8 ways to Increase Average Order Value for Your Dispensary

Posted on August 9th, 2022 to Dispensary Marketing

Basket size is a key revenue driver for all retailers, but particularly for dispensaries. Since a cannabis shop’s market is limited to, well, cannabis users, driving more value out of each customer is a great way to improve your bottom line. Yet it can be a surprisingly difficult metric for any one store to change.

In this article, we’ll go over:

  1. What is Average Order Value?
  2. How dispensaries should think about Average Order Value
  3. 8 ways to increase AOV at your dispensary.

What is Average Order Value?

Average order value (AOV) is the average amount your customers spend per transaction. AOV is calculated by dividing total revenue by number of transactions. This is a key metric for understanding your dispensary’s sales performance and  your customers’ behavior.

You can calculate AOV for your entire company, a single location, or a specific demographic. Each of these will shed light on your business and your market to help improve your overall revenue and strategy.

How dispensaries should think about Average Order Value

AOV is just one of piece of the puzzle when it comes to assessing your dispensary’s sales figures. Transaction volume, foot traffic, online conversion rates, customer retention, inventory turnover, and more will help give you a complete picture of your strengths and weaknesses.

Cannabis consumers tend to choose where to shop based on 3 main factors: location, product/pricing, and the shopping experience. As a dispensary owner or manager, you have to focus on what you can control. Reaching and retaining more customers is the best way to boost your bottom line. Growing your basket size tends to happen slowly over time as a product of building that relationship with your customers. With that in mind, here are some tips for driving bigger basket sizes.

8 ways to increase Average Order Value at your dispensary.

1. Know your market.

Average order size for a dispensary may vary widely between different markets and even between shops within the same market. Regular users and medical patients tend to spend more on cannabis than new and infrequent users. Stores in areas where the population has more discretionary income will invariably be able to sell higher priced items and more of them.

Understanding why your customers choose to shop with you over other nearby shops, what products they want, and what they’re willing to spend will help you get the most out of every customer interaction. Happy customers spend more and are more likely to return.

2. Optimize pricing and product categories

Are you carrying the products and brands your customers are looking for? Is your pricing competitive with other stores in your area? If the answer is ‘no’ to either of those questions, you’re likely struggling to keep up in the marketplace.

Cannabis is evolving fast. New brands launch every day, and new technology and product offerings are rapidly changing consumer preferences. Dispensary purchasing managers have to keep up with what stores are doing in their area, as well as what’s happening at the state and national level.

3. Reduce out-of-stocks

Knowing what your customers want isn’t enough; you have to actually have the products available to buy! It should be obvious, but in an industry where supply chains are confined within state lines, it’s important to keep a close eye on inventory and plan ahead to keep those fan favorites in-stock!

4. Educate your customers!

Cannabis consumers are hungry for information, and educating your customers is a great way to build trust and loyalty to your brand. It also helps expose your customers to the benefits of higher-quality products, in turn driving larger purchases. Budtenders play a key role in this, not just upselling, but educating towards more valuable offerings.

Of course, consumer education happens before they come into your store as well! Our dispensary clients that really crush it make sure to have plenty of educational content on their website to engage potential customers early in the buyer cycle. Optimizing that content for search helps make sure they show up during the customer ‘research’ phase!

5. Potency may matter less than you think.

While higher priced items may help increase your AOV, stocking a bunch of potent, high-THC products may not matter as much as you think. Research has shown that product potency has little effect on price elasticity of demand.

In other words, price discounts and perceived quality affect how much people spend more than potency. Make sure you carry those high-quality items that consumers are willing to spend for and offer pricing that helps gets people in the door.

6. Focus on door swings.

Since increasing basket size can prove difficult, it’s often easier to improve your bottom line by focusing on the volume of transactions. Doorbuster discounts can be a great way to get people in the store—once they’re there, your retail experience and budtender service can make the most of those transactions. Make sure you have a strong local search presence so you show up on Google for those deal hunters!

You can also get more out of your individual transactions by converting more one-time customers into repeat buyers. This increases the customer life-time value and keeps your transaction volume high, even as market trends shift.

7. Have a loyalty program.

Loyalty programs help to incentivize purchases, capture customer contact info, and encourage return visits. Offering rewards and discounts tied to spend thresholds (when allowed) is a great way to drive larger orders by promising the customer that elusive feeling of gratification at having scored a deal.

Cannabis-specific programs like SpringBig and Alpine IQ also help you to remarket your existing customers with texts and emails, allowing you to communicate future deals and inspire repeat visits. (And the CannaPlanners team can help make sure you get the most out of those communication tools).

8. Make it easy to buy.

If you have long lines and not enough parking, customer satisfaction will likely take a hit. More important for your AOV, customers are going to feel hurried and deprive your budtenders of those valuable upsell opportunities.

Facilitating an easy transaction extends to your online presence as well! That’s why it’s important to have online ordering (make sure it connects to your POS so the menu is always accurate!).

You want a website that loads fast, requires only one or two clicks to get to the menu, and is easy to navigate to from Google. Easier said than done? CannaPlanners can help!

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