A PotNetwork Exclusive
Although an emerging industry in its own unique market, most marijuana businesses face many of the same issues found in most of the retail sector today. Primary among those issues is customer loyalty and retention. The idea that product alone will keep customers coming back is a naive notion in an era of big data.
Loyalty marketing has long been the purview of small businesses as a way to tap into the minds of consumers, and now dispensaries are using it to differentiate themselves from the competition. Founded in 2012, springbig has led the pack in helping marijuana dispensaries target their customer base with their software as a service (SaaS) model. Firmly planted across the United States, the company gives dispensaries the necessary tools to keep up with today’s modern cannabis consumer.
We caught up with springbig Co-Founder and CEO Jeffrey Harris to discuss the company, the customer-loyalty market in the cannabis industry, and the future of marijuana across the country.
First, thank you for taking out the time to speak with us today. For the benefit of our readers, can you tell us a little bit about your background, and your journey towards working with the cannabis industry?
Out of college, I went to work for a company that designed and managed incentive programs for corporations. I did that for probably about 11 years out of school, and then I founded a loyalty marketing company by the name of Inte Q. That company is still around, doing very well, it’s about 21 years old now. Inte Q is in the business of designing and managing consumer loyalty programs for the retail sector.
I’m the Chairman of that company; I’m still the majority shareholder of that company. About four years ago I decided with our CIO, to branch out and create a software platform that was going to help small retailers. So, back then our thought was to help pizza shops, yogurt shops, nail salons, and hair salons, with their loyalty and communication needs. We created a software platform, and we sold it for a monthly subscription. And then, in addition to the subscription price, if they wanted to use it to send out communications to their customers to build their database and send out communications, they had the ability to do so.
We built the software and started growing that business. We saw that a number of our bigger customers were medical marijuana dispensaries. And the reason why they were spending more money than everybody else is because they’re much heavier communicators than the other guys. So, a year ago in January, we decided to completely pivot and move the business completely into the cannabis space. It’s been about 15 months that we’ve been fully engaged and providing our software platform and services to the cannabis market.
And talk to me about your company, springbig. Give us the 50,000-foot view of what it is that you offer to the cannabis industry.
Again, as I mentioned, it’s a software and a marketing technology platform. In essence, we do two main things. The first thing we do is we provide the cannabis industry with the ability to run design and run their customer loyalty programs. So, just like any loyalty program that we would participate in with any retailer where, based on your spending, you earn points. Then, you can accumulate your points and then redeem them for free stuff that the store is offering. In 100 percent of the cases in the cannabis space, the free stuff is either discounts, free products, or gift cards that are being offered by the store.
We provide the technology to be able to easily manage those programs, and we help through the loyalty program to build a database they can leverage to market to those customers. They can market specials, they can market deals, they can market vendors that are coming in, brands are coming in, and more. Primarily, that marketing is done through SMS because it’s a much more effective marketing tool today than email is, but they have email as well. But it’s primarily loyalty software.
That’s the primary offering that we have. A big part of our strategy has been —which is very unique in this industry —is, we work very hard to integrate with the point of sale companies. These are companies like Green Bits, Cova, MJ Freeway, CannaPoint, Korona, and so on. We could pull the data directly from the point of sale so there’s no need to have a second device in the store. We can just collect the customer information directly from the point of sale, which has been very well received by the stores, because, who wants another set of devices in the store?
I read that recently, I believe late last year, you raised around $3 million in capital to help fund some expansion plans. What are the plans for the future?
We’re just running our numbers now, but we saw huge year over year growth in the first quarter, which was great. It was about 200 percent growth. Our momentum is great. We have the money now that we need to implement on the plans that we put together, both in terms of our product development roadmap and in terms of adding new products and new features to our platform. Also, from a sales and a client service standpoint, we’re looking to be able to add locations to our platform and to enter into new markets.
Our plan is to be the leading provider of this type of service in this industry. We’re pretty humble people here, we understand that we have to work hard every day for gaining business and keeping business. So we work very hard on that every day, and our goal is to continue doing that, growing our base of stores, growing our base of consumers, and continuing down that path. And then, if we do all those things right, the future will take care of itself. So we’re not as focused on where we’re going to be four or five years from now in terms of what the plan is. Right now, our plan is to be the best that we can be in providing service to our client base.
Obviously, technology is a big part of your business. You mentioned SMS and integrating with the point of sale systems over there. Can you talk about some of the tech/programs you’re using right now?
It’s all homegrown, it’s all created in-house. On the SMS side, we basically have created a unique proprietary software platform that allows us to send messages at about 300 messages a second. There are a lot of competitive providers that send messages a lot slower than we do. If I want to send out a message at 1 o’clock in the afternoon on 420 for a 420 special, I want that message in the person’s phone pretty quick. So, even with a 20,000 person database, and we have some stores that have more than 20,000 people, at 300 a second it would take less than two minutes for the 20,000 messages to get delivered into the phones of the customer.
So that’s one big differentiator. The other differentiator is, we’re doing that with a type of SMS technology called long codes. So, we’re not using shortcodes, we’re using long codes. Tell me, if you know this stuff than I’ll just move on to the next, but long codes are the way that people are sending messages in the cannabis space because it’s an easier way to get the message to the customer. There’s less eyes looking at long codes than are looking at shortcodes, let me leave it at that. So it’s an easier way for the message to get into the customer’s phone. Yet, long codes, traditionally, are sent much slower.
We also have a bunch of technology around automated trigger-based communication. What that means is, you create a rule in our system and any customer that meets that rule, like a birthday, or that they haven’t been in the store in a certain period of time, and it’s three days after, and we want to get a review. So there’s certain rule-based messages that can get set up. They only get set up once, and then they run forever until you stop them, you never have to think about it again.
There’s a lot of tech features around the messaging that makes our messaging platform pretty unique in the space. And on top of that, on the loyalty side, what’s very cool about our technology is, we’re probably the only guys in the industry that give the store three different ways to run a program. There’s definitely a best way, which is points per dollar, but we also provide a points per visit-based approach, or, think about an electronic punch card, right? Every, you come in and spend $25, get a punch, every 10 punches gets you X, right? Kind of like what you would do at your frozen yogurt shops. So we’re the only guys in the industry that offer those three different types.
In 2017 I saw that you won the pitch competition at ArcView. Can you talk to us a little bit about that experience?
Yes, we won a pitch competition at ArcView in September, which was pretty cool because they actually became part of our investor group. We won $50,000, we went up against 12 great companies and, for whatever reason, the audience liked our pitch the best. So I’ll take it, it was a great experience to meet some other companies in the industry. We actually, believe it or not, are partnering with two of the companies that I met in September there. So that’s kind of cool too, it was a great opportunity to meet some people and to find out what other people are doing, and to figure out what’s complementary.
One of the very cool things, I think, about this industry that’s different than a lot of industries that I’ve been in before is, there’s a lot more corroboration. I think there’s kind of this feeling of, “Okay, it’s us against the world,” kind of thing, so let’s try to work together to be able to advance as fast as possible. There’s a lot more corroboration and connectivity in this industry than I’ve in other industries. So I think that’s exciting, and I think it makes working in this industry quite frankly more fun, right? Because you’re getting to meet new people, you’re getting to be able to think about how we can work together. And it actually happens, we actually do things together and you collaborate with other companies. I think it’s a very beneficial part of the industry.
I’ve spoken with a few CEO’s in the industry and all of them seem to agree that right now California is the market to be in. Do you agree and can you expand a little on your thoughts about that?
Yes. We actually opened up an office in Los Angeles in January, so I think I can speak to it pretty well. I think California will definitely be the market to be in. I think it’s still a bit early, that’s my opinion. I’m just finishing up our first quarter investor update, and the words that I used —especially in Southern California, less so in Northern California —I use the word tumult. There’s a lot of tumult in that market. There are a lot of people that don’t have their licenses yet and are still working off of dated licenses that really expired or about to expire. You have a lot of stores that are doing a lot of renovation now because they’re ready to get their licenses so, therefore, there’s a lot of store renovation going on.
So, on the one hand, it’s pretty exciting because you can definitely see a market getting ready for what they expect to be a huge opportunity. But then, on the other hand, it’s not necessarily the best sales environment today, in my view, right? Because you have a lot of stores that still are waiting for their licenses, you have stores that are evaluating those new point-of-sale systems, you have stores that are just waiting for the state to come out with certain guidelines and how they’re supposed to operate aspects of their business. We’re very bullish and excited about California, and we’re happy that we have our office there but it’s like you said, wow, they turned the switch on in January like it was just going to be a gold rush, and it’s taken longer than people thought.
I don’t know if you’re aware but recently Shopify began shutting down the sites of companies working in the CBD space here in the states, presumably due to the controversy over the status of its legality. Do you worry about the divide of state legalization and federal prohibition affecting your business?
Not much – well, yes, I don’t worry about the direct concern about it because we’re not touching plants, selling plants, we’re not involved in any of that. So I’m not worried about us directly, but I do worry about it. I do think that this is something that has to get worked out, and I think it will get worked out, believe it or not, sooner rather than later. I know there’s a lot of nervousness about it now, just over the last few months in terms of what the federal government has been talking about, and their stance, and how it’s shifted from the last administration. But I don’t necessarily see things slowing down.
Now, Shopify, they basically made a decision to get into this space but, you know, you have cannabis-specific point of sale systems, and a lot of them, that are doing fine and I don’t hear any noise about them doing their business. So it’s not like companies like Green Bits, or MJ Freeway, or Cova are, at least to my knowledge, experiencing any issues with doing business in this space. On the other hand, you do have companies that are outside the space that are very nervous to get in because they’re concerned about what’s happening on the stateside versus the federal side. So, no, it definitely is concerning, it’s something that we watch. We don’t focus on it every day because to some extent it’s out of our control, what am I going to do about it anyway, honestly? So we focus on stuff that we have to focus on and hope that cooler minds will prevail over time and they’ll figure it out.
Finally, tell me something I don’t know? What’s something in part of the cannabis world that no one is talking about right now that you think they should be discussing?
Interesting, that’s a great question. So what I would say, just from our vantage point, what we’re starting to see and what stores are really getting focused in on is, they are becoming much more data-driven. Why I think that’s really important is because, the beginning of the evolution of this industry, people just thought you could put up a storefront and you’re just going to make a zillion dollars, right? You know, okay, I’m going to start selling cannabis in Aspen, Colorado when all those tourists come in and I’m just going to rake it in.
As everyone is starting to see, you’re starting to see a more mature market and you need more sophisticated tools to really differentiate yourself from the competition and really leverage your data to be as efficient and as profitable as possible. So I think one of the big things that I think is happening is, behind the scenes, you have stores now that are much more focused on interpreting the data, understanding the data, and then acting on what they’ve learned from the data versus just doing what I’ll call hodge-podge general type of marketing. They’re getting much more specific and much smarter about how they market to their customers and how they leverage their data to do a better job at that.