The Cannabis Brand Report Inaugural Issue: Defining the Luxury Cannabis Market

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Defining the Luxury Cannabis Market–Taking Advantage of a Tremendous Opportunity

Like any disruptive, decentralized, entrepreneurial developing industry, the cannabis market has grown rapidly and without many industry-wide and standardized formalities. This has given the industry exceptional energy and inventiveness as it pushes ahead on commercial, political and social fronts. With sales of $6.7 billion in sales in 2016, according to Arcview Research, the legal cannabis industry has reached the stage where there is the critical mass of producers who have the financial and commercial stability to build successful, ongoing businesses with repeat customers, a constant source of quality product and solid revenues.

But the cannabis industry also has reached a point where it will face the limits of the commoditization of its core agricultural product. After all, cannabis in its most primitive form is a plant, but through modern science and exceptional growing, harvesting and top-quality processing standards, this processed plant and its byproducts can be made exceptional and more valuable by communicating its distinctive properties to a wider audience. This can be done through the branding process. Branding is not tangible. It is a process that has many incremental steps that are done over time. When done correctly, a successful brand develops, builds and accelerates sales. Brands are also very valuable.

Brands are also very valuable. One study of companies in the Financial Times Stock Exchange (FTSE) Index found that 70% of the market capitalization of the top 100 companies was intangible. The same value 20 years ago was 20%. By the early-2000s, brands were considered a company’s “most important single…asset.” *This helps explain why the combined brand values of Microsoft and Coca-Cola in 2009 was $129 billion.

But branding in the cannabis industry is unique. Cannabis branding involves issues that have not been faced before when other consumer products have been introduced. Cannabis is used for both medicinal and entertainment purposes. It is also highly stigmatized and criminal in many states. It has a long, emotional and racial history that is intertwined with American history. It has also been a formative part of the nation’s cultural, music, lifestyle, urban and even religious histories that has to be recognized.

All this makes it more than a mere product or commodity. It is the nation’s, and perhaps, one of the world’s most disruptive plants, along with corn, potatoes, and wheat. But no one has ever written songs or gone to jail for possession of corn, potatoes and wheat. All this makes cannabis unique as an American industry. It is an industry which has exceptional transformational powers for American business in terms of generating jobs, new taxes, promoting progressive political and social values and even being organized around cooperative business structures that promote more egalitarian income distributions and workplace job responsibilities and community participation.

So how does branding fit into all of this?

Branding, as it applies specifically to the cannabis industry and all of its related products, is simply what makes an agricultural product and the business that refines the plant more distinctive. As it does in other brand creation processes, branding creates an emotional connection with employees and customers. When a brand becomes embedded in people’s lives, it can eventually be turned into a tradition.  

When done effectively, branding can prevent products or services from failing. Branding also works best when it puts a human face on a corporation, which enhances customer relationships. Since branding is an ongoing process, successful branding today must encompass perception building, as well as traditional marketing, advertising and public relations techniques. This is because consumers make buying decisions based on perceptions, as well as the actual properties of the products. Buying based on perceptions hinges on credibility, reputation and emotions, but these intangibles can evaporate quickly in any buyer’s mind when a product or company essentially breaks its implied promises when its products or management makes bad decisions or releases inferior products. The goal of branding is to create a bond with customers, so it should not be casually altered

Finally, brands also have a natural lifespan. They exist in an increasingly competitive environment and must be occasionally refreshed.

In a complex, competitive consumer-focused business environment, branding makes companies more profitable and stable. This is why branding is the topic of the following white papers.

Defining a Brand

Branding may be one of marketing’s most overused concepts, but in modern capitalist consumer-focused society, brands can cut through the clutter, propel sales, and make a commodity-type product more distinctive and emotional to its target audience.

Brands today should be considered the most important part of any company’s offering, whether it be goods or services offered by a for-profit corporation or a non-profit organization.  If a company wants to build long-term value, it must recognize that it is first and foremost a brand.

Most people today consider brands as being synonymous with trademarks, but this is a very limited definition. Earlier definitions may be closer to their true function. Brands were originally used by farmers and craftsmen to distinguish their work from other commodities. This is why irons brands were put on cattle, and pottery makers in ancient civilizations marked their work with a symbol or their own thumbprints as a way of showing ownership and later, artistic pride and provenance. As the quality of their quality work became more widely recognized, forgers began copying these marks to capitalize on the higher prices the original work commanded. Forgeries continued to be widespread until the 17th century when royal families in France and Belgium helped develop laws protecting a craftsman’s hallmark on gold and silver objects.

But while brands began to gain legal protection, they still needed to have a formal definition. In order for brands to be successful, they have to be distinctive and universally recognized. Brand also should also be constant. When effectively used, brands help build the bridge between the consumer and the manufacturer, grower or artist about its products, services, quality and implied promises. Consumers buy the brand because they like what it represents. If the brand delivers, the brand prospers as customers return. Brands build customer loyalty and create a self-renewing process.

When a company has developed a distinctive brand, this relationship accelerates impulse behavior. When a company executes a good branding strategy, it can expect to accomplish four goals: create an emotional attachment with customers; maximize the customer’s experience between what they expect and what they will get; it will create an environment that allows for brand extensions; and it will build their trademark’s identity and protect it from competitors.

Branding is a byproduct of combining quality and distinctiveness. In the past, brands were owned by the manufacturer, but in the future they will be owned by the consumer. Historically, branding has evolved as the consumer society developed by the rise of the middle class. In the 1980s, brands used the Organizational Selling Proposition which shifted attention to the business’ attributes behind the brand, such as its philosophy and how it conducted its business. In the 1990s, the “Brand Selling Proposition” emerged which made the brand more powerful than the product itself. In this environment, Harry Potter, M&Ms, Disney and Pokémon brands carried the brand story further than the product itself and into other products entirely, such as toothbrushes and linens.

The change in branding** became more evident in the late 1990s with the emergence of the “Me Selling Proposition.” In the 1950s, brands ascended by using the “Unique Selling Proposition,” which focused on the differences in the physical product, while the brand itself was secondary. In the 1960s, brands began to use the “Emotional Selling Proposition,” which relied on creating an emotional attachment between the product and the consumer. This was used effectively by the cola manufacturers, Coke and Pepsi, which created emotional identities based primarily on their labels, rather than the taste of the colas themselves. The most recent evolution of branding involves the “Holistic Selling Proposition” (HSP), which leverages sensory branding practices to expand the brand’s message. This proposition is based on the following:

• The stronger the synergies between the senses, the stronger the association with the brand.
• HSP brands rely on building emotional ties. Those ties are built by using the five senses.
• HSP brands have a history, traditions and rituals which come from its consumers.

And while the HSP approach may not make sense for many industries (financial services, purses, fashion, autos, and medicine, for example), it is a provocative idea which can expand the entire branding discussion for cannabis. And fortuitously for this industry, involving the five senses in a branding effort is ideally suited to cannabis.  

Another important element of branding is its social component. Any social network or group has a shared meaning, or common belief system, which bonds them together. Shared meaning not only makes groups more cohesive, but it also fuels innovation and makes people more motivated. Good branding thrives on the common ground which links producers to their customers.  

Defining Luxury

So what makes a luxury brand?

It happens when the brand’s status is elevated in the eye of the consumer. Since branding is about a new experience, the brand should make consumers anticipate the purchase and consumption of the product. Consumers should be tantalized by the thought of using the product and they should become more excited and engaged as they anticipate the future experience. Think about this as being the perennial first date or visiting the five-star restaurant.

According to the Lexicon of Luxury, an item becomes luxurious when it has the following criteria:

• It has evolved from a simple to a more complex form showing exceptional craftsmanship, design, and quality;
• It is markedly better than its competitors;
• It is exclusive in terms of its availability and distribution;
• It is strange and unusual and comes from a location that is renowned for its craftsmanship, natural resources and quality.
• The people preparing the product are known for their expertise and talent;
• It is made by hand and shows craftsmanship and personal attention;
• The product reflects the customs and culture that have created it and have been passed down from earlier generations of craftsmen.

When people think about acquiring the product in the future, the luxury effect is also present. Psychologists call this anticipation “hedonic effect” and it happens when consumers think about buying new clothes, jewelry or fashion accessories. This effect makes people happy. The big difference is that in the cannabis world, people can anticipate the purchase and be happy and they can also be happier or feel better after the purchase is made. In the world of purchasing hard, luxury items, such as perfume, clothes or even autos, the degree of happiness from purchasing those items can evaporate quickly after the purchase is made.

“Basic human psychology, then, suggests that luxury brand’s greatest opportunity to enhance the happiness and overall experience for their customers is to extend the planning and anticipation process of the wonderful new item that is coming,” according to one writer.

Defining Luxury Cannabis and Entering an Entirely New Frontier

The market segment of luxury cannabis is currently not defined and is open to development. Luxury cannabis should incorporate all of the elements of any other luxury item and its essential branding process.

But what makes luxury cannabis more challenging and lucrative is that it has a unique history, chemical, medical, pharmacological, social and political cache that has yet to be refined and bundled by producers and dispensaries in this billion dollar marketplace.

To do this, luxury cannabis should be of the highest quality and consistency and it should incorporate the following:

• It should appeal to all of the five senses (sight, sound, smell, touch, hearing) as part of the branding process;
• It should deliver on its implied and explicit promises (such as quality, healing, sensory, taste, fun) as defined by the producer, manufacturer or dispensary.
• It should make people feel happy or alleviate their pain.
• It will be and promote the practices of being environmentally sustainable and earth-friendly.
• Unlike other traditional luxury items, it should be 21st Century. It should have a larger political and social meaning and deliver on its ability to provide a new experience whether in a private or public setting. Part of the luxury cannabis promise is that purchasing it will benefit not only the purchaser, but the community at whatever level (local, state, national) that the provider defines as being part of its brand promise. It will continue to contribute to the social and political evolution to make this a better community and environmentally sustainable environment.

If this plant can be converted from a commodity to a luxury item that commands a higher price, accompanied by delivering a quality, safe, positive experience that benefits the individual, as well as others, it will break into a new frontier of profitable commercialism that can make this a truly disruptive natural plant.

Sources:

*Brands and Branding, by Rita Clifton, John Simmons and Sameena Ahmad et al., Bloomberg Press, 2004

** Brand Sense; Build Powerful Brands Through Touch, Taste, Smell, Sight and Sound, by Martin Lindstrom, Free Press, 2005, Simon Lindstrom.

For More Information Contact:

Cynthia Salarizadeh, CEO

Salar Media Group

Cynthia@salarmediagroup.com

856.425.6160