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6 Data Metrics Every Dispensary Needs

Just like any retail environment, cannabis retail businesses often struggle with finding growth opportunities to expand their businesses. Data is key in today's technologically advanced society and must be utilized in order for your business to keep up with the competition. The insights gained from data help cannabis retailers increase revenue as they can identify and solve operational inefficiencies, optimize costs, and better understand their customer base.

As said by Bryan Hill on a panel at MJBizCon 2018, “Your competitors are working to take market share from you.” But with the help of data, you can be the one taking market share. According to this panel, "Growth Hack: Using Your Dispensary’s Data to Drive Profitability," there are 6 data metrics that can be attributed to the success of a dispensary.


1. Average Transaction Price (ATP)

ATP is the average amount a customer spends when they purchase from your dispensary. It’s calculated by dividing the total value of all transactions by the number of transactions (sales).


Dispensary metrics: calculating the average transaction price

Unless a decrease in ATP is a result of you dropping your prices, it often means that there is a problem and something is going wrong. In the cannabis industry, one potential reason for a drop is changing customer product preferences. This could mean that you’re simply not carrying the products that your customers are interested in. Or it could mean that your budtenders are not spending enough time helping each customer find the right products for them. Ensure that your budtenders are making suggestions based on customers' preferences.  

If your customers aren’t spending as much because you don’t have the right product offering at your dispensary, then you should look into making some changes. To help provide you with insights, you can look at data including industry trends and sales and order data.


2. Customer Frequency

Customer frequency is a metric that measures how often a customer purchases from your dispensary. It is calculated by dividing the number of orders within a certain timeframe (usually 1 year) by the number of unique customers (within that same time frame). Combining customer frequency with ATP will help you understand the state of customer loyalty as well as customer buying behaviors.

A decrease in customer frequency likely means that your customers are going elsewhere – and thus you should dig into all of your data and explore some reasons they might be choosing to shop with your competitors instead of you.


Dispensary metrics: calculating dispensary customer frequency

If your customer frequency is low, then you should focus on improving customer loyalty. Some ways you can achieve that are through providing a better brand experience and optimizing your loyalty program. In addition to running a loyalty program in which customers can redeem rewards, you can also boost loyalty with small gestures that show your appreciation for your customers. This could be a postcard that says, “Thank you for being a VIP customer,” a little thank you gift, a customer appreciation event, or even a $50 gift card for a 5-year loyalty member and top spender. Little gifts go a long way and make a personal connection.

3. Customer Acquisition Cost

Customer Acquisition cost is the cost it takes to convince a consumer to buy your product or service. This includes all research, marketing, and advertising costs. It is calculated by dividing all the costs spent on acquisition marketing (within a certain timeframe) by the number of customers you acquired in that timeframe.


Dispensary metrics: calculating dispensary customer acquisition cost


People are often surprised by their customer acquisition costs – they’re usually higher than expected. Contributing to the high costs are the marketing limitations faced by the cannabis industry and the high cost of print advertising for cannabis businesses.

If you’d like to reduce your customer acquisition cost, there are a couple things you can do. First, focus on conversion rates. How often are your customers coming in because of a particular ad or marketing campaign? You can test conversion rates by creating unique codes for discounts or by sending them to a landing page on your website, which you can track with Google Analytics. If something is not performing as well as others, consider reducing your spend on it. You can also change up the content, such as the design of an ad, the coupon deal, or the wording, and see if that has an impact.

Another significant impact on customer acquisition cost is customer churn. As Forbes says, “Naturally, when you lose customers, your acquisition costs go up. It’s six to seven times more expensive to acquire a new customer than it is to keep a current one.” Additionally, if you’ve lost a customer who is dissatisfied, your dispensary’s reputation can be damaged through the spread of negative reviews and referrals. This is why customer retention is key to keeping acquisition costs down – and another reason to focus on customer loyalty. Focusing on customer loyalty will increase the average lifetime value of a customer.


4. Gross Margin Return on Investment (GMROI)

GMROI is a useful metric for dispensary managers to determine the most profitable products. It calculates the dispensary’s returns on product inventory, taking into account all costs attributed to buying (wholesale) and selling the inventory. It is calculated by taking the gross margin and dividing it by the average inventory cost.

A ratio higher than 1 means your dispensary is selling the merchandise for more than what it costs you to buy it. The opposite is true for a ratio below 1. Some sources recommend that the sweet spot for GMROI in a retail store is 3.2 or higher – so that all occupancy and employee costs and profits are covered.


Dispensary metrics: calculating gross margin ROI

It’s important to break down this measurement by product type so you can see which kinds of products are giving you the most return. For example, you can compare edibles versus flower. Whichever has a higher GMROI means it’s making you more money. Some other ways to categorize products for GMROI are indica, sativa and hybrid, % of THC, or by brand. Calculating the GMROI of your vendors will show you which brands make you the most, and which you may want to re-evaluate stocking.


5. Days of Inventory (DOI)

Days of Inventory measures the adequacy of in-stock inventory and the average number of days the company will hold its inventory before selling it. To calculate DOI for your dispensary, divide the number of units on hand by average unit sales.

According to Bryan Hill on the MJBizCon panel, it is best practice to calculate the DOI of each SKU every 2 weeks. Having this process in place helps you avoid overordering slow-selling products that can result in wasted product and wasted dollars due to spoilage. Additionally, it will help you avoid shortages that can result in unhappy customers, more work for your team, and missed sales opportunities. If the product isn’t on your shelf, you’re not making money from it.



If a customer inquires about product that is out of stock, make sure to sign them up for a restock alert. Instead of taking down the customer’s name and number and calling them when it’s back in stock, you can set up Product Notifications to be sent out via text message to an entire list of customers that want to know. Check out the “Personalized Product Notifications” section in this article.

6) Hourly Productivity

Hourly productivity defines how productive your staff is during any given hour – and if you’re adequately staffed or understaffed during certain periods of time. It’s calculated by taking the hourly transactions and dividing it by the number of employees working the floor.

First, you’ll need to get the average number of transactions for every hour you’re open, for every day of the week you’re open. Next, you will find the average number of floor staff working during each time slot. Then divide the number of transactions by the number of staff. For example, if you have an average of 12 transactions between 10 and 11 am on Tuesdays, and 4 staff members during this time, then you will divide 12 by 4. This will tell you how many transactions each team member makes during that hour. In this case, each staff member only makes 3 transactions per hour.

If this number is too low, then you can probably look into reducing your headcount during that time. Alternatively, if it’s too high, you should consider scheduling in more staff so they can provide top-notch customer service without feeling pressured to get to the next person waiting. Try checking this once a month and see if these numbers make sense or if things should be changed around.


6 dispensary data metrics you need


Data is such an important tool for dispensaries because it enables you to identify what’s working and what’s not. It helps to take guessing out of the equation when it comes to you making decisions that will affect your business and competitive advantage. Although you may be limited to accessing data from your own business, and not competitors, you can at least visit competing dispensaries to gather information – see what deals they’re running, what marketing materials they’re using and how their pricing compares to your own. Use this competitor information, in combination with your own data insights, to set yourself up for success. If you’re interested in learning more about how software can help with your data initiatives, read “The Ultimate Guide to Dispensary Software.”

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