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Mark Ritson investigates: Recreational marijuana

Mark Ritson investigates: Recreational marijuana

INTERNET MARKETING NEWS

Mark Ritson investigates: Recreational marijuana

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About four times a year I jet over to the United States to do a bit of consulting work and generally avail myself of all things America. There is nowhere quite like the place in terms of the quality and scale of the brands you can work with, the positivity towards marketing that you always encounter and the general excitement of hanging out there.

But I must confess that my latest trip, and indeed this column, comes to you from a more chilled, reflective place than usual. It would seem that since my last visit many parts of the US have fully embraced legalised marijuana and it has become widely and freely available.

In 2018, 10 American states, along with Canada, legalised recreational pot and, faster than you can say “Zebedee is sitting on the Magic Roundabout” (ask your dad), North American culture improved overnight.

Suddenly, thanks to the new-found freedoms, American food seems better, the TV much improved and – my goodness – being locked up alone in a hotel room over a long weekend has been transformed into something of an adventure sport. A cross between It’s a Knockout and Fast Times at Ridgemont High.

Clearly, I support this wonderful new development. It has provided me with an entirely new recreational pursuit during the long, lonely evenings after the branding work is done for the day. In fact, other than a particularly solid bank holiday weekend in Bristol about 20 years ago I have never been this high, for this long.

And what makes the situation all the more delightful, other than the obvious fact that I am fantastically off my box about 18 hours of the day, is that there is also a newly minted set of brands to get to grips with. The last time I smoked weed the only brand available was ‘Tony from the caravan park’. Suddenly there is a panoply of logos, packaging and back stories appearing and disappearing through the haze.

Get to the top of the mountain in the next few years of frenzied competition and your advertising will work better for you because your scale will enable it.

My advice is to start your Saturday morning with Caviar Gold and then, once your facial muscles start working again, take a couple of the Elevate tablets from edible pot brand Level and head off to the shopping mall, cinema, or indeed an empty car park. Given the amount of THCV that they pack into these bad boys you could amuse yourself for hours in a phone booth.

Then it’s back to the hotel room for Ben & Jerry’s, a shit-but-now-suddenly-amazing cable movie and a couple of pre-rolled joints from THC Design. Hello Sunday.

During occasional, fleeting moments of clarity there is also a genuinely interesting branding battle to ponder too. While it’s still early days for recreational pot, history and advertising effectiveness research both teach us that these formative few years will prove crucial.

Only three or four national pot brands are likely to dominate the future American marijuana market – one that is already estimated to be worth billions of dollars. In these next few years the winners will emerge and the losers will go up in smoke.

The reason for that urgency is the fundamental unfairness of marketing. While we pride ourselves on the battle of big against small, the reality of branded competition is that it is a casino which gives the high rollers get incredibly better odds than the small punters.

READ MORE: One marketer on the challenges of building a cannabis brand

It’s important to have the right position, the optimal media mix and of course the right creative in order to have advertising effectiveness. But when you actually look at what drives advertising impact more than anything else it’s a lot to do with the sheer bloody scale of the brand behind the campaign.

Thirty years ago, the brilliant advertising professor John Philip Jones observed in the Harvard Business Review that sales volume and advertising budgets tended to move in lockstep. But when Jones examined more than 600 brands and the relationship between their share of market and share of voice he found the relationship between these two variables varied by size.

Bigger brands were able to grow or hold share despite consistently lesser share of voice than their share of market. On average, for example, Jones observed that a smaller brand with 10% market share required 14% share of voice to retain that level of sales.

In contrast, a big brand with 25% of the market only required 20% share of voice to retain that strong position. “For such brands,” Jones concluded, “advertising works harder, dollar for dollar, than it does for most smaller brands – a clear economy of scale.”

It’s a phenomenon also observed by the brilliant Paul Dyson, who founded media consulting firm Data2Decisions. Dyson has published a couple of big studies, most recently an ROI effectiveness study of 1,500 different campaigns. He looks at the factors that deliver the best profit multiplier from an advertising campaign.

Dyson confirms that the right creative, utilising multiple channels and optimal brand architecture all play important roles. But the biggest and most important factor, with a multiplier effect of 18x, is the pre-existing annual revenue of the company doing the advertising. The bigger the brand’s annual revenues, the better the return it gets from its advertising.

Dyson explained the effect to me recently. “Bigger brands with greater annual revenue get higher ROIs – they are more well known, a safer bet when people switch, more available and likely to be selling at a price premium. Or they might simply be operating in a high value market.

“All these factors contribute to a bigger return from advertising and a higher ROI. Marketers need to understand this relationship to help them allocate budgets, set realistic targets for their brands and understand the longer-term value of growing their brands.”

That last bit, about the “longer-term value of growing brands” is crucial. You want to build a stronger brand because it begets all kinds of business advantages. But one of the best is that a strong brand begets more effective marketing, which begets a stronger brand – a wondrous, virtuous branding circle.

The clear lesson for the hundred-and-something marijuana brands that are currently doubling sales volumes each month is that they must over-invest in marketing now in order to grow larger and faster than their rival brands. Get to the top of the mountain in the next few years of frenzied competition and your advertising will work better for you because your scale will enable it.

The billions and billions that will come later are mostly earned in the next few feverish years of competition.

And the bonus down the track is that once that supremacy is achieved it becomes much easier to defend. If one of your pesky smaller competitors challenges you and ups their ad spend in an attempt to also grow their share, you can dig deeper into your larger pockets and restore the share of voice proportions and your brand’s scalar advantage.

It’s the reason why, in stable grocery categories that have been around for decades, most of the big brands from the 70s are still the top two or three brands today. Take a look at 40-year-old photos from the supermarket aisles of yesteryear and, aside from updated logos, it’s likely that most of the soft drinks, chocolate, dog food and toilet paper brands you see there are the ones awaiting you on your next weekly shop.

Once you’ve built a Cadbury’s or an Andrex it’s bloody difficult for anyone else to match your scale and all the marketing efficiencies that come with it. The virtuous branding circle becomes a virtuous wall that most rivals cannot overcome.

We talk too much about disruption in marketing. We focus on the shiny new brands and assume that the barriers to entry are low and that the cauldron of competition causes brands to constantly bubble up and crack the turgid oligopoly. That turns out to be inaccurate. In new categories like electric vehicles or home automation it might apply. But in most mature categories the story of brand supremacy is an incredibly boring one.

READ MORE: A true brand purpose doesn’t boost profit, it sacrifices it

We forget that the game of branding is – for the most part – a concerto played in two very different movements. The first a short, intense piece played allegro and featuring a lot of horns and timpani. The second a much longer, slower piece for strings that runs three hours and is played larghissimo.

That first movement is particularly intense for America’s recreational pot brands right now because only a handful of states have legalised the drug. Furthermore, most pot brands are still geographically limited to one or two states.

As more states legalise pot, as regional brands expand to a national footprint, and as the North America approach to pot spreads around the world, the race to build the few great global pot brands will accelerate and intensify. But the point is that the billions and billions that will come later are mostly earned in the next few feverish years of competition.

It’s a frenetic time to be building a pot brand, that’s for sure. The pressures and the potential rewards could not be greater. Even writing about it stresses me out. If only there was a quick and pleasant way to ease my troubled mind and relax a little.



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