By Jerry Abiog and Dennis Collins
Artificial Intelligence (AI) can be defined as getting a computer to think and act like a human. According to Grandview Research, the current AI market is valued at $93.53 billion and is projected to grow to $997 billion in 2028 (Research, 2021). Likewise, the current valuation for the legal cannabis market is $13.5 billion and is projected to grow to $70.6 billion by 2028. As of July 9th, 18 states and Washington DC have legalized marijuana, while 37 states have legalized it for medical usage (Legality of cannabis by U.S. jurisdiction, 2021).
(Robot: Creative Commons; Leaf: Pexels)
Currently, there are close to eight thousand dispensaries across the US. As legalization grows, so will competition. In the book Competing in the Age of AI, the authors state, “Every organization should get to work now to digitize and structure its processes, systems, and capabilities to accelerate operational scale, scope, and learning. There is no longer any rationale for waiting. It doesn’t matter if your organization is new or old. Ultimately if the virus doesn’t get you, your competitors will.” (Iansiti & Lakhani, 2020)
Recognizing the Purchase Patterns of your Customers Using AI
Digital transformation has taken a foothold in many industries, including cannabis. Being data-driven is a must-have for successful businesses. There are typically two types of methodologies to help drive growth – AI and business intelligence (BI).
BI takes a traditional approach, uses descriptive analytics, looks at what happened in the past, and leaves decision-making to humans. AI implements an advanced process, uses predictive/prescriptive analytics, answers what can happen in the future, and empowers your computer to make decisions themselves.
As digital transformation grows in the cannabis market and AI is becoming democratized, business owners will need to consider all technological tools at their disposal. More so than other industries that deal with less stringent government regulations.
Cannabis Marketers Face an Uphill Battle
Legal restrictions on cannabis marketing are many. Be it at the Local, State, Federal, or corporate level, a cannabis marketer must be aware of and deal with complex regulations and restrictions. Facebook is a minefield of murky rules left for Facebook judges to enforce.
According to Susan Gunelius and her article titled Facebook Marketing for Cannabis Businesses and Cannabis-Related Businesses:
“It wasn’t until October 2018 that Facebook revised its rules and allowed cannabis business pages to appear in users’ search results. However, there are still a lot of rules that cannabis and cannabis-related businesses need to follow, and most of those rules are vague and up to Facebook’s interpretation.” (Gunelius, 2021)
Meanwhile, Google forbids advertising from companies selling products that contain CBD. According to Morning Consultant’s Joanna Piacenza, “Google is taking steps toward ending its prohibition on advertising for cannabidiol products through a trial program that allows select companies in the budding hemp sub-industry to purchase ads on its platform.” However, for the vast majority of cannabis marketers, Google remains off-limits (Piacenza, 2019).
What about television and radio? Can cannabis companies advertise there? Currently no. Not even in states where recreational marijuana is legal. Since at the Federal level cannabis is still illegal and since the Federal Communications Commission regulates all broadcast television and radio, companies worry that an overzealous Federal District Attorney might prosecute a company that broadcasts a cannabis commercial. “Violations potentially carry criminal penalties” (Davis, 2015).
Are AI-Driven Tools the Answer?
What do all these restrictions mean for a cannabis marketer? It means that taking advantage of your customer data can play a critical role in successful marketing. Cannabis companies can use email and text marketing with those in their customer base. And what’s the best way to take advantage of your customer data? Why with artificial intelligence, of course. As we have already discussed, AI and not BI gives you the ability to predict what your customers are likely to purchase next. Hence cue the email and text marketing highlighting what the AI predicts your customers will want.
In a physical brick-and-mortar store, a salesperson can help customers search for items. That salesperson is absent when a person is ordering online, and the customer must shop on their own without assistance. Perhaps they know the correct parameters for a successful search, but maybe they do not. Perhaps they become frustrated and leave without buying anything or only buying half of what they had intended. How do we solve the problem of helping customers find what they are looking for and, additionally, perhaps items they don’t even realize they need?
With thousands of SKUs, it would be impossible for a human member of your sales staff to know all of your products. However, artificial intelligence doesn’t have that problem. AI loves large sets of data. So, the AI can recommend the appropriate SKU from all the thousands available and not just a few hundred as the memory of a typical salesperson operates. Not to mention the fact that only your most experienced and long-standing sales staff will be able to recall hundreds of SKUs to recommend to a potential client.
For example, a dispensary in Boulder, CO, may have over 12 thousand customers in their database or POS offering over 7500 SKUS, AI-based, personalized recommendations on predicted purchases based on their demographic, geographic, psychographic, or behavior characteristics could look like:
|John||Hybrid Lemon Diesel||Vape Satvia Meringue [500mg]||Luscious Lemon Satvia [10pk] (100mg)
|Fred||Remedy CBD [15pk] (45mg)||Chocolate Chip [10pk] (100mg CBD/100mg THC)||Day Off [10pk] (100mg CBD/100mg THC)|
|Jennifer||Indica Barry OG American Weed||1:1 Pain Cream, 30oz Care By Design||CBD 10:1 Pet Tincture|
This example, also known as “AI-driven virtual budtender,” enables one’s dispensary to target the right person, with the right product, at the right time. In addition to personalized recommendations, AI can help predict what and when specific products will sell and automate certain marketing outreach functions.
Recommended items are unique to each individual, based on their purchase patterns and others like them (Customer 1)
Recommended items are unique to each individual, based on their purchase patterns and others like them (Customer 2)
Know Your Customers Better Than They Know Themselves
Just like with anything in its nascent stage, the use of AI for marketing may not appeal to everyone. One can simply study the purchase patterns of their customers and come up with their predictions. In reality, marketers want to drive growth for their clients or employers. However, with AI, they can improve customer experience, prevent customer indecision, and tell their customer what to do next – all powered by data.
Amazon and Netflix are doing well using AI for product and movie recommendations. Those lagging in digital transformation initiatives have fallen by the wayside like Sears and Blockbuster. AI may not be the silver bullet to drive growth for your cannabis business; however, integrating it into your tech stack can put your competition at a disadvantage.
Davis, J. B. (2015, December). Can marijuana ads be shown on TV in states where it’s legal? Broadcasters aren’t so sure. ABA Journal.
Grand View Research. (2021, May). Legal Marijuana Market. Retrieved from grandviewresearch.com: https://www.grandviewresearch.com/industry-analysis/legal-marijuana-market
Grand View Research. (2021, June). Artificial Intelligence AI Market. Retrieved from grandviewresearch.com: https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-ai-market
Gunelius, S. (2021, March 26). Facebook Marketing for Cannabis License Holders. Retrieved from Cannabiz.media: https://www.cannabiz.media/blog/facebook-marketing-for-cannabis-license-holders
Iansiti, M., & Lakhani, K. R. (2020). Competing in the Age of AI: Strategy and Leadership when algorithms and networks run the world. Boston, MA: Harvard Business Review Press.
Legality of cannabis by U.S. jurisdiction. (2021, July 18). Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Legality_of_cannabis_by_U.S._jurisdiction
Piacenza, J. (2019, June 20). Google Is Testing the Waters for CBD Ads With Trial Program, CBD Retailer Says. Retrieved from morningconsultant.com: https://morningconsult.com/2019/06/20/google-testing-waters-for-cbd-ads-with-trial-program/
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Jerry Abiog is a Co-Founder and CMO of Standard Insights – an AI as a Service growth marketing platform. Their solution helps companies worldwide address the challenges of leveraging customer data to drive repeat business. Check out what they’re doing in the cannabis industry.
For more cannabis marketing content visit CMA’s Blog.