The cannabis business is one of the most lucrative ventures we have in the U.S. Even as other businesses suffered a blow in 2020, the cannabis industry had a breaking record moment. That shows how resilient this business can be regardless of any global and economic disruptions. Even in 2021 and the future, this industry will, without a doubt, continue to be a bull market.
But if you are setting your foot into a new market, you have to carry out some in-depth research. Cannabis markets are not equal. The market structure often varies depending on the legal status for consumption and sale of recreational cannabis in a state. For example, California and Colorado, where it is legal, have monopolistic competition. But in other states where it is not legal, the market structure represents an oligopoly competition.
This article looks at factors you should consider and questions you should answer to determine the best market for your new cannabis business.
Step 1: Who Are My Target Customers for the Product I Am Selling?
The first step when determining the market for any product is understanding the customers you are targeting, and with cannabis, it’s no different.
You need to consider the following:
What Are Their Demographics?
Consider the demography of your target customers. You can divide the market into categories based on age, income, lifestyle, or gender. With such categories, you can rest assured that the additional information you need is quickly available. Such information can allow you to move beyond and determine how and where the customers can get your products once you start the business.
What Are Their Preferences?
The cannabis business is dynamic, and customers are now more demanding than before. Once you land into a new market, you must increase your capabilities and adapt to the changing customer preferences; otherwise, you won’t beat the existing competitors.
You can understand customer preferences in the following ways:
You already know who you are targeting in the new market. You can move on to conduct interviews and collect customer inputs directly so as to know what they prefer.
With focus groups, you interview a small group with a specific topic or product. That way, you can get richer information regarding their preferences. You will carry out quantitative and qualitative surveys in the groups, thus get more motivations and opinions.
Surveys can also help know customer preferences. These give you a wider picture of what it takes to fulfill the needs of your target customers.
What Are Their Expectations?
Other than what target customers prefer, there is also what they expect from you. Meeting customers’ expectations is a crucial way of winning them. The expectations could range from the quality of your products to service delivery and the level of customer satisfaction. A business that understands customers’ expectations is in a better position of fulfilling and even exceeding them.
You can determine the customer expectations in a new market by keeping an eye on the existing cannabis business. Watch the brands on social media and note what customers rave or rant in their conversations.
Step 2: Do the Demographics of the People in This Market Match the Target Customers I Want to Appeal To?
Now that you have the demographic data of your target market, you can now consider whether it matches with the target customers your cannabis products suit. The overall demographic data can help you get a bigger picture of the U.S. cannabis market. Like the markets, cannabis consumers are not created equal. It is easier to market cannabis products to consumers only when you know their demographics and intent.
Going by the demographics data of the entire country based on the lifestyle, age and gender, first note that over 70% of CBD buyers have pets, and 24% of those surveyed reveal they use cannabis products for their pets, themselves, or both.
On age, estimates by Headset reveal that Gen Z and Millennials will dominate the market soon.
Currently, the total sales from the main demographic groups are as follows:
But other than knowing the above, you need to know demographics based on gender. For instance, this information is crucial if you are targeting females between 55-73 years. While females buy cannabis products for health and wellness, their male counterparts purchase them for recreational purposes.
Step 3: What Does the Competitive Landscape Look Like in This Market?
The cannabis industry has fierce competition. Some of the core drivers in this sector include customer expectations, new product mix, changing demographics, and social acceptance and use. Start by analyzing the situations. Are you the first to sell the products in this market, or do other companies exist? Both scenarios have pros and cons.
For example, introducing a completely new cannabis product into a new market would mean that you need more effort to introduce it to new customers than when it already exists. But if many brands already sell the product in the same market, it could mean a challenge trying to outsmart the competition.
However, move on and research how well established your competitors are so as to customize your marketing strategy in a way that propels you. Besides, establish whether they target the same customers. You should also check their location to know whether they are in places that are difficult to compete with. Finally, analyze the supply chain agreements of your competitors to establish if there are exclusive ones that could affect your supply chain.
Step 4: Does the Market Support Your Goals?
Before settling on a market for your cannabis products, you need to determine their potential. A market with enough demand to support your revenue goals means it can give you the money you target to get by capitalizing on all available advantages.
Of course, you want to grow your business to the next level. Therefore, in this step, you also determine whether the market is expanding to accommodate future scale. Check any signs that the market is likely to become a target for other competitive businesses in the future and how long it may take them to get up and running. You can even review the company share of the existing cannabis businesses in the market.
Basically, there is no point in investing a lot in a market with low potential. You want a market that can support your business now and in the future, regardless of whether competition increases.
Questions to ask yourself when determining the best market for your new cannabis business
Get a Complete Market Analysis
Proactive analysis of the market’s conditions is critical before you move forward. But as you realize, an in-depth market analysis would require you to invest a lot of effort, resources, and time.
For this reason, you need professionals such as BeGreenLegal to help you get a comprehensive insight into the market. We carry out a thorough market analysis, covering all critical industry points to give a complete report for your target market. Reach out to us for a market analysis today.