Before cannabis was a legal option, prices in the unregulated market varied wildly depending on the whims of the individual seller. But as states find themselves at different points on the path to legalization, the market is rapidly changing. Today, cannabis is a $52 billion industry, and Americans cultivate 29.9 million pounds of the fast-growing crop each year.
In spite of America’s evolving legal market, cannabis pricing remains more of an art than a science. While demand for cannabis remains relatively consistent, pricing fluctuates to an extreme degree depending on a myriad of factors.
Cannabis Price Determinants
Location
First, when deciding on pricing, it’s crucial to consider location because some markets are more mature than others, which can have a sizable impact on how products are priced.
In the legal recreational markets of Colorado, Oregon and Washington, prices tend to be less expensive and, generally speaking, more stable than in many emerging markets. In more well-established markets, competition between companies creates favorable prices for the ever-increasing number of consumers.
Pricing is most heavily controlled by the supply and demand in the state in which you’re operating. Each state — and even some individual cities — implement its own set of laws and regulations, and these rules can significantly impact how cannabis is grown, manufactured and sold. If your state, for example, restricts the number of licensed cultivators, pricing will be driven by the low supply rather than factors like the specific strain, potency or even the quality of the product.
In states where cannabis is only legal for medicinal purposes, consumers are more sensitive to pricing because they are using cannabis as a medicine to help treat everything from appetite loss and epilepsy to nausea, chronic pain and seizures. When patients can’t count on either availability or pricing, it can be difficult for them to access cannabis for the treatment they need.
If your state allows for it, the vertical integration of your operations is one way to overcome pricing challenges because you’re afforded more control over your supply. If not, having your operations aligned in cost decisions will empower you to ensure cost-effective production, which keeps overhead and cost per unit down.
Quality
Beyond the location in which the cannabis is grown, manufactured and sold, the quality of the products you offer can also impact your pricing strategy.
Obviously, not all cannabis is of the same quality. From the different strains of cannabis to THC and CBD levels, testing results and even the bud’s smell and appearance, several factors affect the quality of the cannabis, but a higher-quality product will generally fetch a higher price. Whether your business wants to be known for being the lowest cost, middle of the road or a premium brand offering premium products, it’s critical that you set up your promotions and pricing structure appropriately.
Brand Strategy
Be careful to control your narrative around pricing as it relates to quality. If your consumers are expecting a certain price for specific quality, don’t sacrifice one for the other. Helping your customers understand the price as it relates to the quality of the product is a tactic you can employ that will help you make more money in the long run. Regardless of market conditions and quality, pricing is ultimately a branding and marketing decision that has to align with your business philosophy, operational strategy and financial capacity.
Whether the conversation surrounds location or quality, the price of cannabis varies significantly and is subject to a broad range of factors. In a volatile market, how can cannabis companies remain competitive with their pricing?
Tips and Tricks for Staying Competitive with Cannabis Pricing
Be Consistent
Due to the variability in agriculture, it can be difficult for customers to get a consistent product and experience at a dependable price point. From environmental conditions to nutrient usage, numerous factors influence a harvest’s end result, making consistency a challenge in cannabis cultivation — but one that can be rewarding in sales.
As such, it’s wise for cultivators to hone in on one or a few strains that they like and become the expert on the ins and outs. From temperature, humidity and the right mix of nutrients to the length of time it takes to dry and cure the plant, each strain is unique, and comprehending the unique patterns and preferences of each strain will only help you produce consistent yields of relatively unchanged quality, ensuring a consistent product experience.
Companies that deliver a premium product on a consistent basis are able to earn the trust of consumers because customers can predict what to expect in terms of the quality of the product they’re purchasing. If a customer can’t count on you to routinely deliver a specific set of flavors and effects, they’re unlikely to become repeat shoppers.
Transparency and Brand Authenticity
When companies are not transparent with their pricing, it becomes difficult for consumers to actually know if prices are too high and adjust their purchasing decisions accordingly. Being honest and transparent with pricing helps buyers make informed decisions, which inevitably builds trust and keeps them coming back for more.
It’s also important to remain authentic to your brand and its values. At Terrapin Care Station, we strive to ensure cannabis isn’t pretentious by focusing on accessibility and approachability. By aligning our storefront, communications, staff and pricing with approachability in mind, consumers truly identify with our store and with our product.
If you’re looking to bring more authenticity to your brand, one of the best things you can do is connect with your community and the local cannabis scene. Authentic brands aren’t just created, they are built on the back of everything the organization does. So much more than alluring packaging, clever advertising or a premium product, authentic brands are built on sustainability, transparency and consistency.
Cultivate Customer Relationships
In cannabis, as is the case in many consumer industries, customers crave a more intimate, individualized experience. Get to know your customers, understand their wants and needs, remember their name and guide them throughout the entire purchasing process.
By keeping your finger on the pulse of what your customer truly wants, you can monitor your offerings and the market so that you can adjust to what people really want — and keep your prices where it makes sense for you and your customer. While your price is important, it becomes secondary to your relationship with customers. Cultivating successful customer relationships and adopting a customer-centric approach to pricing allows you to do right by your customers, which engenders customer trust and loyalty.
The bottom line is there are so many variables involved in cannabis pricing that remaining competitive can be a challenge — unless you are regularly monitoring conditions and clear on where your product and your brand fits in the market. While location and quality invariably create pricing concerns, by focusing on product consistency, pricing transparency, brand authenticity and cultivating customer relationships, you’ll be prepared to not just survive but thrive in the growing legal cannabis space.
