Building Trust in Uncertainty
Article written by Evan Eneman
As COVID-19 has wreaked havoc and vastly disrupted our economic and social reality, many industries appear to be trapped in a downward spiral. As international airlines, hospitality providers, and a broad range of other sectors seek bailouts and federal assistance, the cannabis industry has shown signs of thriving amid the volatility, despite some turbulence in 2019.
As 2020 was getting started and brands were gearing up for a big 4/20 month, COVID-19 hit and crushed hopes of the industry for mid-year events such as Expo West and Hall of Flowers. However, as the COVID-19 crisis expands, the situation is showing signs that it could be a catalyst for growth in the cannabis market. Current data supports anecdotal evidence of increased demand, and the potential for social change suggests the uptick could be a precursor for a new era of acceptance.
We’re seeing that consumer discretionary spend has stalled and unemployment has spiked due to the COVID-19 response, leading to major retail stores closing and a significant decline in discretionary spending. The shift in discretionary spending will impact brands and how they position, price and engage with consumers.
Navigating Uncertainty & Planning For The Future
There is ongoing optimism that recent trends throughout the COVID-19 epidemic will be long-lasting. For example, sales initially sharply increased with many brands experiencing records for the month of March due to adult-use customers and medical patients stockpiling and spending 3x more time at home than normal; that has averaged out over time, but overall basket sizes are stronger. As many U.S. states under stay-at-home orders have deemed cannabis “essential”, business models are shifting and dispensaries are focusing on delivery and curb-side pick-up. Overall, cannabis businesses remain open for 12.9 million adult-use consumers and all 2.3 million medical patients.
How consumers will adjust to extended social distancing policies is uncertain, though what is for sure is that consumers will trend toward brands they can trust. Trust can be elusive and is one of the most valuable intangible assets that any business has. These could manifest in products, services or their engagement in the community. Brands must be reliable, responsible and mindful.
For brands and operators to thrive amidst the chaos and uncertainty, it is critical to build trust with all of their stakeholders; consumers, employees, regulators, and the community. There are three core areas of focus that will define the “winners” and “losers” of this cycle in how they respond and build trust during these uncertain times. Companies need to focus on:
Strategy: positioning for the best possible outcome of a ”recession” or other economic impact by being prepared to deliberately capture opportunities. These strategies will combine cost cutting efforts (identifying efficiency gains) with strategic targeting (pinpointing). While cutting costs is a short term solution to weather an immediate hit, in order to win, companies will have to identify the short-list of projects that will form their next business model (pinpointing) and accelerate out of the turn by spending and hiring before markets have fully rebounded. Focus areas include:
- Early Cost Restructuring & Balance Sheet Discipline
- Selective Commercial Growth Activities & Proactive M&A
Brand: re-imagining what the brand means to its community. Market uncertainty breeds mistrust, companies must navigate the conflation of market implications with that of how a company operates and for what it stands. In a down-market, and with intent to continue developing trust with consumers, brands need to focus on longer-term, brand-building activities. Focus areas include:
- Core Pillars & Messaging
- Community Engagement & Partnerships
Marketing & PR: navigating slashed budgets and potentially catastrophic events, we know that it is critical to understand the impact of your marketing activity and associated costs. Strategy means knowing when to stay silent just as much as it means knowing what to post and when. When facing issues involving massive global impact (public health, economic, psychological), it is best to remain conscious of both macro and micro events and triggers, and adapt marketing and public relations plans to reflect a thoughtful approach. Focus areas include:
- Crisis Communications
- Brand Preservation & Advancement: Thoughtful Marketing
Trust is what we cultivate over years of a relationship and it’s foundational to how consumers engage with brands. Now is the time to rethink the basis of your brand, your promises, your strategy and your aligned execution moving forward.
The Fiorello team has worked with 100s of brands in cannabis and emerging industries, providing strategic advisory services around brand architectures, go-to-market strategies and creative campaigns that align with their purpose and core values. Sign up for our newsletter, follow us on social media, or contact us via email@example.com to learn more.