I had the opportunity to sit down with Andrew Watson, the founder and CEO of Happy Cabbage Analytics, an “integrated data platform that is revolutionizing how cannabis businesses target customers and inform business decisions.”
In this interview, we discuss Andrew’s journey into the cannabis industry, the inception of Happy Cabbage Analytics, and its mission to generate revenue by raising the standard on data-based marketing campaigns.
Q: What can you tell us about the origins of your interest in/experience with cannabis?
AW: My first experience with cannabis was in September or October 2007 when I was 15 and a sophomore in high school. I was waiting by the Royal Farms in North Baltimore (which is where I was born and raised) for a friend to pick me up and take me to see a Resident Evil movie. Some kids from my high school were walking by to go into the wooded park that was behind “the RoFo” as we called it back then.
Now, these were definitely kids I would consider “cool” in the social hierarchy of high school, and I was definitely considered “not cool.” I was a pretty big goth, budding theater kid, and overall weirdo. I wasn’t good at or interested in sports and instead mostly played PC video games and listened to heavy metal. These kids saw me though and invited me to go smoke with them; very cliche.
During that first session after I was handed the bowl I immediately tipped it over upside down spilling the nugs all over the ground. I remember Andy Dufrense (not a real name but let’s call him that) had to open up his flip phone in the dark for some light and pick them up off the ground. Incredibly embarrassing, but very memorable. From there I definitely became a “stoner” in high school, sneaking around my house and Baltimore, smoking out of homemade bowls, cooking brownies, and overall experiencing the black market life that was cannabis in Baltimore in the late ’00s.
I always had a sense of it being wrong that it was so stigmatized: kids I knew got harassed by cops by just having half-smoked joints on them, kids kicked out of my private high school for being caught with weed on them (but other kids not kicked out for harassment or assault). After high school, I was fortunate enough to go to a very “hippie” college in Oregon in which I became enmeshed in West Coast (and white) weed culture. There I learned what cannabis can be when removed from the specter of over-policing and stigma. It was an alternative to the heavily ostracized culture that I experienced in Baltimore, a world in which every kid was smoking, but being caught with it could ruin your life.
My cannabis consumption in college and in the years since definitely reduced from high school (nowadays I pretty much only smoke pre-rolls every other week) but my strong interest in the political movement, economics, and opportunity flourished. In 2017 when I had the opportunity to start consulting for a delivery business in Oakland I pounced on it, and from that experience ultimately Happy Cabbage Analytics was born.
Although from those earlier experiences I have never truly felt like a part of the West Coast weed culture, I admire its opportunity and the wave of change it will bring to the country. To put it bluntly, a place like Baltimore will likely be last in line to experience the opportunities, prosperity, and wholesomeness that the legal industry provides. Many folks who maintain power either via keeping the legal industry exclusive, or preventing legalization all together, will flourish in a place like Baltimore with its stark inequities and deeply entrenched police brutality. That being said, work being done here, mistakes we are making, and progressive movements we are building around equality restoration will eventually make it to Mondawmin Mall, Druid Hill Park, and behind that Royal Farms.
My interest and career in cannabis ultimately stem from that hope and desire to help see it through. In a lot of ways, it’s all about making my 15-year-old self happy and to rue the stigma that shaped so much of my original experiences in cannabis. I want Baltimore City to ultimately be proud it has natives who have become cannabis entrepreneurs, and hopefully re-shape the minds of those adults who knew me back then and helped perpetuate that stigma.
Q: Can you briefly share with our readers what Happy Cabbage Analytics specializes in? What part of the supply chain do you service? What problems do you solve for them?
AW: Happy Cabbage specializes in growing revenue- we take a dollar spent on our platform and convert it into $30. This starts with data from POS systems in cannabis retailers, dispensaries, and delivery services. From there, we detect opportunities for revenue growth. What customers have disappeared? What do customers like to purchase? What would a business analyst advise if they were to look at the purchase data? We identify opportunities, present them in our platform, and then, via a marketing solution called Polaris, we segment customers who should be marketed to via SMS. The idea is not to produce charts and graphs but to produce actionable insights. We primarily serve the Bay Area, but we do also have customers in Colorado and Ohio, from mom and pop shops, large franchises, small businesses, delivery platforms, etc.
When our customers hear “analytics and data”, their eyes tend to gloss over and they start to feel overwhelmed. Having them use an overly sophisticated, cumbersome platform is a disservice; it actually dissuades them from taking the time to analyze and get familiar with their outputs. Our culture is focused on how to empower folks with information, without making it overly burdensome to do that. We serve all kinds of clients. Take, for example, the mom and pop shop. How do we get them to use their data, that is fully and entirely theirs, and generate targeted SMS messaging, price optimization, etc without having to invest in expensive tooling? It’s very important for us to say that cannabis is a collection of small businesses and entrepreneurs at this phase in the industry (at least in California). While we love serving all kinds of businesses, that accessibility means we have a responsibility to enable even small businesses with an intuitive and intelligent interface.
Q: What is the value of investing in text message campaigns for cannabis retailers?
AW: As mentioned above, investing in the machine-learning powered text messaging we provide shows consistently a 30x ROI for our clients. Said another way, for every customer you engage we see about $3.50 of revenue generated. For our customers who are spending $1,500 a month on our platform, that means they are generating $45,000 a month in attributed sales from their usage of Polaris. When you compare this to the $5,000 a month many folks are spending on Weedmaps or other forms of customer acquisition, the value becomes obvious.
Regular customers, customers who are already familiar with your brand, can be brought back into the store at a significantly lower cost than new customers can be acquired. Furthermore, they have higher average ticket sizes, consistent order frequency, and can help boost community awareness of your dispensary by referring their friends.
Furthermore, these customers have already opted-in to receive text message promotions: they have stated they want to know the deals. That doesn’t necessarily mean however that they are engaged. Our average dispensary that has two years of data in their system, less than half of their opted-in regular customers have come back within the last 90 days (when on average the order every 20-30 days). For many dispensaries and delivery services that means they have thousands of opted-in customers who are primed to come back but haven’t.
A great way to burn these customers though is to give them heavy promotional messaging about products they don’t care about. The customer who only ever buys Plus Gummies does not care about the high THC exclusive flower you have on your menu and vice-versa. Blanketing these customers with uniform text blasts, and not matching consumers to preferences lowers the potential ROI.
Using Polaris, however, you can easily drive much higher ROI by matching those customers’ preferences to the texts that you send out. This is ultimately where the value comes from. A recent customer of ours in San Francisco who surveyed their consumers found that 98% said they like the text messages they get, and many consumers respond to our messages specifically that they appreciate the personalized marketing and messaging associated with their consumption preferences.
Q: For our readers who want to implement new tactics like text-based campaigns into their overall marketing strategy, where do you suggest they start?
AW: You should start by messaging your existing customer base who has opted-in to messaging. You can collect these opt-ins (either automatically through WebJoint or) via a simple opt-in form you embed on your website. Contrary to popular belief, many consumers both want and seek out the promotional messaging that comes from retailers. High taxes, and difficulty in finding certain products, means consumers have to rely heavily on communications from dispensaries and delivery services to know if deals and products are available.
Unless you are using a solution like Polaris that can help you automatically sort through consumer preferences I would avoid strong messaging about certain products and product categories. If you have a great deal on Raw Garden, but only 20% of your consumers have ever purchased or care about Raw Garden products, the 80% you message about Raw Garden are going to get annoyed and either opt-out or simply ignore future messages.
We see this strongly in our data, where blanket messages that don’t mention specific products can get much higher conversion and engagement than blanket messages that advertise specific products.
Using Polaris however, I would start off by following our guided campaigns. This can help you see quickly who your lost customers are, who prefers flowers, who is overdue for an order of edibles, etc. From there you can leverage our Advance Targeting by going after folks with specific preferences around brands, order sizes, and importantly, geo-fenced delivery zones. That way your messaging is powerful and tailored appropriately to the diversity of your consumers. Our customers who use our tool in this way see by far the highest ROI, with some customers seeing as much as $10 per customer engagement in sales.
Q: In a few words, how would you define a successful text-based marketing campaign?
AW: One that drives $3.50 or more of sales per customer engaged, and or one that recaptures over 20 lost customers. The best campaigns we see are most often the ones tailored to a specific brand, order timing, and product category preference. These go out to a few hundred consumers at a time, but 5 campaigns for 500 consumers will easily see 2-5x the returns that 1 campaign to 2,500 consumers drives.
Q: What would you say are the top 3 factors behind a great text messaging campaign?
AW:
- Take the time to really carefully segment your customers. Look at customers based on their behavioral attributes, not using generic demographic data like age or gender. I feel like the focus on customer recapture isn’t as strong as it should be. Customers that drop off are still customers that have been sold at one point. They already get you and your brand. They don’t need to discover you. And oftentimes, if the incentive is there, they want the exclusive offers of a loyal customer. Get specific with their attributes; whether customers are overdue for the order, have completely dropped off, prefer extracts/flower/specific brands, etc. Communicate with them strategically, using their relevant brands and products, so they feel like you’re looking out for them.
- Text messages are meant to be short and to the point. When sending an SMS blast, you need to be efficient with your language and prioritize what you say, so state your offer upfront. Provide a clear call to action. Without this, recipients will most likely opt-out, or simply leave you on read.
- As with any marketing campaign or platform, it is important that you analyze key metrics. Are you gaining a return on your investment? What’s resonating with customers? How can these observations feed your communication strategy? Every campaign is a learning experience, and a great campaign is a gift that keeps on giving. It not only generates revenue through a single promotion, but it informs continual strategic, data-driven communications.
Q: What are the most common mistakes you see cannabis operators make in terms of marketing – specifically on text message marketing?
AW:A lot of the most common mistakes are easily avoidable ones. Some campaigns are not explicit in the action they would like the recipient to take- is your call to action clear? If a text blast is indiscriminate enough, users will sense that the message isn’t genuine, and they certainly won’t be compelled to engage. Another item that will place you in a customer’s blocked contacts is reaching out too often. Try to limit reaching out to your customer no more than once a week. We often see the most successful customers fall in the one text every two weeks category. But the most important of all these is to pick the best segment of customers. Are they relevant to the promotion you have on hand? Are they dropping off from their frequency of contact? Are they loyal to specific brands or products? And you really don’t need to get much more specific than that. If you stick with simple parameters, you lessen your chance of hyper-targeting and correlating groups that don’t really have much in common.
Q: In the breadth of experience with your customers, what is the ultimate value of data analytics and insights you can get from text-message marketing campaigns?
AW: Humanizing your consumers and understanding the trade-offs and relationships between brand and retailer. We as an industry have a lot of myths about how consumers purchase cannabis and what information they respond to. By pairing analytics and data with text messages we effectively build a virtuous feedback loop to constantly experiment with what actually drives consumer behavior.
For example, a recent trend we have found is that when you mention a specific brand in a text message (such as Raw Garden) yes it will drive more folks to purchase the brand, but on average even our most successful branded campaigns only get 10-20% of the consumers who order to actually purchase the mentioned brand. That being said if you take 500 customers who have bought Raw Garden before and mention there is a sale on Raw Garden, they will convert at 2x the rate of mentioning Raw Garden to consumers who have not bought it before (but still prefer extracts and vapes). Of those consumers who bought Raw Garden before though, very few of them might actually buy it again, they’ll buy something else like Select or F/ELD.
Understanding these nuances is what you get from intelligent experimentation. This is what Instagram does when they serve you an ad on the story, what Netflix does when they sort your recommended shows, what Lyft does when it gives you a notification about discounted rides. All major retailers both digital and in-store are constantly testing their consumers. They make no assumptions about consumer behavior and let the data decide what to market, when to market, and how to market. This is the value of the data in cannabis, which is far richer than most retail data in the traditional industry. We as an industry should expect this level of automation, customization, and precision in our marketing. We at Happy Cabbage Analytics are taking the first steps to empowering our retailers with the tools to get them there.
Q: What are a few resources you can share with our audience? What are some of your favorite books, podcasts, software, etc. that have benefited your personal and professional growth in the industry?
AW: Check out our blog, https://www.happycabbage.io/blogz, where we try to publish a lot of our findings and recommendations.
In terms of understanding consumer behavior better and what tools and techniques we use to create intelligent marketing campaigns, I’d suggest reading the book Thinking Fast and Slow by Daniel Kanhamen. This book goes over some of the fundamental premises of behavioral economics, consumer psychology, and buying behavior. Another good book in this realm that’s a bit lighter is Nudge by Richard Thaler and Cass Sunstein.
To keep up with cannabis-specific trends and updates I subscribe to a lot of the various newsletters. Although short and mixed in relevance, the MJ Biz Daily newsletter is a great source for industry tidbits to keep you informed.
Honestly though, I, like many people, generally feel as if there is a gap between folks on the ground doing business in California and the reporting and pomp around the more established cannabis news and investment newsletters. I really appreciate what WebJoint and some others are starting to do in terms of getting more of the on-the-ground perspective, particularly as it relates to California (which is a larger market than Canada).
Q: Lastly, where can our audience find you?
AW: We can be found at:
You can find me on LinkedIn here: Connect with Andrew Watson on LinkedIn
You can reach me via email at andrew@happycabbage.io
