Loyalty Programs Explained | Springbig, AlpineIQ

Brandon Quan | Founder

Published: March 13, 2023

In this video I explain the different types of cannabis loyalty programs you can use for your dispensary! These programs are essential in getting your customers to keep on coming back and spending more at your store.

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Transcript

Hello, everyone, back at it again with another video. In this video, I’m gonna go through the loyalty software guide I created. Now, I know that there’s a bunch of different loyalty softwares, but the two big ones that I’m gonna talk about are using Alpine IQ and Spring Big. And if you’re an F1 fan, you can possibly say Alpine IQ .

Anyways, so let me get right into it. So first things first, the overview of loyalty software. So relatively self-explanatory, so I’m gonna go over this very quickly. Cannabis loyalty programs are customer reward systems that are designed to incentivize and retain loyal customers at cannabis dispensaries or online cannabis retailers.

Now, these programs typically reward customers with points or discounts for their purchases, and the rewards accumulate over time as customers continue to make purchases. Now, there are different types of loyalty programs, and I think there’s actually more, there’s definitely more than three, but the three main ones that are gonna be relevant towards cannabis, cannabis dispensaries are gonna be these three.

The first one is going to be points, points-based programs. So this one’s the most common one that you’re most familiar with. All you do is you get points for the amount of purchases that you,spend, right? Typically it’s like you get one point for a dollar purchase or whatever it is, and then you accumulate X amount of points and then you can use those points to buy things later on.

The second one is tiered programs. So programs offer different levels of rewards based on customer loyalty. So customers can move up and down through the tiers based on how much they purchase. So very common in the airline industry, you’re like a bronze member, silver member, gold member, platinum member, titanium member, whatever it is.

Typically, the higher tier you are means you get more access to discounts, exclusive offers or premium products. So for example, if you have,very loyal customers that spend, I don’t know, a lot of money every single month, you can reward them with greater access to discounts and offers. Then the people lower down in the tiers.

The third one is cashback programs. This is probably the most straightforward one, and this is typically seen in credit cards. So cashback programs offer a percentage of the purchases back as cash or store credit, right? You spend X amount, you get 1.5% credit back, and boom, you’re good to go, right? Typically, these are for people who want,to get immediate rewards based on the purchases that they spend.

So these three main ones, points-based rewards, where you get points per purchase tier programs where you get,exclusive offers or discounts based on how much you purchase in the tiers of whatever company you’re buying from. And then the third one is cashback programs where you get x amount percentage of cashback or store credit based on the amount that you, that you spend, right? So,what these loyalty programs really do is that they really incentivize people to make more purchase, but you also get valuable customer data, and then you can then tailor specific preferences to the target audience of people that are purchasing different things.

So I’m gonna go through that in a second, but first things first, why loyalty, right?what you need to do is you need to understand that in order to generate additional revenue for your dispensary, you need to do two things. You need to get customers and you need to get customers coming back, right? Then after that you can discuss like, how do you get them coming back for longer? How do you get them coming and purchasing more? But in a nutshell, you want to get customers and you want to get them to come back, right? So Starbucks uses a points-based loyalty program called Starbucks Rewards.

This is probably one of the most successful rewards programs. They were one of the first companies to roll out something like this.and then everyone followed suit like McDonald’s and stuff like that, right? So you get a number, specific number of stars based per transaction, and then that can be increased by purchasing specific products or by making purchases during special promotional periods.

Customers can then redeem their stars for various rewards, including free juice, free food, drink, exclusive merchandise, and access to special events.and then Starbucks Rewards also offers tiered membership levels based on the number of start earns,with higher levels, offering more benefits and exclusive offers.

So they have a mix of the points-based system and the tier based system, right? So they’re taking advantage of both. Now, why loyalty? This is a little case study. So,bond Brand Loyalty did a case study on Sephora’s reward program, and they found that,they called them Beauty Insider members .

So they found that the Beauty Insider members spent 2.5 times more than non-members and are more likely to shop at Sephora more frequently. So what are we getting? We’re getting more spend per customer and more frequency per customer visit, right? Which then increases the lifetime value here of the customer, meaning that they’re more likely to remain loyal to Sephora over time and continue to make purchases.

So two customers aren’t equal, right? If you have one customer that’s spending $500 a month, that customer is more,valuable to the business than the customer spending only $200 a month, right? The key is how do we get customers now to spend an additional $300 more, right? So 2.5 times more is, you know, nothing to scoff at per customer if they’re members, which is why these loyalty programs are very, very,powerful.

another study conducted by Salesforce, this is a general loyalty program, right?they said that the loyalty program members on average spent 18% p more per transaction than non-members and are more likely to refer others to the brand, right? The study also found that loyalty programs can help increase customer engagement and retention, which then makes,members more likely to open engage with marketing communications, right? So this acts more so like as a positive feedback loop.

So if you have customers coming in and purchasing and they’re happy with the results, they’re more likely to interact with email and text and then refer people to the business and all of these different things, right? So overall loyalty is a good,strategy that you can use to help increase lifetime value of your customers, help customers come back more often and help them spend more.

Now, this is a case study by Spring Big. This is directly on their website, and initially this was kind of confusing for me to look at, but don’t worry, that’s what I’m here for. I’m gonna go through and explain this case study that you have here. Now, what Spring Big did is they broke down how much non-members spend, how much members spend, and then how much members who have redeemed points spend, right? So the first one is non-members.

So you can see here that 50% of customers after 12 months are non-members. So this means that 50% of customers within the dispensary are people who have not signed up for any loyalty program, right? But even though they’re comprised of 50% of the customers, you can see that they only are responsible for 5.8% of the total spend in month 12.

Now, this is a pretty crazy statistic. That means that the majority of customers that who are not part of any loyalty program are responsible for less than 6% of the total spend, which is interesting. Now, let’s see what happens when you have members with no redemptions, right? So members that are part of the loyalty program, but do not have any redemptions, you can see here that they make up 40% of all the customers right now they make up 40%, but now you can see this increased by six, almost three per,more than three per more than three times, right? So almost 20% of the total spend in month 12 is made up of the 40% of customers who are members, but they haven’t done any redemptions.

They just signed up for the membership and they haven’t redeemed any offers or anything like that, right? Now’s where it gets super, super interesting members with more than one redemption, right? Make up almost 75% of the total spend in month 12, which is crazy. So you’re saying, or what, not you, but what’s my biggest saying is that 10% of all the customers make up 75% of the purchases.

So I’m not sure if you’re familiar with the Pareto principle, the 80 20 rule, where like 20% of people are responsible for 80% of the results. This falls under the same bracket. This is more 10, you know, 10%,90%. But you can see here that the, the members who have redeemed,anything to do with loyalty are only making up 10% of the customers after 12 months, but they make up 75% of the purchases, right? So as marketers, as salespeople, we want to re reverse engineer the thing that’s going to provide us the result that we want.

So as a dispensary, what do we want? We want to have the most amount of sales as possible. How do we do that? That means we try and get as many people to sign up for the rewards program as possible, and we also get them to redeem the points or whatever type of points strategy that you use, right? Because when you do that, you know that those customers are going to spend, what is this, 10, 20, 20 times more than,what people would normally do if they haven’t signed up, right? So if we’re talking about leverage, meaning that like the inputs that you put in and the outputs that you get out, if you focus on getting your existing customers to start redeeming things in your loyalty program, you’re going to get outsized returns for the sales that you get instead of trying to convince the non-members to come back and purchase over and over and over again.

So based on this case study, again, in a vacuum, what I would do if I was a dispensary owners, how do I get as many people to sign up for this loyalty program as possible and also make redemptions because we are getting multitudes more of sales based on the members that have redemption. So you need to now focus on this 10% of customers because they provide you 75% of sales.

What typ, but people typically do is because they think that they need to focus on these members and the volume just seems high, like emotionally and almost logically it, you, you think it makes sense to focus on these 50% of customers. That’s actually wrong. You need to focus on the customers who make up this 10% base because they are then responsible for 75% of purchases, which is very, very important.

Now, I’m gonna go through this one more time very quickly. The non-members, they make up 50% of customers after 12 months, and they only are responsible for 6%. The members with no redemption, meaning they signed up for loyalty but didn’t redeem, they make up 40%.but they’re only responsible for 20% of the spend, but the members with more, with, with more than one redemption have, are made up of 10% of customers and are responsible for 75% of the spend.

Now, I’m just gonna go through the, their websites very, very quickly. As you know, with websites, things can change,you know, at the drop of a hat, but I’m gonna go through this.you know, just go through, see if there’s anything that catches my eye, just to kind of let you know. Now the differences between this two,it looks like both of these companies do a lot.

Like you can see here that there are web apps, native apps, analytics, and event tracking. Like they, they do a lot, right? Products, retail, and brand. For the purposes of this video, I’m just gonna talk about the loyalty,that they do. So here,at,Alpine iq,you can see here that the thing that was super interesting is that they say that they’re the only loyalty solution securely built into dutchie, iHeart chain, and Shopify.

It’s coming soon. Checkouts. So what does this mean?this means that if companies have access to the checkout window of when people are making purchases, then you can then see, okay, if somebody ends up making a purchase and I can see what products are being purchased, then I can have more targeted marketed material based on what people are buying through the loyalty software itself.

So I don’t know if there’s some sort of automations that can be done, but let’s say if a customer comes in and, you know, at their 10th purchase, they come in, they typically purchase flour, and after their 10th purchase, they stop purchasing for whatever reason, right?the lifetime value of that customer is only 10 purchases.

What you can then do, do is then send a coupon and say, Hey, thank you very much for shopping at insert dispensary name.I appreciate your, you know, your loyalty and coming back,we developed this specific coupon, so you can buy this thing right now. You know that if your customer typically purchases and makes only 10 purchases over the time of their lifespan, you can then send them a, a coupon, which would then extend the lifetime value of the customer, right? Which I hope that that’s what this implies, but this sounds really, really cool.

compliance, you know, goes without saying. That’s a big one. Personalized loyalty rewards based on each customer’s behavior. Again, this is very good. Having customized rewards based on customer behavior is really important. So let’s say you have top 10% of purchasers, you can only send your top 10% of purchasers a specific coupon based on their loyalty and say, Hey, thank you for, you know,giving me .

Thank you for giving me so much more. Thank you for,purchasing my products and being such great clients and customers.here, go ahead, get some coupons.you’ve been doing an awesome job here.you can have customized rewards, point modifiers, expiration windows. So it looks like they have a lot of customization options.

So like here, like I said, the three main ones are the points tiered in cashback program. So it looks like they have a lot of customizability between what they do here,and then reporting. And then they have the web and native mobile apps down here, some case studies,some safety stuff and yeah, so that, that’s about it.

but it seems like they have this pretty sorted in terms of they, it looks like they have texting integration with softwares and then can then can provide rewards,for the customers by,I’m assuming using a wallet of some sort. Now, if we go to Al,sorry, if we go to spring big,again, relatively the same thing.

You have cash back points, like I said, tiered loyalty, you have POS integrations, and then you have text message based rewards programs.I already went through the benefits of loyalty programs, customizable backend,digital wallet, which is interesting. Now this is interesting, I, I did a podcast episode,with a close friend of ours over at Heat and we’re talking about like the friction it takes to download another app to your, your phone, right?a lot of times people don’t want to download apps, but if you can then convince people to use this digital wallet, they will then end up keeping the app, right? So this is a very interesting play.

dedicated messaging center referral programs,this one’s pretty interesting. So they have referral programs here that will allow customers to be like, Hey,here, use my code. And then you get another customer. And what’s interesting about referral programs or just referral in general is that it’s the only like exponentially growing marketing,asset that you can have if you can leverage it properly.

Cuz if you have one person that tells two people, two people tell four people, four people will tell eight people, so on and so forth. If you have a robust royalreferral program, this is where you can get exponential results as well, because any other marketing strategy, let’s say you do paid ads, right? You put in a dollar, you get in, you get out $10, right? That’s ideal.

But as more competition comes in, you put in $1, maybe you get $9 in the next year, put in $1, you get $8, so on and so forth. So, so you’re actually decreasing the effectiveness of that marketing strategy. So referral programs are the only types of programs that end up going exponentially outwards.maybe I can make another video on the power referral programs, but that’s a, a very interesting take.

So like I said, the two big ones are Alpine IQ and Spring Big. I’m sure there’s other loyalty programs built in with poss and stuff like that, but I know these two are the big dogs in terms of what they do and like the, the companies that they work with. Now,scrolling down here, just to quickly summarize the power of loyalty, right? one, obviously they increase customer loyalty, right?they help build stronger relationships with the customers and incentivize them to return.

what loyalty does is again, it aligns incentives for your customers to come back and purchase more and more product. And it’s a lot easier for you to keep customers than it is for you to get new customers. Just like if you have your favorite lunchtime spots or your favorite dinner spots, you’re more inclined to go back to that place.

Now there’s one caveat though is that you will only go back to that place if you like going there if, if they provide you with a good experience, right? So it’s not just, Hey, here’s a loyalty program, boom, buy my stuff. It’s like no, do you have good quality product? Do you have good pricing? Do you have good customer service? Do you have a good buying experience? Once you have those four things put in place, then you can start focusing on these loyalty programs because if you have these loyalty programs alone, nothing is gonna happen because people are not going to want to come back because you have a bad business.

If you have a bad business, none of this matters, right? Second one, driving revenue growth. Like I said, loyalty programs can help dispensaries increase revenue by encouraging customers to spend more on each visit or to make additional purchases. Offering discounts or other rewards can be effective way to entice customers to make larger purchases or try new products.

This one very underrated is gathering customer data, right? Because when you use these loyalty systems, you know that person a purchases this much product and they spend this mu this much money and they are male and they’re aged 32 and they buy this. Now you can develop specific marketing strategies to target specific demographics,that, that to target specific demographics, right? So you know that like let’s say in your store you can curate specific music based on the type of people that come into your store.

I did another podcast episode andthe dispensary owner was saying that she plays different music in the middle of the day towards the end of the day because in the middle of the day the demographic is skewed, typically older. So you play top 40, but later in the day it’s a younger demographic. So maybe you play, you know, rap, hip hop or whatever it is, like whatever the customer demographic that comes in at the specific time of the store.

It’s very interesting and this all goes into the buying experience.it also helps you stand out for your, your competitors. So again, not only do you get to gather the customer data and then make strategic marketing decisions on what you want to do with that data, you can then stand out from the competitors because you now have a loyalty program.

Again, the loyalty program itself won’t necessarily help you stand out from the competitors because as more companies and as more dispensaries do take up loyalty programs, you will just be another company that has a loyalty program. It then becomes baseline of what is expected from the business and not an extra thing that you have that differentiates you from everyone else.

So sooner, better than the later if you possibly can. Then the last one is encouraging word of mouth marketing. Like I said, the referral structure is one where if you can get customers to refer you, it’s the only marketing strategy that lets you exponentially grow your business because now one person refers two people, 2, 4, 4, 8, so on and so forth, right? So overall, I would say yes, loyalty programs are good.

overall I would also say that,if you don’t want to do spring break or I’ll I’ll Alpine iq, you can go ahead and find, you know, another company, just ones put those two out there cuz those are the two main ones. Last but not least, if you want to delve your dispensary sales,you have two options, right? One, you can download a market marketing checklist and guide, or if you want to fast track all of the results and you wanna speak with me personally,you can schedule a one-on-one for fast results and a more custom marketing strategy where we go into things like talking about these loyalty programs, things like seo, things like web design, things like conversion, and all the other videos that I make, we can talk about anything that you would like,well, maybe not anything, but anything to do with helping your dispensary grow.

And all of those links will be in the description below. But that’s it for me for today and I’ll talk to you later. Bye.

Article By

Brandon Quan

About The Author: A digital marketer with over 7 years of experience, Brandon Quan is wildly known as the top marketing expert within the Cannabis Industry.

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