What cannabis entrepreneurs should learn from the past

This is an article I wrote for the first issue of cannabis community Chromatic Clouds's publication.

On the way from Los Angeles to Las Vegas, in the middle of the Mojave desert, stands an old ghost town named Calico.

Calico was established in 1881 by four guys who found silver in the area and opened the biggest silver mine of the mid-1800s. By 1887 the population grew to 1200, and in 1890 the estimated population of the town was 3,500. People from all over the USA, England, Ireland, France, and more came with the same dream of fast money making.

Calico town grew rapidly, so much so, it had a Chinatown, a Wells Fargo office, and a very well known and successful red lights district.

By the mid-1890s Calico turned to nothing but a ghost town. US Miners had extracted vast quantities of silver which resulted in oversupply that drove down the price of their product, often to below the point at which the silver could be profitably extracted. 

130 years later and it looks like people don’t learn. At least most people.

The story about the demise of the prosperous silver town of Calico shines a light on the cannabis industry and the green rush of today.

Twenty-something years ago the Dot Com bubble burst, and people who had millions of options in companies, discovered over one day they have less than nothing.

If you are old enough to remember those days, it was so much like what we are seeing now with the cannabis industry, just better. I was there and it was a lot of fun, the faucet of cash was wide open and life was sex, drugs and writing code. The feeling was so fresh and new, we were changing the world, and then it crashed and reality kicked in.

As someone fortunate enough to be doing marketing back then in the tech industry and now in the cannabis industry, I can observe a lot of resemblance and similarities between the two. The tech industry started by people who were in the fringe of society, nerds who set all day in front of the computer became overnight Millionaires, just like growers who were outlaws for years turned Millionaires extremely fast, the wild west feeling that everything is possible while governments try to regulate the global revolution, and how both industries grew so fast and changed the way we live.

But other aspects that are more important and pivotal when it comes to the business world, are not the same at all.

The most important thing is that tech is about doing different things. It’s about inventing new ways, new platforms, new applications, new devices. You enter the tech world because you have an idea for something new, not because you want to do what “they” do. In the cannabis industry, everyone wants to grow cannabis, to extract, to make and sell the same products all the rest are selling.  maybe that’s why Oregon Live magazine wrote on February 2019 “Oregon’s regulated cannabis industry is so overstocked with product that it could meet consumer demand for the next six and a half years”  

Oversupply was what made Colico a ghost town.

When everyone produces and sell the same but say their product is better, the real differentiation in the consumer’s eyes is the price. This is, unfortunately, what we call a commodity market. When dealing with commodities you really need to be a savvy businessperson, not just savvy when it comes to cannabis.

Which brings me to another highly noticeable difference. Back in the late 90s early 2000s, when a Dot Com company wanted to grow, the sentences you heard the most in meetings about growth or with investors where “first, we need a CEO”, or “who is your CEO?” in the cannabis industry everyone is a manager, who needs a CEO, I can run a successful business?

There is some arrogance in the cannabis industry that wasn’t part of the tech world. With all the geniuses back then, even those who made lots of money, people knew what they are good at and what not. 

The third difference is that every startup company back then knew that success is a marketing game. The number of meetings I had in those days was staggering. I sat and talked marketing with huge companies in lavish offices, or in high-end restaurants, and entrepreneurs at their mom’s kitchen on the same day. All had a very exciting product, but all new it’s not about the product. The product, good as it may be, can only take you so far, brand awareness and brand equity are the things that make your company highly successful. 

Cannabis professionals must learn from the past, and even more crucial, they need to understand that today’s world of commerce is totally different than even ten years ago. Society has changed, the way we gather information and consume has changed dramatically. Think about it – the first iPhone hit the stores in mid-2007 and was primitive in capability compare to today’s smartphones. Online sales and commerce was still a new thing while today kids are buying with a touch of a finger. This is huge!!

To get a competitive advantage in this competitive industry you need to think marketing, you need to understand branding, and no, branding is not a logo.

The reason to buy and support a specific brand has changed. Since today there is so much of the same and the consumer has all the power, the reason to buy deviated from “want” to “need”.

Since 70% of online sales happen on mobile devices, consumers hold the power in the palm of their hands. Today we can buy pretty much whatever we want, wherever we want, whenever we want.

Branding was always about the same things, but now it’s more important than ever. Branding is about focus, differentiation, and customer benefits. You need to differentiate your business from the competition by focusing on a specific customer base and offer a specific product that answers their specific needs.

If I had a Dollar for every time I asked a client “who are your target customers” and they answered “everyone”, I would have been a Millionaire by now. You can’t sell to everyone – you will end up selling to no one. Find a specific customer base and focus on it. If you will do a good job, other people will follow.

Epsilon’s research shows 80% of consumers are more likely to do business with a company if it offers personalized experiences and 90% indicating that they find personalization appealing. To achieve success, you need to stop thinking about your product and start thinking about your customers.

The foundation of every company is the brand, and if it is not solid it will eventually catch up with the business. So don’t wait, take your managers, sit down and think. Usually, the first thing you will think about is your business, your company, your product’s features. But you need to understand – it’s not about you, it’s about them – your customers.

Who is your customer? Is this the right customer that you need in order to reach your business goals? Maybe it’s just the customer you’d wish you have but in order to get to him, you first need to focus and cater to another segment?

Sometimes you find that the customer you were trying to sell to is not the right one, and sometimes if you want to focus on specific customer segment you will need to change your value proposition, your brand’s personality, the tone you use in your marketing… There must be a correlation between who the brand is, what value it brings and the customers the brand caters to. Otherwise, it’ll not work.

It doesn’t mean you need to rebrand, it doesn’t necessarily say that your logo is wrong. Think why would the customer will buy your product or pay for your service? What customer needs do you answer? What are their pain points and how do your product or service benefits them? No, this is not easy, but who said this is going to be easy? The people who came to Colico thought getting rich from mining silver will be easy. Don’t be like the people of Colico, change your thinking, learn from the past and invest in the future.

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