The strange thing about drugs is that people who don’t do them at all have a totally different view than your occasional recreational drug user. Those people who have never puffed a joint might understandably equate a puff of marijuana with a hit of acid. Recreational drug users know that the inability to distinguish which drugs are the most “dangerous” is the single biggest barrier to ever solving the “war on drugs” or towards responsible legalization of cannabis. This is why most recreational drug users believe that alcohol is a much worse problem than marijuana. Our recent article on a marijuana breathalyzer generated some strongly worded banter to that effect. Like this comment from one of America’s rising stars:
Lots of people agreed with this gentleman’s comment, which while being essentially one giant run-on sentence devoid of any proper punctuation, says that you can buy alcohol on every street corner when 28 people in the United States die every day from drunk driving (1/3 of all traffic deaths). You would be hard pressed to find a recreational drug user who believed marijuana on its own contributed to any number of deaths even remotely close to that number. What we’re getting at here is that before we go about writing an article about how to maximize your sales of an illegal drug, we need to put some context around the topic first.
We’ve talked before about the McDonald’s of weed, and the Uber of weed. Now we’re going to talk about the Salesforce of weed. Who is Salesforce some of you may ask? Salesforce (NYSE:CRM) is a $63 billion cloud-based customer relationship management (CRM) tool that has been a wild success story. If you were smart enough to invest in CRM when they had their IPO back in 2004, you would be up +2,100% on your investment:
But you didn’t, and now you think that if you can just find the right “marijuana stock” to invest in, you can hit it big the next time around. While the company we’re going to talk about isn’t publicly traded yet (mainly because marijuana is illegal at the federal level), it’s still a company that’s attracting the attention of investors.
Founded in 2014, Denver startup Baker has taken in $5.3 million in funding with their last round of $3.5 million closing in March of this year. Investors include several of our cannabis venture capital firms (Phyto Partners and Poseidon Asset Management), and also some “normal” VCs like Base Ventures (lead), 500 Startups, and XG Ventures. One investor, Michael Lazerow, has some success with CRM startups having sold his startup Buddy Media to Salesforce for $800 million back in 2012. He also worked at Salesforce as the Chief Marketing Officer and then the Chief Strategy Officer during a time when the company grew revenues from $2 billion to $6 billion. Having someone of Michael’s caliber as a mentor is worth far more than whatever money he put into the venture.
So what does Baker do as the “Salesforce of weed”? In order to better understand this, we need to understand the business a bit first. For those of you who sold eights of skunk to help fund your college tuition, you already know the cardinal rule when it comes to selling weed. No IOUs. Selling marijuana in dispensaries is no different. Marijuana is a cash-only business, which makes any form of CRM very difficult.
So how can you get a customer’s phone number or email address when they pay you cash for every transaction? Not to mention, most people want to maintain a certain level of anonymity. Well, Baker claims that “76% of shoppers want dispensaries to offer loyalty rewards“. Those customers are then likely to “spend 60% more per purchase” and to “visit 90% more often“. This is particularly important for dispensaries when you consider how expensive it is to acquire a new
user patient. It’s actually more expensive to advertise with a cannabis print ad than it is to advertise in the Super Bowl:
Maybe that’s why High Times recently sold 60% of their business for $42 million – which also values High Times at roughly $70 million. Advertising costs a lot, and dispensaries want to nail down as many repeat customers as possible. Now that we understand some of the problem dispensaries face, let’s look at Baker’s various product offerings:
e-Commerce for Cannabis
With just a single line of code, you can enable online ordering for your dispensary. It’s a bit more complicated behind the scenes though, since each state has unique and ever-changing regulations that “cannabis e-commerce sites” need to adhere to. All you need to worry about though is getting your inventory updated:
While most states require in-store pickup, customers will order online to take advantage of specials, browse what you have in stock more easily, and get in and out of your store more quickly by pre-ordering.
Check-in and Loyalty
Remember how dispensaries operate as a cash business? Now you can tempt customers in your store to engage with kiosks that will give them discounts in exchange for a telephone number or email which can then be used for marketing to them later:
Once Mr. Smiley puts in his contact information, you can then use Baker’s Connect solution to send him targeted messages that have a 98% open rate. With a trustworthy salesperson engaging customers to enter their details for an immediate discount, you should have a decent sized client list in no time.
There are quite a few point-of-sale (POS) solutions for dispensaries today, but that’s not what Baker does. Instead, Baker connects to these various POS systems and then provides the analytics component. If you’ve ever used Salesforce, you’ll know just how strong a player they are when it comes to providing easy-to-use analytics “dashboards” that contain “components” which can be configured by pretty much anyone – even MBAs. Dashboards like this can be very useful to see sales patterns across all your stores:
The current state of marijuana dispensaries is that they are extremely disparate, and the only way we’ll ever see a “McDonald’s of weed” (or rather the “Starbucks of weed” which is the terms our readers preferred), is if there are a whole lot of acquisitions. When you acquire a bunch of dispensaries that all use different POS systems, you’re going to see the value of Baker’s analytics platform in a hurry. Here are the benefits your average dispensary can expect to see:
Of course the entire platform lends itself quite well to easily setting up promotions, drawings, and prizes.
In addition to a POS software solution, a mandatory investment that every cannabis dispensary will need to make is that of a CRM system that allows them to compete in what is now a viciously competitive space. Baker claims that their platform pays for itself in just 10 weeks. With over 350 dispensaries using the solution (it’s available in 14 states) you can expect to see lots of delicious “big data” being generated here which could also be monetized in a variety of different ways. While we’re not likely to see Baker acquired by Salesforce anytime soon, at least we know who will likely be the dominant provider of CRM software for marijuana dispensaries in the years to come.
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