How Data Analytics is Transforming the Cannabis Industry

It’s no secret the cannabis industry has enjoyed unprecedented growth these past few years — from a market perspective and a political one.

Consider the political and policy changes we’ve seen in recent months. The House of Representatives recently passed historic legalization legislation (the Marijuana Opportunity, Reinvestment and Expungement Act).

Thirty-six states now have programs for recreational use, medical use or both. With these changes and a new, cannabis-friendly administration, we’re on track to see federal legalization within the next few years and continued leaps forward in this industry.

One place we’re about to see disruptive transformation is in the cannabis industry’s relationship with data analytics (DA). I’d argue this critical area holds the single-most-important growth opportunity for the critical coming years.

Over my career as a business operations executive, I’ve helped bring DA strategies to the airline, retail, and banking industries, and I’ve seen firsthand how data accelerates growth. Indeed, data collection and analysis proved integral to the successful corporate restructuring I helped oversee during my tenure as Chief Information Officer for United Airlines.

And in the rapidly maturing cannabis industry, a strong grasp of DA is essential for setting growth strategy and boosting market differentiation, consumer satisfaction, and other benchmarks.

No Brand Differentiation Without Data

The U.S. airline industry embraced DA more than two decades ago. Now airlines are 100% dependent on data—from pricing algorithms to loyalty programs to operations management to customer service.

Leveraging data for trend analysis and developing offerings proactively, rather than reactively, changed the ways airlines served their consumer bases—and paved the way for so many other industries to do the same.

But the biggest way that leveraging consumer data influenced the airline industry was in providing opportunities for brand differentiation. And that, I’m confident, is what’s going to make the difference in cannabis.

Because cannabis is a brand-new industry relative to airlines or some heavy-hitters in consumer packaged goods like Coca-Cola or The Hershey Company, many cannabis businesses don’t have product roadmaps or precise market segmentation.

The result is a lot of businesses offering similar sets of products to similar segments of the market. And in an increasingly crowded industry, the brands that figure out how to stand out will be the brands that last.

DA can help cannabis businesses accurately determine which products to develop and segments of the market in which to position them.

Diving into this specifically, for example, DA can tell us how much marketplace opportunity there may be for another brand of gummies, line of pre-rolls, or high terpene CBD sublingual.

Consumer behavior research and point-of-sale data can help brands dial in their product portfolios and emphasize key product and branding points, leading to highly valuable differentiation and brand strength—which is shown to consistently lead to higher returns across industries.

Trial and error in product development may have had its moment in cannabis, but as the industry becomes more and more saturated, brands will simply have to leverage data or risk being left behind.

Segmentation Opportunities are Everywhere

History tells us that even the most well-intentioned products can flop if they’re not positioned in the correct market segment. There are major opportunities for cannabis companies in leveraging transactional data, seasonality, trend forecasting, as well as regional and demographic data to pinpoint which segments of the market to serve and the correct marketing mix to utilize.

As the industry extends its reach across the U.S., I guarantee we’ll see continued expansion of existing segments and development of entirely new ones.

Moving away from the “guess and check” model of segmentation and truly gaining an understanding of currently served or underserved segments will help drive product development and pricing, which of course drives sales.

I’ll give you an example of this opportunity in action: The pandemic has taught us a lot about disruption but also reinforced certain things we know about consumer behavior, like a preference for online shopping and the enduring popularity of subscription-based delivery services.

I see that on the horizon in cannabis, especially in the ways it will help the industry reach so many more interested consumers—once reforms are made so the industry can actually accept payment online, of course.

I’ve also seen significant opportunities for subscription or delivery models in reaching consumer segments that may not feel comfortable visiting a dispensary: people new to cannabis, parents with busy schedules, and similar demographics.

There’s a slate of health-and-wellness products such as edibles, capsules, topicals, and more that I anticipate will see big growth once we provide opportunities to decouple cannabis consumption from dispensary visits.

The Race to the Bottom Won’t Keep Consumers Happy Forever

As we’ve seen in other industries, particularly in hospitality and air travel, loyalty programs are some of the most important tools for retention and brand growth available.

Done right, they’ll keep consumers happy, feeling included—and sometimes paying more for a product or service just for the sake of being part of the program. I call this kind of loyalty “stickiness,” and it’s 100% dependent on programs developed with good DA.

That’s just about the exact opposite of loyalty-type programs across mainstream retail and many dispensaries that rely on discounting mechanisms—the cheaper, the better—to earn repeat business.

But the data show there are segments of the cannabis-consuming population that support a loyalty program that celebrates a cannabis brand’s superior quality, excellent experience or product selection, not how low its price is.

Integrating Data Analytics ASAP

Many industries struggle with prioritizing data or becoming “data first,” so cannabis isn’t alone playing catch-up.

That said, the entire cannabis ecosystem has an opportunity to lead the charge in embracing data—further developing the industry’s supply chain, manufacturing processes, product offerings, retail dispensary and purchasing experience, average basket price, consumer retention and more.

Just as DA revolutionized the airline industry, data will change the face of cannabis — but only for those leaders that start crunching the numbers now.


  • Nirup Krishnamurthy is the Chief Operating Officer at Schwazze. He brings more than 25 years of leadership experience at Fortune 500 companies, with a focus on technology innovation, restructuring and integration. As Chief Information Officer for United Airlines, he helped oversee one of the largest turnaround restructurings in corporate American history, spearheading initiatives to drive major cost reductions and revenue enhancement. Mr. Krishnamurthy also held C-level roles with Northern Trust Bank and former grocery retailer The Great Atlantic & Pacific Tea Company (A&P).

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