Sales incentives are nothing new in the world of retail, but the practice seems to have struck a nerve for some in cannabis.
Part of the criticism might come from the regulated industry’s start in medical marijuana. Some operators who began in that space have expressed concern that sales incentives could push budtenders to promote products that aren’t in the best interest of the patient.
At a recent Benzinga conference in New Jersey, one panel reacted negatively when someone mentioned Sparkplug, one company that has created a platform for sales incentives. There were audible groans from the panel as some expressed dismay that well-funded brands could spend the money to incentivize sales, while smaller brands couldn’t compete at that level.
One panelist even exclaimed they wouldn’t want medical dispensary budtenders to be motivated to sell the wrong product just to enrich themselves.
However, today, the bulk of legal cannabis sales occurs in adult-use stores, where cannabis is treated like a typical consumer packaged good product.
Sparkplug Co-founder Andrew Duffy told Green Market Report that the company mostly works with adult-use stores, not medical. He added that some states have restrictions on promotions, so Sparkplug takes on the role of providing educational information in those markets.
A better customer experience
Duffy noted that dispensary owners don’t necessarily make big bucks – and labor is usually their biggest expense. Despite that, many budtenders only make the same – or less than – fast food employees. At the same time, they are expected to be able to speak at a highly educated level about the products.
There’s a disconnect between the pay grade and the expertise required for the job, Duffy said. And that disconnect can lead to higher turnover.
“I would say the genesis of Sparkplug was really an interest in creating an ecosystem and a financial framework that would allow those people to generate value for themselves based on the hard work that they’re doing every day, which is not only financially beneficial but also psychologically beneficial, because all of their work is contributing to their own success rather than feeling like they’re just sort of clocking in and clocking out and trading their hours of their life for maybe minimum wage or slightly above minimum wage,” he said.
The way it works is Sparkplug interfaces with cannabis point-of-sale platforms, such as Flowhub and Cova. Brands pay to be included in promotions or to create educational information about their products for the budtenders. When budtenders ring up a sale that happens to have a promotion running, they stand to earn extra money or prizes like concert tickets that come from the brands – not the dispensary owner.
Duffy said the additional money budtenders earn has helped them pay rent and have extra grocery money.
“That has always been our motivation and is really what keeps the team going and excited on doing this work,” he said. Last year, the company distributed about “$10 million of supplemental income to employees in the cannabis industry.”
And that, he said, contributes to creating an environment where customers – particularly those coming in for the first time – have a better experience, because the budtenders feel more valued.
“I definitely take seriously people’s concerns about the impact of incentives on customer decision-making or on the experience that they have coming into the store. But all signs from our data point to the fact that customers have a better experience with incentivized employees,” Duffy said. “They come back more often, they’re consistently repurchasing the products that were on incentive because they’ve had a good experience consuming it, and the employees are happier too.”
It’s a strategy that has borne out for Denver-based Sun Theory as well.
“We frequently offer incentives on our top products, allowing customers to explore premium offerings at a discounted price while also motivating and rewarding our budtenders for their efforts,” said Blythe Huestis, vice president of retail for Sun Theory. “This creates a win-win-win situation and this synergy can lead to increased sales, improved customer experiences and a stronger team dynamic.”
Standard retail practices
Sales incentives are commonplace in retail and the service industry, whether its it’s a restaurant asking waitstaff to promote a certain menu item or commissions based on achieving on sales goals. The rewards can be cash, or they can be other tangible rewards like travel or gym memberships.
For example, Spokane, Washington-based Cannabis & Glass provides a program in which all retail employees are eligible for case incentives based on achieving individual and team goals at the dispensary.
“We want to make sure that employees’ successes are identified and celebrated. Sales incentives can be a powerful tool if correctly paired with other service and operational-oriented goals,” CEO and Co-Founder Cristy Aranguiz said.
Sparkplug said that its incentives are half financial and half products like concert tickets or swag. Sparkplug handles the monetary disbursements, while other promotions come directly from the brands.
But it’s not just employees that benefit, Duffy said. “There are fewer people calling out or missing shifts in general. It’s just creating more excited, motivated and happy teams, which is obviously reducing the cost of turnover for them and helping to get the optimal store environment from just a customer experience perspective too,” he said.
“People who feel happy and compensated and motivated are just going to be way better at the job of helping people come into a dispensary and have a good experience.”
Sparkplug says it has paid out $10 million to budtenders in sales incentives. Read More
