Whether you’re operating in retail, e-commerce, hospitality, financial services, or any other sector, churn analysis provides valuable insights that should be used to help you retain more customers, increase lifetime value and improve customer experience. But what about industries with unique challenges, such as the cannabis sector?
The cannabis industry is growing rapidly. Legalization has fueled intense competition. Retention and maximization of customer spend are critical for cannabis companies and their growth. With more choices available, cannabis consumers often shift brands or dispensaries based on promotions, experiences, or product variety. Churn analysis empowers cannabis businesses to understand why customers leave, allowing them to proactively address these reasons, improve loyalty, assess promotion effectiveness and optimize product offerings.
Let’s explore how a cannabis organization can get started with churn analysis and how it can unlock valuable insights to keep customers coming back.
Getting Started with Churn Analysis in Cannabis
1. Collect and Organize Data
Data is the new gold. Like all analysis, you must start by gathering key data elements to understand customer behavior. Cannabis businesses should focus on:
- Purchase History: Product preferences, frequency, and spending.
- Visit Frequency: Tracking in-store or online visit patterns.
- Customer Demographics: Age, location, and loyalty program engagement.
- Customer promotion activity: Are they discount shoppers only?
- Feedback: Capturing reviews or survey data to understand satisfaction levels.
For instance, dispensaries often notice that customers buying edibles tend to churn faster. Solvenna’s team, experienced in data integration for cannabis, can assist in organizing data from platforms like Dutchie, Magento, AlpineIQ, Surfside, and others to ensure reliable insights. Making sure the data is clean, organized, and accessible is important. You can make do without it but the better the data, the more accurate the churn analysis will be.
2. Segment Customers for Tailored Insights
Customer segmentation is essential for targeting churn strategies effectively. Dispensaries can create groups based on:
- Product Type: Segmenting by edibles, flower, tinctures, etc.
- Purchase Behavior: Differentiating frequent from occasional buyers.
- Demographics: Age, location, and other distinct factors.
For instance, young professionals who frequently buy pre-rolls tend to churn less often, while occasional users who prefer edibles churn more frequently. Segmenting allows the dispensary to identify which groups are more likely to leave and which ones remain loyal.
Solvenna has supported multiple cannabis clients in segmenting customer data, providing actionable insights to craft focused retention strategies.
3. Identify Churn Patterns
With organized data and defined segments, businesses can detect patterns that indicate churn. Examples include:
- Product Quality Concerns: Edibles buyers may churn if quality is inconsistent.
- Loyalty Program Engagement: Customers in loyalty programs often show higher retention.
- Customer Inactivity: Individuals who haven’t made purchases recently are higher churn risk.
By identifying such patterns, businesses can understand customer behavior better and address specific reasons for churn (e.g., a bad in-store experience or lack of stock for favorite products).
4. Implement and Test Retention Strategies
This is the exciting part. Once patterns have been identified, now you can tack action to test various targeted retention efforts. Given Solvenna’s experience in retail marketing and with Cannabis companies, we can recommend a variety of options that have worked in the past. Here are a few potential strategies to consider:
- Personalized Offers for At-Risk Customers: Send an email with a discount offer on edibles to customers who haven’t purchased in over 60 days. This could entice them to return and reconsider their lapse.
- Optimize Loyalty and Rewards Programs: Re-evaluate loyalty programs to address churn insights. If customers leave due to a perceived lack of value, strengthen the program by adding tiers, exclusive benefits, or points for certain purchases.
- Re-Engagement Efforts: For those who haven’t purchased in a while, send a personalized message with a limited time offer or recommend new products based on their previous preferences (e.g., a new line of pre-rolls or concentrates).
- Enhance Content Marketing for Increased Customer Education: If churn analysis shows that customers leave due to product misunderstanding or support issues, launch educational content or support initiatives. This can be particularly useful in complex categories, like edibles or concentrates in cannabis.
Testing these approaches through A/B testing and feedback mechanisms helps ensure that strategies are both effective and scalable. Solvenna’s team offers hands-on support, drawing from experience with cannabis focused re-engagement campaigns.
5. Track and Measure Impact
Tracking metrics for each segment is crucial to measuring the success of churn prevention strategies. For example, if churn reduces among former edibles buyers, it indicates success in addressing quality concerns. Similarly, if customers re-engage through loyalty programs or personalized offers, the business can attribute this success to insights gained from churn analysis.
Solvenna has helped multiple cannabis clients develop robust tracking systems, refining churn analysis efforts over time.
Benefits of Churn Analysis in Cannabis
Beyond reducing customer loss, churn analysis offers multiple advantages:
- More Effective Marketing Spend: Identify which customer segments are most at risk and which are most loyal, enabling more efficient allocation of marketing budgets. Reduce wasted spend on churn prone segments and instead emphasize high-value or re-engagement strategies for at-risk customers.
- Improved Customer Retention: Identify specific reasons customers leave, allowing you to proactively address issues and implement targeted retention strategies, such as personalized offers or loyalty incentives, which can increase customer loyalty and reduce turnover.
- Enhance Product Development: Recognizing why products like edibles may lead to higher churn helps dispensaries improve quality and manage customer expectations.
- Stronger Customer Experience and Brand Loyalty: By understanding the touchpoints that contribute to churn, companies can enhance the overall customer experience—whether through better in-store service, easier online navigation, or improved product consistency.
- Reduce Acquisition Costs: Retention focused strategies decrease the need for new customer acquisition, reducing overall marketing costs.
Driving Customer Loyalty and Business Growth
Churn analysis provides cannabis dispensaries with the insights needed to foster customer loyalty in a highly competitive industry. By collecting the right data, segmenting customers, and implementing tailored retention strategies, businesses can retain more customers, improve their product offerings, and drive growth. Solvenna’s consultants bring extensive experience in cannabis customer analysis and can help you accelerate your churn analysis and properly integrate the findings into actionable change.