#034 - The Art of Data Driven Sales Success w/ Krista Raymer

Ben Larson: 0:02

Hey everybody, welcome to episode 34 of High Spirits. I'm Ben Larson and, as always, I'm joined today by my smarter half, Anna Rae Grabstein. It's Thursday, March 7th 2024, and we have a nerdy conversation for you today where we'll dive into data around consumer behavior and retail, with one of our industry's brightest minds as our guests. But first allow me a moment to check in with my co-host, Anna Rae how are you doing today?

AnnaRae Grabstein: 0:33

My week has been great. I have spent most of it in West Hollywood, working with a client on here doing strategy work on a big go-to-market effort, which is going to be awesome, and staying in my favorite hotel, getting to go to consumption lounges in West Hollywood. So yeah, I'm good. How are you doing?

Krista Raymer: 0:52

I'm okay. It's been a week of the highest highs and the lowest lows. So on Tuesday I got to play hooky a little bit and go up to Tahoe and chase some of that snow that fell. Anyone that's not in California. We had about seven to 10 feet drop over the weekend, so Tuesday was really incredible day, but come by Wednesday I was showing 103 degree temperature. We're covering from that a little bit. I'm going to do as little talking as possible today because clearly my brain is all over the place.

AnnaRae Grabstein: 1:29

Well, that is a lot. I'm glad you're feeling better enough to join us today and you still look great even if you're not feeling good. Yeah, well, I thought that it might be fun too, just before we jump in as part of what's happening in the world round out, just to remind everybody that tomorrow is International Women's Day, march 8th, and I did a little reading about where this all came from, and it goes all the way back to New York in the 1830s, where there was a group of women that marched through the streets of New York for fair pay and fair amount of time, that they were required to be on the job and stand up for themselves, and just wanted to remember those women and also just to call out all of the baddies out there, all of my awesome cannabis women and super excited that we get to have one of them today. So seemed like perfect. We didn't think about it when we booked Krista, but she's one of us, so super pumped. Yeah, anything else you wanted to talk about today, ben? Before we jump into the episode.

Krista Raymer: 2:40

Well, I think that's a perfect segue. Let's bring on our awesome woman founder, and.

AnnaRae Grabstein: 2:46

I'll queue it up. So Krista Reimer is the founder of the Betrina Group. The Betrina Group was founded to help retailers do better, to make retail more achievable and easier and more successful, and Krista comes from a long career in fashion and retail fashion, adjacent retail and she is someone who I have met over the years at various conferences. She's an incredible speaker. She's really engaged in getting the story about data-driven thinking out into the world, and every time I hear her speak I learn something new and it seemed like we needed to make sure that her voice got out there to our audience, so super pumped to welcome Krista today.

Speaker 4: 3:31

Oh, my goodness, oh, thank you.

AnnaRae Grabstein: 3:33

This is like the kindest intro ever.

Speaker 4: 3:35

Like can we just end it here and be like that's it, that's all we got?

AnnaRae Grabstein: 3:43

Everything I said is true, so really stoked, and I think it would be fun, krista, to just hear a little bit about your journey and about Betrina before we dive into some of the most exciting and nerdy data conversations that we've had on the show.

Speaker 4: 3:57

So tell us about how you got.

Speaker 4: 3:59

I guess I'm a super nerd and the irony is that we're having this conversation just before International Women's Day and the entire team at Betrina are also all women, which has been a bit of an accident, but also like the most amazing accident, I think, as well.

Speaker 4: 4:18

So we actually started Betrina after going into one of the first dispensaries in Canada and realizing that there was a lot from a retail operations perspective missing. That was in that environment. There was inventory and margin strategy that I think was missing, and we said we're not sure exactly where the gaps are, but I think we know how to solve for some of them, and so for the last five years, we've been identifying where gaps are, both in terms of inventory, the teams that are operating the stores, as well as marketing, and coming up with easy and actionable tools that can be applied within those environments to create better traction and engagement with customers. So we're super focused on how you attract, retain and build the spend of customers in cannabis retail stores, and we do that through avenues like loyalty programs, promotional offers, as well as team trainings, and inventory and assortment strategy.

AnnaRae Grabstein: 5:11

Amazing, so useful. And those are just the common issues that retailers tend to have when I talk to them. So yeah, listen up, folks. Well, so let's dive in then. So what do you think is the data that really matters, and how do companies find it and track it?

Speaker 4: 5:29

That is a very broad, deep question that has a ton of answers and also no answers all at once.

Speaker 4: 5:38

The end of the day, from a retail perspective, we need to be focused on what amount of retail revenue we're generating and what the profitability of that is.

Speaker 4: 5:47

So we can measure a ton of other metrics that influence both of those things, but if we don't have a good sight line of how much money are we generating with the customers that we're having come into the store and what the profitability of that is, we are using all the other KPIs as distractions essentially. And so I think that keeping in tune with what the top line revenue is and what our net results are super important. And then, within that, the other data points that are really helpful is understanding what percentage of your customer base is driving what percentage of your revenue, and largely what we see is that retailers overestimate what number of customers are generating what percentage of revenue. It's usually a really small group of customers purchase the most, and so being in tune with who they are and how you grow that as a customer segment is where some of the best results can come from, and so, from a KPI perspective or data and analytics perspective, having a sight line of who is driving what revenue is really helpful.

AnnaRae Grabstein: 6:53

Well, so if I'm a retailer and I bring in you and your team and we want to answer these questions and start diving into the customer data, how do you track it? Are all the POS systems that retailers are using now up to par? And it's all sitting there and we just aren't seeing it on our dashboard. Like, where do you begin?

Speaker 4: 7:15

Yeah, I mean, some of it is built into the POS.

Speaker 4: 7:19

It's not always in the cleanest dashboard and the format of the data can be a little inconsistent, but a lot of it can be found within a POS platform and what we're trying to identify is basically what number of unique customers are purchasing, and so you can layer on top of that like a program that is, a CRM or some type of Lloyd loyalty tool to be able to analyze how many customers are coming and going and what level of purchasing they're making and what their frequency of purchases, for example.

Speaker 4: 7:53

But at the end of the day, the majority of the data is hidden within the POS. I think when we, when we get and talk about data and how organized that data is, to be able to make sure that it's readable is a completely separate side topic. But your, your ability to create organized data to then read it, is where we usually need to start. So I say kind of like what is this today? What do we need to maybe change or adjust in terms of data best practices to be able to see the insights and then pull insights from there? But, like and right, you see a lot of operators as well. You must see the same thing when it comes to data is like we can see something, but is it true?

AnnaRae Grabstein: 8:39

Yeah, it's such a good point. I mean, it's like this, like, ok, there's a lot of data, but what actually creates a business insight is a whole different kind of question to ask, and so taking the data and then finding opportunities in it often means like taking disparate pieces of data and comparing them, and that isn't necessarily what all of these tech platforms do, or sometimes the most important stuff is hidden, and the truth is is that so many cannabis operators are caught up in them, working in their business, and what I mean by that is just like making sure that the transactions keep coming yeah, the inventory coming in or whatever it is.

AnnaRae Grabstein: 9:17

And so I think, like what you do and what I do, of getting to work on the outside with operators is I often say that you guys are working in the business, it's time for us to help you work on the business and so, taking some of those insights and saying, ok, this is like an aha opportunity of how we can engage in a different way or how we can create a new product or initiative that's going to target people that we've identified through business insights, using data. So, yeah, I'm with you. I think it's really critical to take that step back.

AnnaRae Grabstein: 9:52

One of the things that I find people really struggle with is navigating that tech stack. You know, and sometimes, like I watch operators not get what they're needing out of an existing tech platform and I know in your space it's POS often, or maybe it's their customer engagement tools, and so they just move to another and it's like, and that that's really disruptive and can be really like obstructionist to business. Yeah Well, you know you're, you're coming in from the outside and mostly with existing businesses. Are you bringing with you, like here's my four tech platforms that I think you should use to get what you need, or are you navigating within the existing. How do you look at the tech stack in the right tech stack for each operator?

Speaker 4: 10:36

Yeah, you know there are different tech stacks that work for different operators and it could be as simple as just saying, like, how many stores are you operating, but also comes down to the like volume that you're operating within, and so to say, that is like maybe you need a different set of tools to be able to analyze 40 stores across four different markets. Then you do to analyze two stores in one market and that's a like, really important differentiation when we get into tech stacks.

Speaker 4: 11:09

I'd love to show up to everybody and be like these are the only tech stacks that we look at, but that's not fair, like we are in a position in the industry where we are still building some of the best tools that will be used in forever future, and some of the tools that exist today might no longer be relevant, and so I think it's important to stay agile, because there's a lot of evolve and advancements that are happening, or evolution and advancements are happening within those tools as well, and so it's not fair to just say we only work with these ones, but we do reoccurringly kind of like see the same set of tools.

Speaker 4: 11:49

The one thing that I wish that we could just get on the same page of is like customer service, and being able to get in touch with somebody on the other side is, like probably the most important thing, and when we looked at historically, like what some of these say for example, your POS player, what the customer questions that come in through customer support only a portion of them are actually about operating on the platform.

Speaker 4: 12:18

The other portion are, like usually business strategy questions and maybe how they integrate with the platform, but it's like how do I know if my inventory is aged is like. While there are tools that are within the platform to be able to see, you might be able to say, for example, tag certain products, but it's really also your strategy in identifying and analyzing and saying what is aged inventory. How does that evolve and change through different categories? We're in a very complicated position where I am empathetic for some of the tech players because they're answering a lot of questions, but at the same time, we also have to be better about just being able to get in touch with people to be able to answer questions.

AnnaRae Grabstein: 13:06

What occurs to me as you're talking about this is the cleanliness of the data, too, and how platforms categorize data in different ways, so it becomes harder to create one-size-fits-all solutions when you're using lots of different platforms, and that's got to be something that you navigate pretty regularly.

Speaker 4: 13:28

Yeah, how clean information comes in, maybe through one position and then gets read through another. If you layer, say, for example, bi tool or data analytics tool, maybe it's really organized within the POS, but if the naming conventions don't line up, will you be able to just pull the insights that you want out of it? So when you were talking earlier about when does a data point become an insight is an insight needs context, and so you also need to make sure that the data is cleaned enough that it can have context.

AnnaRae Grabstein: 13:57

Huh, cool. Well, let's get into some of the work that you do around really driving growth. So the tech stack is like that's a foundational element, but then it's where you go from there. When we were talking prepping for this, we talked a lot about your perspective on the lifetime value of a customer, and while this is an over-emphasized concept in cannabis, for a lot of really interesting reasons and I think it would be fun to talk about that for a little while.

AnnaRae Grabstein: 14:28

And really, what then become the alternatives to thinking about a lifetime value instead?

Speaker 4: 14:36

Yeah, I mean I'm very opinionated. I think lifetime values in cannabis are like a temperature check, but overall a really bad metric to use to guide decisions. There is not yet a market that is stable, and we were just actually talking about this earlier as well. It's like if you don't have a stable market, you can't compare the historical data to the current data, and so, like I'll use an example of this If you pull the lifetime value of a customer in Michigan, the product value, so the price points of products from two or three years ago is very different than today, and so lifetime value would be essentially skewed by the purchasing price points that were in the market at that time.

Speaker 4: 15:29

So if, over the timeline, we are not just accounting for, say, for example, inflation, we're actually talking about inflated demand that shows up in metrics like price points, it could influence the decision that you make today, and so I actually make the case for moving away from lifetime value as a driving metric, as more of like a just a quick temperature check, like how are we feeling, but actually using things like a year's worth of purchasing behavior to better understand how the customer is purchasing. Now there will be shifts in that even as well. Like we can look at new markets, there's very, very disruptive things that happen in terms of, like, overall product, the sort of number of stores that are open, price points of products that could influence your transactions even just six months ago. But in a more, I guess, mature market, like if we were to look at California, colorado, washington, all of those markets, a year's worth of data is going to be a truer picture of how the customer is purchasing.

AnnaRae Grabstein: 16:41

Yeah, it makes so much sense. I was just talking with someone yesterday about New Jersey and their retail market and a great example of that.

AnnaRae Grabstein: 16:50

The stores that were the initial stores that were able to open in the adult use market had these massive revenues, huge lines out the door because they're just were not and still are not but enough stores to serve the consumer base. But it's quickly changing. There's going to be a lot more stores and even you know Verano is a public company that operates in New Jersey. They just had their earnings call this week and the CEO said that they are not seeing, they are not projecting that New Jersey retail revenue will be as high in the future as it was this past year, because they know that more competition is coming, and so it's a great example. We're talking about these really high level concepts and you're talking about customers. Over this one year, what are some wins Like? What are some numbers or ways to think about it, Things you see, patterns that to you create opportunities, or that say like, oh my gosh, the store is killing it in that one year. Look back.

Speaker 4: 17:47

Yeah. So I think one of the things that are helpful to look at is what the frequency of purchase is. Now I think we're getting a little bit better as an industry to see the big picture here, but on average, your customers are usually shopping in stores eight times a year. Now, this is an average. Averages are not good. They include highs and lows, and so this is where, kind of like, there's a convergence between your best customers and your worst customers, and identifying where there are certain triggers within the customer relationship can be really helpful.

Speaker 4: 18:27

So one of the things that I think about before kind of looking at any historical data or a retailer's performance, is what are the indicators that we might have good customer trust and what are the indicators that tell me that we have some level of stability in the customer base? So what does stability look like? So we've got a core number of customers that are driving the majority of the revenue and that we can rely on them, and then, from a trust perspective, it's like are we seeing big fluctuations around average basket sizes or say, for example, the frequency of purchase? And so we'll start there. So average basket sizes are going to be relevant to price points, but one of the things that we can look at is how many units per transaction are being purchased at a time. So most stores that we look at are kind of like pushing the border to two units. If you're a border store, maybe you're exceeding two units because a customer is purchasing differently, like they are traveling, they're not making the trip as frequently and therefore they purchase more units. So this needs to be relative to your market as well.

Speaker 4: 19:41

But if you can get the customer to consistently purchase two units, you're in a really good place, because the customer is trusting the recommendations, usually as well as the inventory and the store, to meet their needs, and then on the flip side of that is Well, that seems to me just the most two units.

AnnaRae Grabstein: 20:00

I'm surprised.

Speaker 4: 20:01

Two units seems low, it's like three units is golden, but two units with consistency is like where there's big opportunity. Now I'll get nerdy for a minute and be like okay, if you're not hitting two units per transaction today, what do you do? And most people will be like just get our bud tenders to sell more than two units, we'll bring up the average. Well, the reality is actually reduce the number of baskets and only have one unit. And so where are there instances that we are creating baskets with one unit? Is it like certain promos are creating that? Is it that those customers are purchasing on a particular day? Why might that be influencing it? Are they purchasing a certain product, like? Maybe they're overwhelmingly purchasing ounces? So understanding what is contributing to just one unit in a basket is helpful.

Speaker 4: 20:58

The other area that is a really good indicator of like if you have trust or you have stability is if you have a good portion of your customers getting past eight visits in a year's time.

Speaker 4: 21:11

And that is going to be a quick temperature check to say if I've got like in the range of 20 to 30% of my customers getting past eight visits, I've got a healthy amount that we can kind of like plan in terms of revenue and that we can feed that group of customers. So we want to motivate customers to get past eight visits and we want seven or eight depending on the market. And then we really want to embrace the customers that have, because they've showed us that they are loyal and we want to keep that relationship going with the customer. So if you can get baskets to more than two units per transaction consistently and that you are getting your customers past eight visits and that you're keeping those customers, then you've usually got some pretty good indicators there as well as it's pretty directive in terms of what you can do to improve the results from the store.

AnnaRae Grabstein: 22:06

Well, what can you do, then, to improve the results in the store?

Speaker 4: 22:11

More visits no.

AnnaRae Grabstein: 22:14

I guess that plays into like customer loyalty kind of all of the strategies that you employ. So let's get into that. How do you do it?

Speaker 4: 22:23

Yeah, like if you want to increase the revenue in a retail store, you can attract, retain or and build the spend right. Most the basic way is to just say, well, we're going to sell more per transaction and that is like a very slow way to add revenue. It's not not helpful, but it's not going to be the fastest way to gain momentum in terms of revenue. Adding more customers just like your surface area of luck that's helpful and then increasing the frequency to which they purchase is very helpful. So if you have a bunch of customers that are getting to eight visits, how hard is it going to be to get them to 10 to 12 visits? This is where, like loyalty and really understanding your customer is important. We know that customers are shopping at multiple locations. So if you want to take a customer from like eight visits a year to 12 visits, this is about recapturing some of their other transactions or prompting the customer to make a purchase that maybe they weren't intending to make. So if we take like an annual calendar and we look at it and we lie out, okay, there are five peaks. So what are the five peaks?

Speaker 4: 23:36

We've got like holiday new year, we've got 420,. We've got 4th of July. We've got Labor Day, we've got like weed Wednesday, black Friday situation in there. Then those transactions are likely to happen. But where can we insert new transactions along the way? Where can we create an opportunity where they're shopping more than every 45 days? Is there an opportunity where we can inspire a transaction? Can we offer a product that is so enticing that they want to come into the store because it's relevant for them? And that's where this level of personalization and leveraging loyalty programs as well as promotions play a big part of. That is like how do we add our days between visits shorter or insert the number of increased the number of transactions that are happening over a calendar year?

AnnaRae Grabstein: 24:29

Well. So communicating with the customer becomes a really important element to this of getting them back into the store, letting them know what you're up to, letting them know about these promotions you might be doing or a new product launch. And we see text, we see email. How do you see customer communication and what do you see as the things that are working or the things that aren't working consistently?

Speaker 4: 24:56

We are sending too many messages that are neutral and boring, like there is no reason we're not creating value for the customer. Now, value is different things at different times, but the ability to connect with a customer at a time that is relevant is important. If you have promotions going on, are you even sharing what those promotions are to your customer race? Maybe that's relevant for a portion of your customers. Is it relevant for all of them? Segmenting down and creating focus about what you're communicating and when can be very impactful. I was just having a conversation with a retailer this morning actually, about if you blast your entire list with the same message, it's going to cost you X, y and Z. But maybe we can blast just a portion of the list with the message and we see better conversion with that group. We don't need to send the number of text messages that we've maybe had in the other way. So it's creating segmentations and audiences for different messages and creating value there.

Speaker 4: 26:07

Now, value can be derived other than just promos and discounts. Like there are lots of other things that our customers care about. They care about when there's new product, they care about when something's sold out, they care about if there's a new flavor, like. There are lots of other instances to which we can communicate and we can get super specific. Like what if you have a group of customers that always shop with particular type of pre-roll, with a particular type of paper, and you bring in a new brand that has a new format to which they were already purchasing, and we let them all know about that to maybe come and try it? Like that is where things feel really relevant without feeling creepy. And so that's the hesitation always is how do you communicate with the customer and offer a level of personalization and segmentation without feeling creepy and weird?

AnnaRae Grabstein: 27:00

I've definitely felt the creepy and weird sometimes with some text messages, like I remember getting sort of an overly sexy message around Valentine's encouraging me to buy some cannabis loop, and I was in a meeting when I got the text and I just was like this isn't what I want to be thinking about this right now.

AnnaRae Grabstein: 27:19

Yeah, it's just creepy and like the timing matters, like, don't send that at 11 30 am, when I'm in the middle of a Zoom call and I look down at my phone and all of a sudden I'm thinking about Lube. But yeah, I mean you talked about these peaks and also this week you published and wrote about the Super Bowl a little bit. Yeah, and it was fun for me to see what you were posting, because I am guilty of going to a dispensary before the Super Bowl. The 49ers were in the Super Bowl. Unfortunately they lost.

AnnaRae Grabstein: 27:57

But that is my local team and I specifically purchased what I felt were some sort of celebration products that would be fun in case one Like I got one of those sort of like infused cigar, looking blunt type of hash hole products that I would normally use this because it's too big for me individually. It's like costs more than I would normally buy the product. But I was like, no, this is a fun thing If my team wins. This is what I want to light up at the end. I guess I wasn't alone in that. No, not at all.

AnnaRae Grabstein: 28:35

What happened at the Super Bowl this year that you saw.

Speaker 4: 28:39

Yeah, I think how this came to be was that I am thinking about these peaks and everybody's talking about the peaks and it's like where are there opportunities to talk to the customer about something that's relevant in their lifestyle Like when we were talking about being relevant in segmentation and all of that with loyalty. It's like where do those opportunities exist? And I was like Super Bowl is a thing. There are group and community activities that happen around Super Bowl, meaning that you like go and hang out with your friends and watch it, and a whole group of people that might not even be football fans are meeting up to watch this event. And I had been listening to this podcast about the impact of Super Bowl on TV and just like sheer audience growth in like football, and I was like, ok, I'd love to be able to understand how this is potentially influencing or how this event is impacting our customer and how that translates to difference in purchasing behavior.

Speaker 4: 29:45

And so, yeah, we teamed up with Surfside to basically say how does purchasing show up? How is it different? And what we found was that around Super Bowl, the customers that were already purchasing at cannabis stores purchased and likely inserted an additional transaction of products that they don't usually buy. So, if they're traditionally a flower consumer, they were purchasing things like pre-rolls or even beverages. Beverage is a huge peak in terms of our spike, in terms of the total sell through, with an increase of more than 87%. And so, looking at the weight, yeah, yes, 87% increase of Super Bowl.

Speaker 4: 30:34

Yes, yes, and that is where things get really interesting is being like OK, well, this is a totally make sense, like it's a shareable product, it's easy to consume, it is like very sociable, and so when we look at the product and the way that the product is selling through, it's different. And if you compare it to 420, we had these like big lifts, so it was the largest Saturday of the year so far. Sunday was the second biggest day of the year so far as well, and we didn't see a total drop off in terms of sales on the Monday after Super Bowl. That we do say, for example, after like a 420 or some of the other holidays.

AnnaRae Grabstein: 31:19

Do you think that that lack of drop off is because the Super Bowl didn't have as many promos around it that caused people to purchase more inventory than they normally would and not need new products like what happens after 420 all the time?

Speaker 4: 31:32

I have no idea. That's a problem. It's like with retail there are so many inputs that could be influencing this that I don't know for sure. And the interesting is that I went down this path because there is the Super Bowl flu, which I had never heard about until I started doing this research. Maybe it's because I'm not American, but it is that a lot of people have responded and said that they either call in sick or are not productive on the Monday after Super Bowl, and I was like is this a real thing? So then I went to the Bureau of Statistics and found that something like 14% of all working age Americans call in sick on the Monday after Super Bowl. I was like this is insane. So it's like is it that the retailers didn't create promos that created the drop off? Or is it that we had an entire group of customers who were at home and available to go to a store? Or is it that they were hungover and were utilizing cannabis as a way to nurse their hangover?

Speaker 4: 32:39

I don't know for sure, I don't think we'll really know until we have more data, so more Super Bowls. But for now, what I think it tells us is that there are ways to create and manage and mitigate the pull and push around of demand that we usually see at other holidays.

AnnaRae Grabstein: 33:00

Yeah, in thinking about the Super Bowl, I want to call out there has been a lot of talk around the Super Bowl outside of cannabis, just around how there's been these new consumers that were brought into football this year because of Taylor Swift and we're looking at International Women's Day tomorrow and Taylor Swift has been this massive driver of new economic energy because of her tour and everything that she's doing and all of these new eyes that are coming into the activations that she's a part of.

AnnaRae Grabstein: 33:31

And I did say the 49ers are my local team, so that's probably I'm not a football fan, but I was showing up and it was fun and it was different this year and I think it speaks to kind of what we're talking about in general, of new ways to get people excited. And what happened in the Super Bowl this year is that a whole bunch of new consumers of the Super Bowl were brought in, because there was a different slant. It wasn't just about football, it was also about Taylor Swift, it was also about other stuff, and there's all kinds of fun lessons to come from that.

Speaker 4: 34:06

Well, it's interesting if you were to pay, if you had been paying attention from the data and there's a portion of me that I'm like I wish I'd been smarter, because if I had been smarter I would have I had seen a couple of weeks before the Super Bowl that the Roman numerals associated with this year's Super Bowl were some of the most googled. There had been no reason to Google and then the search volume for it went through the roof and it was all of a sudden, maybe an indicator of that. There were all of these potential customers or audiences that were not traditionally accustomed to watching Super Bowl get involved and basically it was called the Taylor Swift effect. If we had been smarter about it, we're like okay, there's an entire new audience.

Speaker 4: 34:55

What's going on around the Super Bowl this year? What do we do about it and for what amount of time, and how do we make sure that it's relevant to our customer base? And I think that these are some of the things that we need to think about when we're thinking about cannabis. Retail is not just like what usually is happening, because what usually is happening could be reinforced based off of historical behavior. So, like for 20, it's because we always do for 20 is is for 20. Are there other secret holidays available within the calendar year? Maybe does culture shift and change Absolutely, and so because of that, I think we need to like be open to trying and doing tests and iteration and communicating with segments of our customer base to make things come to life in a new way, and so it doesn't only have to be the five peaks. We have all these other opportunities to be more in touch with, like who our customer is and what gets them excited.

AnnaRae Grabstein: 36:00

I love that and it's a perfect segue to talking about brands, because in thinking about talking with you, I know that really the Vitrina Group's core customer base is retailers. But also when I listen to you, I think, wow, there's so many gems here that brands should be thinking about and if brands truly understood the dynamics of retail, they could be winning in different ways and working better with with their customers, who are the retailers.

AnnaRae Grabstein: 36:28

And one of our earliest shows that we had, when we first launched, we had we had Christie Palmer from Kiva and Jake Bullock from Cannes and we talked about pride products and we talked about creating products specifically for pride, which isn't one of those five peaks that you talked about, but both of those things have gone out and decided that they were going to create special products, marketing activations and and have. This has to be a product that goes into market in June during Pride Month, and similarly Kiva has done we've seen them do Halloween products and and other companies have done products kind of specifically around holidays to create buzz and urgency, I think, for the consumer to go get that product, whether it's something like that or something else like off the wall. From everything that you're looking at and seeing all of these insights from different retailers, what are some things that you would like to share with brands that they should be thinking about?

Speaker 4: 37:27

I mean, I your examples would like these other kind of things or hallmark moments that are happening is super important. Like the customer is experiencing some of these seasonal events and how you bring a product to market in a way that it is relevant. It's so difficult around these because the day that the event passes it is icky, like no one likes, like a candy cane product after like the holiday week, you know, and then you're like give me away from candy cane. And so it takes a certain amount of like commercial planning to be able to enact limited inventory like that or seasonally relevant inventory as a brand. If you can understand what are basket drivers and what are impulse driven products, that's a big important piece of this. So basket drivers like the intended product purchase or could be even in the intended category to purchase.

Speaker 4: 38:32

I'm going to the store today to purchase pre rolls. Or there is impulse driven product, which is like emotionally driven decision making. Now, typically we talk about this a lot as being like low price points, so pre rolls out of those beverages. But you could also impulse purchase something that isn't a low price point because it feels particularly sticky in that moment and I'm emotionally directed to purchase it. So like what's an example of this is like, if a bartender and a customer is kind of always purchasing a certain way, what's the treat yourself moment and when does the treat yourself moment show up? And when you were talking earlier about like the infused cigar, basically that you purchased right, like that, that was a impulse driven, like emotionally derived sale. You're like this I'm purchasing this because it's going to make me feel good if my team wins, and completely outside of your regular purchasing behavior. And so, as a brand, it's like are we building a basket driver product or are we or a hero product or are we building an impulse driven product? And how should that influence the way that we offer available inventory, offer support in terms of marketing offer, like when and how frequently we're going to our retailers to support those and like how does that contribute to our overall portfolio? I think just starting there is helpful to be more realistic around how big the market potentially is for a product.

AnnaRae Grabstein: 40:17

And then and then would you say, then taking that into their strategy, working with retailers of communicating? You know, when you're either a salesperson or the, you're the marketing team, creating the collateral to communicate with, with retailers to get your product on shelf, helping them to understand what category your product falls into and how to sell it better yes, how to sell it better, but also how to price it and how to run promos off of it, like there are different levers that then can be relevant for these types of products versus hero products.

Speaker 4: 40:51

You can't run promo on a hero product all the time. It just undercuts the value of the product and it no longer holds the original price point, whereas with an impulse product, you can change up what the promos are and make them attractive and support in a different way, and so you can go to a retailer as a brand and say I'm going to support you with some insights around how much of this inventory you can carry. I'm going to support you with some information about how to sell this product because it's different, and here are the reasons why. And then also here are some tips and tricks around pricing and promotions that might be relevant for this product as you carry it in store.

AnnaRae Grabstein: 41:35

And so along those lines, and now we're diving into promos in some ways, like there's, there's the element of a promo coming from the retailer.

AnnaRae Grabstein: 41:43

As you know, maybe they work with Petrina, maybe they don't, but they say, okay, this is a holiday or this is aging inventory and I want to run this promo, and they, they, they shoulder the costs of that promotion and and what that looks like.

AnnaRae Grabstein: 41:58

I also see, though, that a lot of times that brands, in order to drive their own purchasing into retail stores around certain holidays be at 420 or otherwise they come up with their own promos that they are offering to retail stores to then, hopefully, pass on to the consumer. Is there one way or the other that's better like? Because is it that if a retailer just accepts the promo from the brand, that it isn't a strategic and it might be actually undercutting part of their promo strategy? Or should they say, okay, wow, this, this, this brand is going to offer us 50% off if we pass on that 50% off to the customer, so we should just do it? How do you advise people from both ends to think strategically about whether they should say yes to these offers and how then to pass them on to a consumer?

Speaker 4: 42:50

This is like one of the biggest struggles that we see in a day to day. The answer is it's like really hard. I wish that it was this life. Do it and everybody do it collaboratively. But the the answer is actually like we have to get in touch with who our customer is and why and how they're purchasing a product and why and how the product shows up in store, and collaboratively come up with things that work. And sometimes we'll have a certain level of insight around if certain promos work better than others. Like maybe they know that $5 off their product on these days has a tendency to lift velocity and they can bring that as an insight to a retailer. But at the end of the day, the retailer has their data around, their own customer behavior and so we have to like make that navigation and decision about whether it's going to support our customer behavior.

Speaker 4: 43:45

Why do we do a promo in the first place? To increase full velocity. So you hope that by taking I'm making some assumptions here, but there's actually and I would be a miss if my team didn't hear me mention this because, like they're always on us about it but there are three types of promos. There are ones that are just a highlight of a product and highlighting the features and benefits of a product, that's a true promo. And then there's things like markdowns and discounts.

Speaker 4: 44:13

So promos are actually there's three different types that you can pull as we burst to get the product moving. But in all of these circumstances, it's like we need to ask ourselves are we creating margin erosion and are we creating margin erosion that will be offset because of the velocity to which we are going to sell the product? So if we are not going to sell the product at a higher velocity or we're not going to move through more units, then what is the point of the promo? Like, if we're just going to create the same results, but it's going to be for a slightly less margin, then why would we do it in the first place?

Speaker 4: 44:50

And that's kind of like what is happening right now in a lot of markets where you see a lot of promos going on is that we've got a lot of promos, were asking our customer to look at a lot of different directions and some of them might be performing and some of them might not be, and ultimately the measurement at the end of the day is going to come down to did it help us move the velocity or influence the velocity? There's always going to be unintended consequences associated with that too. So did I increase velocity in this product but offset the velocity in another product, and what was the margin impact because of that? So it gets really complicated really fast. Is the answer like it's? It's not a super simple path to go down, but basically you need to be in touch with who your customer is and identify their purchasing behavior and then if a brand can collaboratively come to the table with something that will support that, then you're down a much better path around promotional impact.

AnnaRae Grabstein: 45:48

Yeah, I think there's a there's almost there's a pressure amongst retailers to just keep doing promos because everybody else around them is doing promos. But the question really is like what is your customer want in order to come through the door, not like what is everyone else around you doing and how can I keep up with the Joneses, especially if that's eroding your margin? It's really really important insight.

Speaker 4: 46:10

Well they're, they get addictive, like the. You're like I put $2 off this pre roll and I sold 100 more than I usually would. And then you're like, ok, do it more, do it more. But then the thing is the customer You're capturing the customer's attention and influencing because they feel that the promo is going to go away.

Speaker 4: 46:31

At the point that the promo doesn't go away, is it capture the same amount of attention? And so if you went to the store and laundry detergent was on sale every single time, would it change the way you purchase laundry detergent? Probably not. If you went to the store and you never see laundry detergent on sale, and then it is like $5 off, would you buy it in that moment? Maybe, but it's pulled and pushed around your demand because you might not purchase laundry detergent on the same cadence that you usually would. So did you just get the customer to purchase the laundry detergent at $5 less than what they were going to purchase it at anyways? And that is like what is happening with promos right now is we have most of the time, we have too many.

AnnaRae Grabstein: 47:20

There's so many and even if it's not the same product, it feels pretty consistent that I can go to a dispensary and there's always going to be a pre-roll that's on some kind of promo.

AnnaRae Grabstein: 47:30

And so then it's like OK, or a flower jar that's on some sort of promo, and so then the customers chasing those around and yeah, that's challenging. Well, so we're getting close to the end here. I want to talk about pricing strategy and margin, because you brought it up and it's really critical. We're seeing it's held in different markets, the difference between markets and a lot of the pastures where each market is in its own maturation in terms of like where the wholesale market is compared to the retail market and the end markets where there's been massive price compression on the wholesale side.

AnnaRae Grabstein: 48:07

Well, sometimes see like 4x markups at retail, from wholesale to retail pricing. But then in the newer markets where the wholesale prices are more stable or higher, you know that level of of markup you don't see as much. And. I'm wondering if there is like a target margin that you think is what a mature market looks like. What is stability for a retail store? Like a smooth margin across all products? Or how you advise people to even think about pricing and target margin across their stores?

Speaker 4: 48:44

So there are some metrics that you have to consider when thinking about margin, and one of them is discount percentage. So if you are selling at a high margin but you have a high discount percentage, you're not actually facilitating the margin that you had originally set with the product and like, how deep do those discounts it? So that's important. The other thing is that, like margin is also a reflection of the price point that was set, and that price point likely is not always psychologically refined. What I mean by that is, if you go into traditional retail, you see tactics and tools like pricing end in 99 cents or 79 cents or 45 cents. What they're trying to do is utilize tools to make a product more attractive by leveraging pricing psychology, optimizing the way that the product shows up from a price point for the customer.

Speaker 4: 49:51

Your margin or markup, often right now, is being applied to a product and then, whatever the math is, it comes out at like 1247, and then the retailer slaps 1247 on it. The reality is, is you miss maybe cents here or there that you could have gained a little bit more margin here? Or if you reduce the price point and reduce your margin, can you create higher velocity? Also, there's a pull and push that can go either way. As a benchmark, you need to have enough margin that covers the cost of operating the business and then make some money. Do we have enough margin to do that? In most instances where we're seeing margin slipped below 25 percent, it's incredibly difficult to make the business function unless you have an insane amount of velocity to be able to make that happen.

AnnaRae Grabstein: 50:47

Yeah, that's really low, okay. So yeah, yeah, super low.

Speaker 4: 50:53

If we look at the markets again, it depends on the wholesale price. Margin is a relative KPI. It is dependent on the wholesale price. Dependent on the local market. Supply and demand could be influencing a number of things as well as your customer pricing sensitivity. The customer right now in New Jersey is willing to pay a lot more than the price the customer in Michigan for a product because we have a lot more competition in the market in Michigan and it has driven down the price. The customer can then purchase product at a lower price point. We don't have that level of competition from wholesale market In New Jersey and therefore prices remain high.

Speaker 4: 51:40

Pricing and margin is a mix of understanding who your customer is, what the value that they're willing to part with or what their investment is going to be, or they're okay with making, as well as and what the prices you were able to purchase the product for. You should be enacting a blended margin strategy where you are leveraging different margins for different categories. So don't use a standard markup like big mistake, because there's different products that create different velocity in your environment. So if you sell a thousand pre-rolls but you only sell 100 ounces, what would be the impact if you could improve margin on the pre-rolls versus if you kept your margin lower, but could increase velocity on the ounces because the price point was more attractive. So it's a pull and push relationship. I don't think I even answered your question directly.

AnnaRae Grabstein: 52:40

I get it. It's going to lead into my last question before we wrap, which is that I think retailers often are looking also around them at the competitors and trying to price competitively with the stores in the neighborhood. More and more we're going from situations where there's regulatory capture and in a community that means that there aren't any other competitors, or maybe that there's not very many competitors and the stores really can just can dictate, and to places where there are saturated retail markets, where there are probably more stores than are needed and that there will be a shakeout at some point. I would love to just get your quick take, because we don't have too much time on in a saturated retail environment where there are more stores than the market can support, yet the wholesale products that those stores have access to are the same. So we're seeing a lot of similarities with inventory in the stores. How should retailers be setting themselves apart? Because what we're seeing instead is just price wars. Is there an alternative to price wars? So, outside of the price war, what could people do?

Speaker 4: 53:59

Yeah, the alternative to price war is inventory freshness and newness. There are very few customers who right now are purchasing the same product or same brand over and over, and, over and over again, with all of their maybe eight visits in a year. A lot of the time they're trying new products. So you can be competitive in a saturated market by being able to move fast. And by moving fast it looks like changing up with the assortment is providing a sense of newness for different products as well as like a freshness that there is something and it's there, and then it's out and what's the next thing?

Speaker 4: 54:41

Price wars are showing up usually in environments where there is probably too much inventory in the store, and then what ends up happening and it's like a downward spiral is that you end up with too much inventory in store, you start to discount to try and create velocity to get the units out, and then you try and buy new inventory to capture the customer's attention, and then your new inventory undercuts your old inventory and then your promo doesn't work.

Speaker 4: 55:15

So now you take a deeper discount on the first aged product and now your new product is starting to age because you've chased what the next new product is as well, and so, before you know it, you have thousands of SKUs in store with a good percent of John Markdown and like 30% of the inventory not going anywhere, and being able to get a hold of that as a flow is probably one of the most impactful things.

Speaker 4: 55:39

To also be competitive is because if you don't have too much cash locked up in aging inventory or product that isn't doing anything, then you have the cash to be able to invest in, iterate and see what works, so you could try a little something and if it works, then you can go a little bit more and use more of a test and iterative approach as opposed to making these like massive investments and seeing what happens and the product preferences of customers shifts and changes with seasonality as well, as has, like changed historically over time in markets as they mature, and so the combination of those two things is what worked six months ago might not work today, and what worked last year in April might not work this year in April, and so it's kind of complicated.

Speaker 4: 56:27

But if you can stay iterative and be like, well, what happened in the last couple of weeks and what do we have coming up in the next couple of weeks as well and be forward thinking. That can make a big difference. And then, but there is a like, don't get me wrong. We have to be aware of what our competition is doing to an extent, and we have to understand. But just because the competition is doing it doesn't mean that it's creating velocity for them, and so they might have like I don't know what's the craziest deal you've seen recently.

AnnaRae Grabstein: 57:02

One cent. You know joints.

Speaker 4: 57:05

It's like what's the intention of the retailer and what they're doing with that Like one cent joints, is probably to try and get customers in the door. If they're not getting customers in the door, that offsets the cost of doing that. Or they haven't marked up another product that they usually purchase the one cent joints with to accommodate for the margin erosion on the first one, like is there value to that initiative in the first place? And so 10 vapes for $100, like, say, for example, it's if you're let's say you're a retailer and you have a border store, 10 vapes for $100 might make sense. If you're in the middle of a state where you don't have border purchasing, does 10 vapes for $100 make sense? And so you can watch what's happening in the market? But you have to understand, like, the intention behind the promo or the pricing strategy or the competition, to know whether it's something that you should repeat within your own business.

AnnaRae Grabstein: 58:07

Such great insights. Well, we have to wrap, so we're going to move to our last call, and this is our ending, where, krista, we turn the mic over to you and it's your opportunity to really make the last call. You get the last word. So what's your last call, krista Be?

Speaker 4: 58:21

more in touch with our customers, like pay attention to how our customers want to hear information and what information they're giving to you. Suddenly, I think, as an in industry, if we can be more in touch with how our customers are wanting to purchase, we could be doing a much better job in terms of connecting them with the right product at the right time, as well as supporting our bud tending teams to be able to facilitate what our customers really want and need.

AnnaRae Grabstein: 58:47

I love that we didn't talk enough about bud tenders today, so we might have to have you back for another episode to talk just about them. But thank you.

Speaker 4: 58:55

Unspoken heroes.

AnnaRae Grabstein: 58:56

Yeah, unspoken heroes, that's right. And if our listeners noticed, we lost Ben along the way his sickness that he's struggling with, he just said you know, and for International Women's Day, he told us to just take the mic, and so that's what we did, and so I will read us out for this episode. Remember everybody. The dialogue doesn't have to stop here. We invite you to continue these conversations. Keep in touch with us. Let us know what you think about our conversation, call us out if you think we were wrong, let us know what topics you want us to cover, and just know that we are immensely grateful for everyone who's in our audience and that your encouragement encourages us to just keep going. So remember folks, to stay curious, stay informed and, most importantly, to keep your spirits high. And that's the show.