Welcome to my video presentation for Thursday, May 23. The article below is a transcript, edited for concision. For a deeper dive that includes charts, watch my video.

 

As a marijuana investor, you need to pinpoint well-managed canna-businesses. A major headwind that held back the marijuana industry during its early days was the inexperience of corporate management. Many pot start-ups were founded and run by amateurs. Thankfully, that’s changing.

A worthwhile marijuana stock starts with a solid corporate foundation. A “meme” marijuana stock always ends in tears. However, a pot company that adheres to the fundamentals will survive over the long haul and make money for its shareholders.

In addition to overseeing the editorial content of Investing Daily, I’m also the chief investment strategist of the premium trading service, Marijuana Profit Alert. When conducting due diligence to find a stock that’s suitable for the portfolio in MPA, I “look under the hood” for the following 10 best practices.

I use a narrative voice that directly addresses marijuana entrepreneurs, who are also investors in their own right.

1. Monitor Demographic Trends

As the cannabis market in the United States expands, the customer base has significantly diversified. The era of catering solely to patients needing medical-grade cannabis is over.

Today’s younger consumers are often drawn to products boasting high THC levels, while older adults might not prioritize premium craft cannabis. To effectively target your products, use your point-of-sale (POS) software’s customer profiles or wholesale sales data to identify your primary demographic. Tailor your offerings to match the preferences of your largest audience segment.

2. Analyze Purchasing Patterns

A robust cannabis POS system includes sales analytics capabilities that enable you to track which product categories, brands, and price points are most popular. Utilize this data to strategically stock your inventory and optimize your store layout. Understanding purchasing trends helps ensure you meet customer demand efficiently and effectively.

3. Understand Consumer Diversity

Personal preferences should not overshadow the diverse needs of consumers. Even if a particular strain was perfect for you, it’s crucial to listen actively to your customers’ preferences and requirements.

Dispensary staff should consider factors such as desired effects, consumption methods, and budget when recommending products. Similarly, cultivators should offer samples that align with a dispensary’s existing product lines rather than personal favorites.

4. Identify Customer Motivations

Knowing what drives your customers is key to effective marketing. Whether they are seeking affordable options or the latest in rosin products, tailor your marketing strategies accordingly.

Use social media to hint at upcoming sales (while avoiding direct price mentions to comply with platform rules) and highlight new products with engaging content. Conduct surveys or polls to gain deeper insights into customer preferences and adjust your offerings based on their feedback.

5. Leverage Marketing Channels Wisely

Navigating marketing channels in the cannabis industry can be challenging. Paid social ads are often costly and difficult to get approved, while customers may hesitate to join loyalty programs. Despite these challenges, there are opportunities for effective marketing.

Many cannabis marketers under-utilize high-performing channels such as email marketing and programmatic advertising. Develop a robust email marketing plan that includes product updates, newsletters, and educational content, and segment your email list for optimal results.

6. Host Educational Events

Educational initiatives are powerful tools for de-stigmatizing cannabis and engaging with customers. Host in-person events where consumers can learn about the plant beyond basic classifications such as indica, sativa, and hybrid. Interactive elements such as games, vendor meet-and-greets, and terpene-smelling contests can make these events more engaging.

For online businesses, consider webinars with guest speakers from the cultivation side, and share post-event highlights on social media. Educational content not only enhances customer experience but also helps navigate the regulatory complexities of cannabis advertising.

7. Collect Customer Reviews

Feedback is invaluable for both manufacturers and dispensaries. Customer reviews can reveal crucial insights into product performance and areas for improvement.

For instance, if dispensaries report issues with leaking cartridges, brands can use this feedback to reassess and improve their product designs. Engaging with customers through reviews helps refine offerings and boost satisfaction.

8. Utilize SEO Keywords

Keyword research using tools such as Google’s keyword planner can offer more than just improved search engine optimization (SEO). It provides a window into the customer’s journey from online search to purchase.

In this post-pandemic era, understanding digital shopping behaviors is crucial. Analyze data from e-commerce platforms to better understand and serve your customers’ needs, ensuring your products are easily found by those searching for them.

9. Conduct a Competitor Analysis

As of this writing on May 23, recreational cannabis is legal in 24 states and Washington, D.C., with another 38 states and DC permitting cannabis for medical use.

In addition, CBD is now legal nationwide, and other cannabis derivatives, such as Delta-8 and Delta-10, are gaining popularity.

This evolution is transforming the cannabis industry into a multi-billion dollar market, providing cannabis-related businesses with lucrative opportunities.

However, the market is highly competitive. Therefore, it’s crucial to consider: What strategies are your competitors excelling at? In what areas do you surpass them? Where can you improve?

Performing competitor analysis helps you pinpoint weaknesses in your own business model and identify opportunities to enhance your offerings or expand your market presence.

10. Monitor Key Performance Indicators (KPIs)

Identify and track KPIs along with budget vs. actual performance, both during the initial setup and ongoing operations.

Regularly reassess your forecasts to ensure they remain realistic. Strong pre-operational numbers and forecasts are crucial at various milestones, such as the first 6, 18, and 24 months. This approach not only refines your business strategy but also provides clarity for investors regarding your breakeven point.

By implementing these best practices, cannabis startups can navigate the complexities of the industry, mitigate risks, and position themselves for long-term success. These rules also apply to mature cannabis firms.

Companies that pursue these “best practices” will make the best equity investments.

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I regularly write about the opportunities in cannabis. But I also want to emphasize the big profits that await you in crypto.

If you’re worried you can’t figure out crypto…don’t be.

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John Persinos is the editorial director of Investing Daily.

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This article previously appeared on Investing Daily.