customers sign up for your dispensary loyalty program via phone numbers is important. It allows you to send them text messages to keep them informed about your program campaigns. Texts boast an increased and open response rate compared to email marketing and phone calls. Remember, the law stipulates that customers must opt in to receive text messages. 

Text marketing isn't the only feature to include in your canna-business loyalty program. Recent studies reveal that 33 percent of customers who opted out of loyalty programs cited a lack of a fun multi-channel experience. Customers want access to these programs across various channels. That's via texts, emails, and apps. 

Most loyalty programs are guilty of not using the different channels to communicate with their customers. Even in cases where they use various channels, they don't offer seamless integration. Seamless integration implies getting consistent communication about the customer loyalty program on your phone, email, or app.

Tips for Creating and Adopting a Marijuana Loyalty Program

You've understood the perks and importance of a canna-business loyalty program. Now, the next step is to craft and implement one for your dispensary. Here are some tips to help you along the way.

  • Establish your objectives. Do you want to gain new customers or keep your current ones? Or are you looking to increase customer visit frequency or improve the amount of money spent on purchase orders? Your dispensary goals will influence how you structure your loyalty program. 
  • What do your customers want? Conduct research on the unique rewards that would interest your customers. 
  • Start low. It is better to gradually add to the perks and rewards of your loyalty program. Avoid starting with eye-catching promises you can't fulfill.
  • Simplicity is key. Don't overcomplicate your loyalty program. It should be simple to understand for your customers, or else it will become a turnoff. 
  • Include personal incentives. The expected rewards, like points, discounts, and new products, can only go far enough. Add some unique, customized incentives. For example, exclusive outings or events to attract and maintain more customers. 
  • Keep it updated. Competition is stiff in the cannabis industry, so you need to update your loyalty program with fresh, relevant offers and rewards.
  • Maintain regular communication with loyalty program members. Send email and text messages about upcoming offers, deals, and rewards to members. It doesn't make sense to have a loyalty program that customers don't know about. 
  • Track your ROI. Keep in mind the objective of loyalty programs. While the customer enjoys great value and a sense of appreciation, your revenue margins should be positive. Make sure your program benefits your company's bottom line.

The Cost of Loyalty

Of course, rewarding your customers with discounts and offers towards future purchases costs money. For example, the discounts and redeemable points accrued by Planet 13's customers were worth $1.3 million last September. This was against a total return of $24.1 million.

While implementing a loyalty program will cost you, it is an important part of running a cannabis dispensary. For new retailers, starting a loyalty program from the get-go is crucial. Offering rewards to your customers will help you earn their trust so you can learn about them and figure out how best to serve them.

That decision should come before you work out your margin profile or even the products you'll stock in your dispensary because it eventually influences all those decisions. 

The Bottom Line

To stay above the competition in the ever-changing marijuana industry, you must prioritize customer acquisition and retention. Loyalty programs are one of the best strategies to build a sense of loyalty among your customers.

Rewarding your customers with discounts and exclusive deals demonstrates that you appreciate their business. When customers feel appreciated, they take your cannabis business to heart and may end up making frequent and higher purchases from your dispensary.

Keeping your loyalty program simple, unique, automated, and tied to the aforementioned features will attract more customers.