Tech-driven loyalty programs reshape cannabis shopping

Borrowing from the playbook of industries like airlines and hospitality, an increasing number of cannabis retailers are upping their loyalty program game as a means of engaging customers to keep them returning to their stores.

Loyalty programs are no longer just optional perks – they are essential tools for businesses to thrive in the crowded and rapidly evolving cannabis market, industry players say.

“If you want to compete in any cannabis market, you’re going to have to have a loyalty program – it’s table stakes to at least offer one,” said Rocco Del Priore, co-founder of California-based point-of-sale software provider Sweed.

Marijuana stores like Deep Roots Harvest and The Source have adopted tiered loyalty models that reward customers based on their spending.

Technology also is playing a pivotal role.

Companies like technology platforms Dutchie and Sweed are taking loyalty programs to the next level by offering all-in-one solutions that combine point-of-sale systems, e-commerce and marketing tools.

“If you can dream the loyalty program, we can support it,” said Chris Ostrowski, Dutchie’s chief technology officer.

Spend more, earn more

Cannabis stores Deep Roots and The Source, which have several locations in Nevada, have programs that mirror the airline model: The more you spend, the more you earn.

The program has proven effective, with 96% of purchases at The Source and 95% at Deep Roots now made by loyalty members, up from about 85% before, said Matthew Janz, director of marketing with Deep Roots Harvest and The Source.

Customers receive a 2.5% cash value back on purchases with opportunities to upgrade to higher tiers for even greater rewards.

For example, spending $500 unlocks a 3% cash-back rate. Points can be redeemed for discounts, with 100 points equating to $2.50 off and 1,000 points offering $25 in savings.

“We really encourage people to earn those tiers, spend a little bit more and get activated into the program,” Janz said.

Deep Roots Harvest acquired The Source last year.

“The rewards customers are the lion’s share of our business,” Janz said.

Tech-driven loyalty solutions

One of the key innovations in loyalty programs is their integration into e-commerce platforms, which allows customers to track their points and rewards.

Janz said focusing on convenience and allowing customers to choose the products they want is critical in a competitive market because there are so many places they can shop.

“We want to give them freedom of choice so they can spend their loyalty points on the products that work for them,” Janz said.

“Part of exceptional service is making sure customers are rewarded for choosing you.”

Sweed’s platform allows dispensaries to design tiered programs, offer exclusive rewards and gamify the experience to engage specific customer segments, such as tourists or locals.

The technology also includes mobile apps that provide a Starbucks-like experience, enabling customers to scan to pay, track rewards and receive personalized offers.

But until recently, many cannabis consumers were unaware they were even part of a loyalty program, said Tim Barash, CEO of the Oregon-based Dutchie.

“There was no way to see because it wasn’t in your ecommerce – there was no mobile app to show you,” Barash said.

“If you give them these discounts, the most important thing is that the customer knows they have an incentive to be loyal to that dispensary.”

Building community and value

While discounts and cash-back rewards are central to loyalty programs, many dispensaries use them to strengthen their ties to the community.

Deep Roots, for example, positions itself as a “locals-focused dispensary” under its parent company, Minnesota-based Vireo Health.

“We really support the neighborhoods we serve,” Janz said.

“It’s extremely important to bring value to every single customer, not just through charitable endeavors but by rewarding them for supporting us.”

Del Priore said Sweed’s platform adds a layer of education that helps budtenders make recommendations based on a customer’s purchase history, which is displayed on a screen behind the counter.

“It provides increased interaction with the customer,” he said.

The future of loyalty in cannabis

As competition in the cannabis market intensifies, loyalty programs are also evolving.

In established markets like Arizona and Florida, where discounts can reach up to 70%, dispensaries are investing in alternative ways to attract and retain customers, Del Priore said.

Some are even piloting membership programs that offer set monthly projects and VIP perks like skipping the line.

Sweed has implemented a pilot membership program with one of its clients, which Del Priore declined to name.

Similar to a wine club, customers pay a monthly fee and in return get a certain amount of products and the privilege of skipping the checkout line.

Loyalty programs are a big part of the modern retail experience, whether it’s for cannabis or sandwiches or coffee, Dutchie’s Ostrowski said.

“It’s about giving dispensaries the tools to compete and thrive in a challenging market.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.