How to Build a Dispensary Marketing Budget

In business, every expense is – or should be – a calculated investment. Typically, expenses are based on their expected effect on the bottom line and estimated as a percentage of projected revenue. This is particularly true for dispensary marketing budgets, without which no company can hope to expand its customer base.

Dispensaries aren’t immune to market needs or budget constraints, but determining expenses and measuring results can be a bit tricky in an industry where all commerce is hyper-local. With the average dispensary bringing in $1 million a year, according to a 2020 Statista report, what’s a reasonable marketing and advertising budget?

In general, a dispensary should allocate 3-9% of sales or more to marketing on a monthly basis. Assuming $1 million in sales per year, that’s $2,500 to $7,500 per month.

Market Parameters

Every business faces its own set of market forces, which ultimately determine how it conducts its marketing and advertising campaigns. When determining how much dispensary marketing budget you might need, ask yourself the following questions.

• What is the size of the market you serve?
• How many competitors do you have?
• How can seasonality affect traffic and consumer revenue?
• What type of media do you want to use?
• Do you expect to be able to directly correlate ROI (in the form of sales) with your spend, or are you okay with subjective impressions and brand impact only?

Market size should be the first factor you look at when determining how much to spend. How many potential customers are within driving distance? How far do they travel? Is your business near tourist destinations? Is delivery allowed in your area? If yes, how many potential customers live or work in the deliverable area?

Next, identify your competitors. How far are they? How do you think they might impact your sales?

Mechanical

Once you have established the market parameters, turn your attention to the mechanics of the trade.

How can you make sure customers find you? If you use digital marketing platforms, the answer is a combination of search engine optimization (SEO) and outbound advertising. SEO is both an art and a science – a combination of keeping content fresh and relevant that is “discovered” by search engines as well as ensuring that your address and hours are correct and that all of your reviews are responded to in a timely manner (yes, even those where reviews left only stars).

Outbound keyword shopping, as in search engine marketing, is a more difficult puzzle. Google will not accept cannabis ads, and while many have explored potential workarounds, these are generally not sustainable. While digital advertising options may be more limited in cannabis than in other industries, there are still ways to reach the right customers at the right time, including converting them with branded and highly transactional ads. This can be accomplished effectively with programmatic ads using the appropriate targeting settings for your operation.

The basic targeting parameters that almost always apply are age 21+ and some degree of canna-curiosity. (I must love this industry for our ability to create new words). The rest requires a bit of chemistry combining location, footfall and interests to meet individual brand needs. If properly tracked through point-of-sale systems and baskets, digital programmatic becomes a demonstrable medium that can tie exposure to ads and sales. The advantage here is that the technology is modular. Programmatic algorithms are artificially intelligent; they learn what works and try to duplicate or improve on previous successes.

Cooperative expenses

If you’re unfamiliar with these concepts, it can be daunting to know how to allocate and where to spend a digital marketing budget. But does it all have to come out of your pocket?

The answer is no.” By leveraging your customer base, you can encourage the brands you stock to participate in your marketing efforts. After all, your dispensary marketer also markets their products, right? Consider charging a “positioning fee” for storage space or a place on your menu. Perhaps some of your customers’ favorite brands have cooperative advertising funds that will help promote their products in your home. These two practices are Common in the automotive, consumer electronics, and consumer packaged goods industries, these are win-win strategies that promote brands while driving customers through your dispensary door.

There’s a lot to unpack here, with perhaps more questions raised than answered, but this important topic comes down to two basic marketing necessities: developing your brand message and promoting your operation. Ultimately, it “takes money to make money,” and an “always on” approach to advertising and marketing is necessary in this highly competitive industry. With a reasonable and wisely allocated marketing budget, anyone can ensure that their business goes the distance.

Sugar JB is director of digital advertising at WeedStreetNOW, a performance marketing and advertising platform specifically for the cannabis industry. He has over twenty years of experience selling digital advertising for brands such as TV Guide.com, SportsIllustrated.com and People.com. Sugar earned a certificate in Cannabis Plant Biology from the University of Vermont and grows outdoors in her backyard.