Portal - Consumer - Budget Friendly Consumer Profile

Executive Summary

• Budget-friendly users are generally younger, less educated and more religious than higher income patients
• They like to try new products, are wary of technology and work fewer hours
• Budget-friendly consumers purchase and consume more often, and prefer flower over other types of products
• Value easily available products and recommendations from friends for their cannabis products
• Largely underserved customer base, as most branded products target middle and higher income consumers

In considering potential cannabis consumer groups to target, investors might overlook low-income users given their limited budgets and corresponding limited spending capacity. However, to overlook this consumer group would be a mistake.

According to data collected by Brightfield Group from over 1,200 medical marijuana patients throughout California in 2016, low-income users make up nearly a third of marijuana patients, are loyal customers, and tend to use more product per person than higher-income consumers do. Furthermore, as most branded products are currently competing in the Standard or Premium segments, the Economy segment offers an excellent opportunity for investment.

The Budget-Friendly Consumer Profile below includes an in-depth description of this group and its demographic makeup, outlines the group’s purchasing habits, and provides guidance for today’s investors seeking to enter or further capitalize on this consumer market.

Budget Consumers: Who are they?

Perhaps not surprisingly, the low-income demographic is made up largely of young people, with about one-third of users between 18 and 25 years old. Most budget users have between a high school diploma and some two-year college studies completed, and less than one-fourth of them have or are completing an advanced degree.

[1] [2] [3] [4] [5]

Nearly two-thirds of this demographic consider themselves to be highly religious, versus about half of higher-income consumers.

There are substantially more females than males in the low-income space, which is surprising as men are more likely to use cannabis on average and in all other consumer groups.  Low-income users are less than half as likely to be married as their higher-income counterparts.

While cannabis consumers are majority Caucasian, there are significantly fewer white cannabis consumers in the low-income group than in higher-income groups.

Budget Consumers: How do they live their lives?

 

More fickle and adventurous than higher-income consumers

Low-income users surveyed about their sentiments regarding brand, store and product loyalty had some surprising responses. When asked if they would be more likely to repeat business at their “old faithful” than try out a new store, 20% of low-income users responded negatively, showing less loyalty to their local shops and more willingness to venture into a new store - most likely one that offered more convenience, better pricing or selection - than higher-income medical marijuana consumers.

Furthermore, budget consumers expressed great willingness to risk buying new and previously untested products. About 40% of low-income users surveyed indicated that they disagreed with the statement: “I am hesitant to buy new brands”. In addition, many budget cannabis users put little importance on investigating new brands before purchasing them.

Users in this demographic appear to have a greater disposition to abandon what they know in favor of the advantages that may be offered by new stores and brands than those in the higher-income demographic. Strategies to attract the low-budget consumer should include lower pricing, sales and promotions, or increased product and brand availability - but should shy away from depending upon dispensary loyalty among this demographic.

Wary of technology

Budget consumers express a great hesitance to use technology, and appear to both use it less and reap fewer benefits from it than do higher-income cannabis users.

Many low-income consumers are quite adamantly against making credit card purchases over the internet, especially when compared with higher-income consumers. Nearly 20% of budget consumers strongly disagree with buying online, and a dismal 6.8% of low-income cannabis consumers feel highly comfortable using a credit card to make online purchases.

[6]

While there are approximately the same number of high-income users that indicated a preference for online purchasing as in-store purchasing, budget consumers tended to be much more inclined to avoid online shopping, with nearly twice as many low-income users indicating a preference for store visits over online buys. In addition, low-income users tend to be considerably less enamored with their smart phones than their high-income counterparts, and thus less inclined to use them for online purchases or to research products, brands or stores.

Today’s budget-friendly cannabis consumers are wary of technology for myriad reasons, among which are an interest in remaining “off the grid”, distrust of the financial and personal security (or lack thereof) offered by online platforms and accessibility issues. 

App-based platforms that provide marijuana info and delivery services, such as Leafly and Eaze, and those who advertise via these means, will have more success bringing this demographic – which is far too large to overlook – into the fold if they cater to its concerns and attitudes surrounding technology. Some methods of doing so include not requiring users to log in, save their location or contact information, or provide other identifying information in order to access an app, as well as ensuring apps are as simple, straightforward and user-friendly as possible.  Serious steps should be taken to provide cybersecurity for consumer information, and these security measures should be communicated to existing and potential clients. Furthermore, even after being updated, apps should also remain available for older versions of smart phone software so that access is not exclusive to those who use the latest technology and devices.

More mobility, fewer commitments

Low-income marijuana users surveyed were vastly more likely to live in rentals or with family/friends than were higher-income users. Budget users living with loved ones or in apartments with close proximity to neighbors or roommates have a specific set of concerns corresponding with these living conditions. For example, they tend to be more concerned about the smell emitted when smoking flower. Marijuana users in apartment buildings risk being evicted if their usage is discovered by landlords, so it is particularly interesting that this group of renters continues to consume flower at such high levels. 

[7]

Marketing efforts of non-flower companies targeting this demographic should speak to the discretion afforded by these products vis-à-vis flower for apartment dwellers in particular. 

Additionally, since renters and cohabiters change residences and neighborhoods much more often than homeowners do, the 87% of low-income users who live in these spaces may be more prone to changing local stores as they move from place to place, though this will not preclude them from sticking with the same brands or products.

[8]

Further contributing to their mobility, budget-friendly marijuana consumers tend to work less than higher-income consumers, with over half indicating that they work 20 hours or less per week. Within the context of this study, many low-income respondents suffer from severe or debilitating medical conditions (their motives for medicating with cannabis) and thus are unable to work a full workweek; others are younger and not yet employed full-time due to school commitments. Whatever the case, lack of employment commitments allow for more opportunities to relocate.

As budget users Of course, this begs the question – where can companies reach these consumers?  Social media can help to bridge this gap.  While they are somewhat less connected than higher income users, 28% use sites like Leafly or Weedmaps at least weekly, 52% use Facebook at least weekly and 27% use Instagram at least weekly.  Additionally, 28% report reading a cannabis-related blog or website on a regular basis.  

Budget Consumers: What marijuana products are they buying?

Low-budget customers are less likely to seek out concentrates and edibles, and much more likely to purchase all three types of flower available - Indica, Sativa and Hybrid - than are higher-income customers. In fact, 39.9% of low-income users chose flower as their first-choice purchase, versus only 27.9% of higher-income users.

[9]

It can be reasonably assumed that budget users prefer flower to edibles or other processed goods because the prices for flower run lower.  The cost of extraction and processing for infused products are far higher than flower, thus the price per dose of processed cannabis products is significantly higher than that of the same dose of flower. offered by other product categories.

Budget Consumers: How much are they purchasing and consuming?

Low-income users indicated making large purchases during their periodic dispensary visits, with 36% of having bought three or more cannabis products in the last two weeks, and 31% having purchased two products during the same period. In terms of frequency of consumption, budget-conscious customers are for the most part using cannabis daily or quite frequently during the week, with nearly half (47.9%) of the low-income demographic using product every day, versus only 37.2% of higher-income consumers.

[10]

This phenomenon may take place for several reasons, the most likely of which is that those who work less or are unemployed (for whatever reason) can partake more freely in marijuana use outside of work hours than mid-career professionals or others who must be in the office 40+ hours per week. Furthermore, those with more serious or debilitating medical conditions – and presumably less income – generally have greater and/or more frequent need for medication and are thus more prone to using daily.

[11]

Naturally, despite more frequent use and larger purchases in terms of quantity, low-income users are still spending somewhat less than higher-income users out of necessity. This implies that budget users are purchasing vast quantities of lower-priced goods, such as flower rather than infused products, and leaving top shelf and premium items to the higher-income users.

Budget Consumers: What are they looking for when buying weed?

[12]

Aside from the obvious characteristic that low-income users seek in their cannabis: low price point, there are myriad other aspects that appeal to this demographic.

Friend’s approval

Nearly 30% of low-income users cite a friend, family member or budtender’s recommendation as the reason for their most recent purchase.  Furthermore, when looking for a new brand, the most decisive factor for low-income users is in fact the recommendation of a friend or family member (rather than price), followed by competitive pricing, then local availability.  Dispensaries and manufacturers should prioritize selling products, therefore, that are reputable and deserving of their price point, to encourage positive word-of-mouth marketing and bring in new budget customers.  Outreach to and education of budtenders is extremely important as well, as budtender recommendations are the most effective tool for encouraging patients to try a new product, absent a recommendation a friend or family member.  

Availability

Local availability and access are highly important to low-income consumers – perhaps due to limited access to costly mobility /transportation and frequent moves, or perhaps because about half of this demographic consists of daily users who must make frequent purchases. Local availability is not only a high priority when seeking a new brand, but is most likely also a factor in decision-making for a consumer group that is extremely willing to try new stores (or new brands) when convenience and/or price are factors at play.

Budget Consumers: How can companies reach them?

Using various tactics to appeal to the frequently untapped budget consumer market will give manufacturers and dispensary owners access to a good deal of eager customers with a large appetite for product.

Product Development

In the short-term, dispensaries and manufacturers seeking to attract this consumer group should begin offering discounts or budget pricing on a variety of products, especially flower – a low-income favorite. Branded flower offers a great opportunity to tap the economy market, as costs can be lower for flower versus infused products. Existing manufacturers should consider adding an economy line to their portfolio; by leveraging their existing manufacturing capabilities and distribution networks,

Marketing/distribution

First and foremost, these consumers will be drawn in by less expensive products, so it would be advisable to offer discounts or budget pricing to attract them to stores and goods. Bundling or new product giveaways are a good way to encourage these consumers to try new products, but given the importance of word of mouth advertising, incentives should also be given to satisfied customers for referring their friends.  Budtender education is also important, as budtender recommendations are also extremely important to this demographic, so manufacturers will need to be sure budtenders believe in their product and understand its unique selling points to effectively communicate these to potential new customers. 

Since budget-friendly consumers are wary of technology, companies interested in reaching this demographic via app should be cautious to take privacy, discretion, and ease-of-access concerns into consideration. Enabling cash transactions, as much security of information as possible (for example, not insisting on tying enrollment to one’s Facebook account or requiring a location to be entered), and making an effort to provide access to those who have outdated technology, will all encourage low-income consumers to venture into the app space. Despite a lower affinity for technology than their higher income counterparts, half of these consumers are frequent users of Facebook and a quarter use sites like Leafly, WeedMaps and read cannabis related blogs on a regular bases, meaning social media can be an effective method for reaching at least some of these consumers. 

Packaging/Product Positioning

Emerging leaders in the branded cannabis space are largely seeking to differentiate themselves on their premium inputs (e.g. Kiva, Bhang) and continue to pursue the Premium and Standard product markets. Few are seizing the opportunity to capture low-income customers in the Economy brand space. Low-income users are largely left purchasing unbranded products, which may cause them to have inconsistent and unreliable cannabis experiences, leaving this market space rife with opportunity.

One of the few brands that is effectively targeting low-income consumers is Cheeba Chew.  Cheeba features no nonsense packaging with graphics that are less than exceptional, an ingredient list that begins with sugar and corn syrup and some of the ratings of consumer satisfaction on taste.  Despite all of these factors, Cheeba is the leading manufacturer of edibles in California with 7% of the overall market, with its success largely attributable to its low price point and strong distribution network.  

Caviar Gold  This is particularly interesting because Caviar Gold is more expensive than unbranded pre-roll, but these patients report very high levels of satisfaction with the brand and plan to purchase these products again. 

 Encouragingly, low-income users are similarly brand-loyal when compared to higher-income consumers, thus any brand that can effectively tap into the economy market and win the loyalty of this consumer group would likely see rapid and sustained gains.