STARTING IN 2018
The passing of the 2018 Farm Bill gave CBD exactly what it needed to soar. As a result, the CBD industry in 2019 has already experienced exponential growth. Data suggests the trend will continue in the years to come, with the CEO of ArcView Group, Tony Dayton, predicting that CBD product sales will climb to $20 billion by 2024. For CBD brands and businesses, both established and emerging, this can only mean one thing… heightened competition and less opportunity to control market share.
In light of the industry’s current context, and based on what we’ve experienced having worked with a number of CBD brands this year, we’ve created a list of the absolute essentials for any brand to follow in order to stay out of the CBD graveyard.
1. SET GOALS AND KNOW THE SCORE
The CBD industry has attracted a whole host of interested parties this year. As a result, some brands are headed up by cannabis veterans, but many are led by newcomers to the industry and big business investors. The new legal freedom awarded to CBD brands and businesses has inspired a wide range of individuals to leap forward, and dive head-first with spirit and enthusiasm into an industry they know very little about.
The rate at which new CBD brands are coming onto the market is jaw-droppingly fast. The competitive nature of this new industry is so strong that it radiates, inciting brands to move quickly and set-up shop without much time for reflection. But moving at great pace seems to be generating certain drawbacks. Not all CBD brands have their business objectives clear or keep an eye on how close they are to achieving those objectives.
It’s not just valid, but indeed prudent for any brand in any industry to make a decision about how much ROI it expects in order to make efforts worthwhile, whether that figure be per hour, per month, or per quarter. While big business CBD brands tend to have the financial aspects under control, too many of the smaller brands are entering into the CBD space without really understanding the costs involved related to packaging, website development, advertising, product delivery, third-party testing, and more. We’re seeing a trend of brands that underestimate the required detail needed to effectively weigh up costs against possible ROI, and to know exactly how much of a financial risk they are happy/able to take on.
Time is money. Setting up a brand can take time and delays are probable, if not unavoidable. It might be two or three months before a brand actually launches into action and a couple of months after that before any kind of ROI is seen, and that’s if the brand has made sure its branding is spot on, among other things. In the current competitive climate, trying to make an impact without the support of industry specialists and branding experts is extremely difficult, even for brands with plenty of cash to invest. Not all brands are truly aware of just how difficult it is to bypass the competition and actually make a sale. On that note…
2. LEARN THE MARKET
There are a few things that, as branding experts, we know are essential for brand success. The first is to know your competition and the second is to then find the gap in the market. Far too often, we see brands that have been built entirely on an interesting idea, but that in no way respond to market trends, purchase data, consumer behavior, and the like. No matter how cool an idea for a brand might be, if it doesn’t have the potential to connect with real consumers, then it doesn’t have the potential to offer a solid ROI. It’s important to remove the “self” from brand development, and focus solely on the true opportunities for market share as laid out before you.
One of the best ways of understanding your competition is to run a benchmark. Benchmarks can be used to analyze the competition’s branding, websites, social media content, product innovations, point of sale activities, and more. In general, it’s good practice to include between three and six brands in a benchmark. The range helps to offer the objectivity required for a thorough analysis of the competition and to identify useful patterns across the board that can inform future brand development decisions. The competitive nature of the CBD industry at present has made the running of a benchmark 100% essential. If you don’t know how to run a benchmark, then drop us a line, because we do.
The findings from a benchmark also help to highlight the gaps in the market. Considering the rapid arrival of brands to the CBD industry this year, it is now more important than ever to carefully and accurately identify the gaps in the market, and then to focus on that gap by building a brand that is strategically positioned to effectively connect with the target consumer. While your brand might not be the first to offer CBD coffee or CBD cream specifically for joint pain, you could be the brand that ends up connecting more effectively with the target consumer through branding, market analysis, and clear brand objectives. Second market movers can gain the advantage over those already established when research, analysis, and branding are executed correctly.
Once you’ve managed to identify the gaps in the market and you have a solid understanding of the competition, it’s time to differentiate your brand so that it looks and feels like no other. That means branding and packaging. Every single decision, from color, to font, to logo, to brand voice, to photographic style, to calls-to-action, to product naming, and more, must follow the same branding guidelines.
Here are three things we know about branding that we think everyone should know about branding:
Successful brands are not built on personal likes and dislikes. They grab hold of an underexplored opportunity; a gap in the market. (Remember what we covered in learn the market?)
Gratuitous communication and poor branding can kill a brand in record time. Brands that step away from their established branding and publish subpar content online do nothing but damage their brand’s reputation. Brands that evoke trust and achieve consistently favorable ROIs never publish hastily in a desperate enough to move things forward. They are calm, deliberate, and publish only when the content speaks their established brand language.
The power of a well-constructed and carefully-maintained brand identity, particularly in a saturated market like the world of CBD, should not be underestimated. But it should also never be overestimated either. Solid branding is meaningless without sales and profit. (Remember what we discussed earlier in setting goals and knowing the score?).
For example, let’s look at packaging. Does packaging, an element that must ooze brand identity, lead to sales and profit? The answer is yes, when it’s done right. There are 100s of CBD topicals on the market, 100s of CBD edibles on the shelves, and many of them are now being sold through standard retail outlets. Even Sephora has its own line of CBD products laid out on the shop floor. So, what makes a consumer choose one brand over another.
Sometimes it’s because they’ve seen online marketing efforts and have headed to the store to buy as a result. Sometimes it’s because of brand name and previously established trust. Sometimes it’s because the packaging is just so incredibly attractive that it seals their decision at POS. We’ve all put products back on the supermarket shelf because we didn’t like, or were dubious of the packaging. The CBD consumer is no different.
Experts in creating customized packaging that helps differentiate a brand from the POS competition, we know that one of the reasons why so many brands out there disappointingly blend into the crowd, is because packaging regulations are so strict. But there are ways of remaining ultra-compliant without losing the opportunity to differentiate on the shelf. A packaging design that solves a consumer experience issue, for example, is an area worth pursuing. As too is packaging design that opens in a unique way, or presents a limited edition of your star product. A penny saved is a penny earned, but not when that penny leads to decreased sales. Our advice is to definitely set aside a decent budget for packaging, because experience has shown us that it’s an important factor in terms of brand identity and increased sales.
Having said that, packaging can run up greater costs than most brands anticipate. You need to be sure that the cost of your packaging doesn’t prevent you from earning a healthy ROI. Effective packaging increases sales and profit margins. It doesn’t reduce them. Contact us if you’re looking yo reduce packaging costs. We will most probably be able to help.
Consumers, dispensaries, distributors, investors. You need them all to trust you in order to survive… and thrive. So, what inspires that trust?
- A great story, told in a captivating way.
- Sharp copy across the board.
- Professional photography (or professional-looking) every single time you publish something.
- A clear budget that adds up.
- A strong strategy for digital content and SEO that will generate leads and make the financial goals you’ve established for yourself (remember setting goals and keeping score?) a reality.
- Sales. Sales. Yes… Sales. Nobody trusts a brand that cannot make a sale.
If there’s anything you should take away from this blog today, it’s this. Be agile. The CBD industry is a new industry. It’s volatile, at times incredibly unpredictable, and it’s changing fast. Successful brands are agile, they go with the punches, and find a way of moving on to the next step with grace and very little effort, or so they would have us believe. The Face of an agile brand never breaks. You’ll never see an agile brand publish something that goes against established brand guidelines, no matter how much pressure it’s experiencing behind the scenes. (Remember what we said about staying true to brand identity, no matter what… Agile brands do that).
So what do you need to be prepared for in the CBD industry? What are agile brands ready to take on that fixed brands aren’t?
- merchant account issues
- advertising limitations
- the eventual easing up of advertising limitations via the likes of Google and Facebook
- Google algorithm changes
- the eventual need you will have at some point to hire an expert and to recognize cost vs. opportunity cost
- the next star cannabinoid that’ll come along and blow CBD out of the water… IT WILL HAPPEN!
- the new hydrogenations of existing cannabinoids, which are being developed as you finish reading this sentence.
But above all, be prepared to persevere and make sure you know when to pivot. Trust your gut. Yep! Sometimes you just have to hold your breath and go with what feels right, even when you don’t have the data to back those decisions up and that can be fairly scary and pretty risky, particularly when trying to capture the interest of external investment (building trust and building equity, as mentioned in more detail below). It’s a careful balancing act. The more agile you are, the better you’ll learn to balance.
Let’s imagine you’ve done all of the above and you’ve done it really well. The problem is, you still just can’t get that ROI to a comfortable level; a level that you can consider financially successful. When you’ve got to this stage, or even beforehand, truth be told, it’s time to think big and shift the game plan.
Some brands, no matter how great they are, will never be big, because they don’t build a profile that investors can get on board with. Investors like innovation. They want to invest in the next big thing that’s set to blow everything we’ve experienced and understood to date out of the water. This might include proprietary packaging solution patents, underexplored manufacturing processes, or exciting advances in plant and seed genetics. Any brand in the CBD industry that thinks it doesn’t need to know about this stuff is, quite simply, naive. And any brand that doesn’t know how to license or sell an intellectual property must either make the time to learn, or hire a pro. Intellectual properties add value to a brand at any level and they make brands immediately more interesting to possible Investors.
How much do you know about using your competition to your benefit? Does the phrase Your Net-Work is your Net-Worth inspire or confuse you? Are you a sheep or a leader? Do you need help to look at what you brand has to offer and make decisions that will encourage your chances of attracting an investor and taking your brand to the next level? If you do, get in touch. Remember, we can’t all know how to do everything, but we can make sure we hire the right expert to lead us in the things that matter.
On a final note, going back to the focus of this blog, one of the greatest errors we see emerging CBD brands committing in today’s competitive environment, and one which throws them straight into the CBD graveyard, is the strange idea that they can create a brand, design a logo, start a website, and consumer will just come flocking in. Don’t underestimate the CBD consumer. He/She is looking for a brand with something new to offer, despite the fact that the CBD industry is less than a year old. If you want to increase those sales and stay out of the CBD graveyard, you’re going to need to be prepared to do all of the above and maybe more. Looking forward to seeing your CBD brand in action!
Take a look at our large list of the best stoner movies you can watch right now on Netflix (and Hulu and Amazon). Movies to watch while high in 2019.
Despite the projections for growth and the confirmed increase in consumer interest, selling CBD products isn’t as easy as most brands want it to be. Creating a website, setting up an e-commerce channel, launching a few products, and investing in a little branding isn’t enough to secure regular and profitable CBD product sales. But, why?
One of the things that makes it difficult for any cannabis or CBD business to function is the lack of banking support. A solid merchant account is something that all businesses need, whatever the industry, but in the cannabis space finding one is a real challenge. Even though the 2018 Farm Bill made it legal to cultivate hemp on a federal level, and even though most states have legalized the cultivation and sales of cannabis and cannabis products to varying degrees, cannabis and CBD businesses are still having a hard time with banks and credit card companies. It makes the running of a legal, professional business difficult, if not impossible, which is why merchant account service providers, like InclusivePay, have come to the rescue.