These days, most California cannabis consumers have a favorite dispensary. But with more than 800 across the state, there are plenty of opportunities for shoppers to stray. Maintaining consistent business from regular customers is a critical (yet challenging) business model for California dispensaries. So, how do you make sure customers keep coming back?

In this article, we’re going to take a close look at customer retention and loyalty, including how to calculate your customer retention rate, why it’s so important, and strategies you can use to boost retention across the board.

What is customer retention?

Customer retention can be defined as a customer's willingness to repeatedly return to a company to conduct business.

This is usually due to the remarkable experiences they have with that brand.

You don’t want every customer out there to discover your product, think it’s great and only purchase once; you want repeat customers who come back again and again, and who love your dispensary so much that they’ll sing your praises to their friends and peers, too.

Why is customer retention important for dispensaries?

Your retention rate does more than just support profitability.

It lets you know that your marketing is sound, the quality of your product is strong, and that you’re reaching the right people with your communication efforts.

When you’re marketing to repeat customers, you have a 60-70% success rate for selling to them, whereas selling to new customers is only going to give you a 5-20% success rate (at most).

It’s also somewhere between 5-20x more expensive to acquire new customers than it is to retain an existing one—yikes!

What is customer retention rate?

Your customer retention rate tells you the percentage of your customers who you retain (or who purchase from your dispensary again) over a specific period of time.

It’s the opposite of churn, which tells you how many customers you’ve lost over a set period of time.

How to calculate dispensary customer retention rate

Monitoring your dispensary's customer retention rate can help shape marketing campaigns and address pain points that result in customer frustrations.

Fortunately, calculating retention rate is relatively easy. Here’s the formula you need to follow:

Customer retention rate formula

Before you get started, you’ll need the following information:

• The number of customers at the start of a period (S)
• The number of customers at the end of a period (E)
• The number of new customers acquired over the same period (N)

With that information ready, use the following formula to find your retention rate:

((E - N) / S) x 100

Let’s try an example. Imagine you’re a dispensary in San Diego and your average customer purchases at least 8 times per year. You decide to use a year as your standard length of time.

At the end of 2022, you saw that you had a total of 400 customers and that 200 of them were new users. You started the year with 310 customers.

That equation would look like this:

Customer retention rate = ((400 – 200) / 310) x 100
Customer retention rate = (200 / 310) x 100
Customer retention rate = 0.64 x 100
Customer retention rate = 64.5%

This means that in 2022, your dispensary would've had a 64.5% customer retention rate.

3 customer retention tactics for cannabis dispensaries

1. Use customer accounts

Setting up the option for shoppers to create customer accounts is a no-brainer. Your POS system should be able to help you here, allowing customers to store log-in information where they can save their personal and payment information and review past orders.

2. Start a customer loyalty program

Customer loyalty programs are wildly advantageous for dispensaries. They encourage customers to come back and make repeat purchases in exchange for earning points that can be used for discounts (or even entire products).

Loyalty programs can be based entirely on the amount the customer is spending with your business, driving up average order value (AOV).

3. Send engaging emails to your customers

Are you reaching out to customers and reminding them to come back and purchase from you? You should always have triggered automated email campaigns set up for abandoned cart emails, designed to bring back high-intent shoppers.

Let’s grow together, California

Dutchie is an all-in-one technology platform powering the cannabis industry with Point of Sale, Payments, Ecommerce, and Insurance solutions. Through our technology, we’re helping cannabis businesses of all sizes start, operate, and grow with confidence.

‍Get in touch today.