The Real Deal with Cannabis Discounts

How to name them, and 8 Must-Track Discount KPIs   

So, what's the deal with discounts anyway? Are they just about slashing prices to get more customers, or is there more to the story?

Retail discounts help drive customer engagement, increase sales, and build brand loyalty. But they also have a big profitability impact. Merely evaluating discounts as a percentage of total sales doesn’t tell the whole story. 

In this blog, we'll explore the significance of tracking 8 essential discount KPIs and guide you systematically to analyzing and optimizing your discount strategies.

A lot of inputs are hidden in the discount percentage within your POS reports:

• Team discounts 
• Promotional efforts
• Customer Happiness 
• Aging inventory markdowns
• Medical/senior discounts
• Loyalty program incentives

They are all reported under one single discount line, making it difficult to identify what’s working, where opportunities exist, and what tactics are contributing to your greatest growth.

Getting down to improving the way your retail store is using discounts starts with understanding how they are named. 

The art of naming discount conventions 

Imagine your data as a carefully curated garden; naming conventions are the seeds you plant. Get those names right, and you'll easily extract insights. 

So, why does it matter?

Have you ever tried finding your favourite strain in a messy dispensary menu? Chaos, right? Well, the same goes for your data. If you want to glean meaningful insights, you've got to be deliberate about how you name things. 

Think of it this way: without a common language, you end up with a book that only one person can decipher. But, your inventory buyers, retail operations and marketing team must be on the same page for all your retail discounts. 

How do you ensure they’re on the same page? Establishing a naming convention. It’s your roadmap to guiding every team member to name discounts consistently. It's not about stifling creativity but creating order instead of chaos.

Consider this: If one team member names a discount "SummerSizzle20," and another goes for "HotDeal2024," you're setting the stage for confusion. Was the discount 20% off, or happen in 2024? 

Your naming convention should make it easier to find the inputs hidden in the discounts line item. Consistency is the name of the game. Pick a format and stick with it. 

Ultimately, it's not just about neat and tidy data; it's about making the analytics easier later. 

Steps for Reviewing Discounting 

So, now that you have them named, how do you set yourself up to measure the impact of discounts?

Step 1: Create Rigor Around Reviewing Weekly – Delving into Patterns

The first pitstop is establishing a routine for weekly reviews. Setting a consistent cadence for these reviews will help to identify patterns. Being intimate with your data and weekly reports will make it easier to detect trends, anomalies, and customer preferences.

It's all about staying nimble. 

After a few weeks, you’ll be able to highlight which discounts are influencing sales and motivating your most valued customers. The key to success is using the data to stay in tune with your ever-evolving customer behaviour.

Step 2: Create a Predictable Cadence and Record of All Promotions for Consistency

Now that you've got your weekly review rhythm down, it's time to bring predictability to the discount flow. Craft a reliable cadence for promotions, making it a routine your customers can rely on. This isn't just about keeping things organized; it's about building customer confidence and anticipation while boosting retail performance.

Document every move of your promotions in a comprehensive record. Note the duration, discount type, and sales data accompanying each promotion. This historical data becomes your roadmap, helping you assess the effectiveness of different promotions over time. With these insights, you’ll understand what resonates and what doesn’t with your most valued customers.

Step 3: Understanding Gross Revenue vs. Profitable Revenue – Building Sustainable Growth

Discounts may seem like the only option when you need to increase customer traffic to meet a sales goal, but it's important to understand their impact on your bottom line. Sure, they boost gross revenue, but do they deliver revenue? Discounts have to drive attention, foster long-term relationships, and drive spending from new and loyal customers.

It’s all about balance. Your discount strategies must bring sustainable growth. Your data can guide you in selecting discounts that don't just inflate sales momentarily but contribute to the overall profitability of your cannabis retail store. 

Now it's time to look at what KPIs to track!  These help guide you through customer loyalty, promotional effectiveness, and strategic financial impact. KPIs aren't just numbers; they're the pulse of your cannabis retail business. 

The 8 Must-Track Discount KPIs:

1. Loyalty Program % of Dollars – Fostering Brand Loyalty

Ever wondered how loyal your customers really are? The Loyalty Program % of Dollars KPI measures the percentage of sales flowing in from your loyalty program discounts. Adjust for rises, fine-tune program perks or adjust your incentives for declines.

2. Loyalty Program $ – Quantifying Loyalty Impact

Numbers speak louder than percentages. Use the Loyalty Program $ metric to track the revenue generated by your loyalty program. If the revenue plateaus or decreases, it's a sign to re-evaluate and ensure the benefits have the intended impact.

3. Promotions % of Dollars – Maximizing Impact

The Promotions % of Dollars KPI is a metric that shows the percentage of sales driven by promotional discounts. A steady climb or a high plateau? Kudos, your promotions are a hit. If the numbers dip, refine your promotional strategies for maximum benefit.

4. Promotion $ – Analyzing Financial Impact

Promotion $ is a KPI that helps you analyze the financial impact of your promotional campaigns. It's not just about creating a buzz; it's about assessing the return on investment for each of your promotional campaigns and allocating resources more efficiently. Allowing you to focus on promotions that increase sales and boost profits.

5. Employee Discount $ – Balancing Employee Benefits

Employee discounts are like the secret sauce – impacting morale and business economics. Keeping tabs on the dollar amount will ensure you remain aligned with your financial goals. Striking the right balance between team happiness with profitability is the key to sustainable success.

6. Special Discount Groups – Catering to Diverse Audiences

Tailoring discounts to special groups – seniors, medical patients, veterans, and students offers personalized promotions for your local customer base. The Special Discount Groups KPI allows you to assess the dollar impact of each group to learn which personalized promotions resonate and which need a tweak.

7. Markdowns – Managing Inventory Effectively

Markdowns are important for efficient inventory management. The Markdowns KPI shows the percentage of sales from markdowns. Finding the right balance between moving inventory and maintaining profits is crucial to managing inventory effectively. Review this KPI regularly, adjust pricing and inventory strategy, and keep shelves stocked with desired products.

8. Customer Happiness Manual Discounts – Elevating Customer Experience

Customer happiness is the heart of your business, and manual discounts are an indicator of their engagement. Tracking the dollar amount of manual discounts helps measure their impact on satisfaction and loyalty. Too many discounts may signal issues, but reasonable discounts demonstrate a commitment to improving the customer experience.

And there you have it. We started with the importance of naming conventions for retail data to bring clarity and organization. Then, we reviewed how to maintain consistency and predictability when offering discounts, followed by must-track Discount KPIs.  

See what the community had to say about this topic in a post by Krista Raymer,  on LinkedIn. 

If this blog was of interest to you and you’re looking for more KPIs for Cannabis Retail, head over to our recent blog: 7 KPIs of Cannabis Retail. 

Remember, discount metrics are not mere numbers; they drive your cannabis retail business, attracting and retaining customers while increasing spend.

Discounts can be a powerful tool for attracting and retaining customers, but striking a balance is important. Your discount strategies should drive sustainable growth rather than just inflating short-term sales figures. 

Use your data to make confident decisions. The right discount strategy can drive traffic and contribute to the long-term profitability of your cannabis retail store.

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