History has a funny way of repeating itself—sometimes in not-so-funny ways. Few people were laughing back in late 2000 when the dot-com “bubble” burst. The internet bubble wiped out $5 trillion in investments. 2019 will be the 20th anniversary of the start of one of the best (and worst) economic periods in United States history.
When people think about the Internet bubble, the things that come to mind are usually associated with its apex and resulting burst: Brutally expensive company launch parties. Daily IPOs. Company valuations bloating overnight. Company founders that transformed from tech geeks to sex symbols. “Irrational Exuberance” and palpable giddiness that enabled too many people to abandon logic and invest in companies that had no business plan, let alone revenue. A large number of dot-com companies either went bankrupt or were sold for pennies on the dollar. The Internet bubble minted more wealth than any other period in our history. You had to live through it to truly appreciate it, especially here in Silicon Valley.
But bubbles take time to inflate and the dot-com run-up can be traced back to 1993, when internet access arrived for everyday people. Computer ownership then became a necessity. Interest rates were low, allowing more access to investment capital and new technologies were starting to “bubble up” from Silicon Valley. The stage was set and the Internet bubble began to inflate in earnest around 1998, before bursting in 2000.
Could the same bubble inflation period be taking place in cannabis?
As we look at what is happening in both the U.S. and Canada, we can begin to see similarities. Normalization of cannabis (like the normalization of the internet) is evident based on the U.S. states that are embracing full legalization or allowing medicinal use. Canada has moved to national legalization. While some U.S. states are experiencing difficulties due to saturated markets, the overall cannabis conversation has moved past cautiously optimistic to enthusiastic. IPOs are taking place, and the first IPO on a major U.S. stock exchange is in the books. How much farther away can we be from exuberance—rational or irrational?The dot-com bubble inflation period has provided all of us in cannabis with some great lessons (and some still-useful tips) from marketing and communications perspectives. Here are a few to keep in mind as the cannabis market churns ahead:
1. Branding Is Boss
One of the most enduring images of the dot-com era was the sock puppet used to brand and market Pets.com, the poster child of the New Economy. That company went from IPO to out of business in 268 days after spending $11.8 million on advertising in its first year. Its branding was legendary, and the sock puppet lived on longer than the company. Branding was the dot-com era’s rocket fuel.
The cannabis market is no different. Branding will play a crucial role in success or failure. Strong branding creates an emotional connection with a customer and uses a distinct process to determine a company’s place in the market. Cannabis companies must determine their positions: Will you be a craft producer serving a dedicated customer base, or a major industrial-scale producer? Being definitively on one side is better than being in the middle as markets evolve and margins are squeezed. Market position is the jumping-off point to determine the brand story.
Some cannabis brands have already adopted creative storytelling. MedMen, a Los Angeles dispensary that recently went public, is one of them. Demystifying cannabis should be an objective for every cannabis brand, and MedMen’s marketing strategy is to promote “regular” people who consume cannabis as a large part of its customer base. At the opposite end of the spectrum, but still effective, is Brass Knuckles. This concentrates provider claims, “Whether its concentrates, cartridges, or batteries, one thing is absolutely clear: Brass Knuckles ain’t f---ing around.” What you read is what you get—heavy duty branding for heavy duty products. While not for everybody, it bonds with those who like their branding.
Relative to branding look and feel, many cannabis companies are using minimalistic, health-oriented and stereotype-busting imagery on packaging and overall design.
2. You Must Tell a Good Story
Dot-com era businesses promised to create a better way to sell products or services in a new online economy. These web-based companies all were founded on a similar premise. What set some of them apart was the “story”—the founder narrative that generated exuberance and urgency in investors.
A favorite was drkoop.com, a health information site co-founded in 1998 by former Surgeon General Dr. C. Everett Koop. Having Koop’s name on the site brought a confidence-building backstory (Koop’s) that helped generate more than 1 million visits per month and led to an IPO. Unfortunately, the name didn’t help for long, and the company shut down in 2001.
The “story” is as critical to cannabis as it was to dot-com businesses.
In cannabis (and any industry), a company’s story must infuse a personal element to the brand and relate to the mindset of the potential customer. Jack Herer is a great storyteller. His name adorns the popular cannabis strain, and Jack is credited for being a kick-starter in the legal cannabis movement. His 1985 book “The Emperor Wears No Clothes” brought the plant’s history and broad applicability into the spotlight.
3. Your Personality Is Part of Your Product
Regardless of the product being sold, or the era in which it is/was sold, people buy from people. And, those people must act as a brand storyteller. All stories require a storyteller. This has been true since the days of cave drawings. The dot-com era was about stories of great promise and the personalities who told them. Jeff Bezos did better with Amazon than Julie Wainwright did with Pets.com, but both told their stories well and created exuberance around the brands.
Legalization has brought an industry from the darkness into the light, and along with that transformation comes the need for company personalities to act as brand/industry faces. Steve DeAngelo of California’s Harborside dispensaries is one of those faces and a recognizable personality. After DeAngelo read Herer’s book, the two partnered to promote legal cannabis, and DeAngelo became a leading voice for legalization. Similarly, MedMen’s Adam Bierman has expressed strong Point of View (POV) on legitimate legal market requirements in California, while Canopy Growth’s Bruce Linton has emerged as a key personality north of the border. All are helping drive their brands and the market forward via POV—a key marketing and communications currency that should be spent wisely.
4. Differentiate or Die
Many dot-com brands were in similar market spaces (think online retailers), and it was often difficult to tell which online pet or office supply site was better or worse than another. Had the majority of these online businesses stayed alive, it would have been a recipe for vast commoditization.
Cannabis will become a fully commoditized market sooner than later. Commoditization has already arrived in some states. Price points are holding for the time being in newly legal states, but have taken big hits in more mature markets. Innovative marketing can be a hedge against commodity market challenges, and cannabis brands can easily learn a few lessons from alcohol, another prohibition product. Beer is a great example of a prohibition product that shed negative associations and deployed clever branding to get consumers to choose a brand. That industry used creative packaging, personalized advertising and compelling storylines to set craft beers apart from commodity suds. We’re seeing the same in cannabis where brands like Défoncé are adopting high-end consumer branding, making it easy for people to connect with craft suppliers.
5. Think and Act Strategically
Whether publicly owned or privately held, very few businesses can over-extend themselves financially on marketing/advertising/public relations and sustain the business for the long haul. While Pets.com and others may have created stellar brand awareness, it created financial suicide in the process.
Every company, regardless of industry, must plan marketing and communications functions strategically. That means determining up front which people are most important to business success (target customer, potential partners, investors, etc.), what actions those people must take to make the business successful (buying product, investing in the company, co-marketing, etc.) and when those actions need to happen. From there, a strategic communications framework using modern approaches should be developed. Communications approaches come in all shapes and sizes. Some companies can do this in-house and others may seek an agency partner or consultant. Whichever route is chosen, any expenditure must have metrics, be measurable and have a clear linkage to business goals. Anything less would be based on irrational exuberance, and we all know that isn’t useful for much more than blowing up bubbles.