Research conducted by High Yield Insights between September and October 2020 found that 33% of Americans are interested in trying hemp-derived CBD and a further 7% have never heard about it but would like to learn more. High Yield Insights has identified two key market developments that could attract new users to the burgeoning CBD market; highly personalized product offerings, and the entrance of familiar household names.
A confusing brandscape
CBD is the ingredient of the moment. Natural, plant-based, new, and with a raft of health benefits, people want to buy it. With a glut of indie brands, with a few bad actors thrown in, it’s little wonder that shoppers have been left feeling confused and overwhelmed by what’s on offer. However, there are thousands of products on the market in numerous formats made using different extraction procedures, and terpene profiles, and to the uninitiated consumer, it may feel like looking for a needle in a haystack to find one that actually works.
Illustrative of the confusion amongst existing and potential consumers; High Yield Insights has found that amongst the 16% of adults aged 21+ who have used CBD in the last 3 months, fewer than three in ten (28%) have found a product, brand, or format that works for them. In addition, almost one in four (24%) admit to not knowing the difference between broad spectrum, full spectrum, and isolates. This is most pronounced amongst seniors and those with young children (under the age of 4) in the household. The CBD industry needs brands that will not only attract new users but also help to keep current users in the market.
Customization could cut corners
Customization was one of 2020’s key marketing trends. It has typically been a way for brands to innovate in mature markets as it helps to create brand differentiation and taps into demand for bespoke products. However, despite the relative infancy of the legal cannabis industry, there are signs that CBD companies are using personalized product offerings to help reach new consumers who may be confused or overwhelmed by the vast array of CBD products on offer.
Rise in customized product offerings
Research from Epsilon (a Publicis company) found that 80% of adults say they are more likely to do business with a company if it offers a personalized experience. A driving factor behind consumers looking for customized products may be motivated by having a closer connection to a product that is designed specifically for them and their requirements. It offers reassurance that they have the best available product for them, and demonstrates an understanding that, when it comes to CBD, one size does not fit all. Although much of the personalization in the market centers around CBD for health and wellness or medicinal use, High Yield has observed a rise in personalization within the broader market from dosage through to flavors;
- Specialist website https://cbddosagecalculator.com/ claims to draw from hours of Independent CBD dosage surveys, “deep diving” into published research and reports, user experience, studies, blogs, and forums to help users determine the optimum dose.
- Satimed USA offers personalized Phytocannabinoid (CBD) treatment tailored to the customer’s needs and requirements.
- Chicago-based Equilibria claims to be the only CBD company offering ‘personalized dosage support’. Following a purchase, a member of the Dosage Support Team schedules an appointment to discuss how to incorporate CBD into the daily routine.
- A raft of companies including Medterra and Joy Organics offer quizzes to help people identify the products best suited for their needs.
- American grown CustomCBD gives customers the opportunity to customize their purchase by selecting from a choice of three carrier oils oil, a range of concentration, and more than 10 flavors.
- More recently, Serda’s Coffee Co. increased its product line with CBD coffee, providing customers with a way to infuse any coffee with any amount of CBD to meet the drinker’s preference.
Although personalization can help consumers find the shortcut to the best product for their needs, for other would-be consumers, reassurance comes from familiarity specifically from familiar brand names, sold via their usual retail stores.
Big names bring reassurance
If brands with personalized offerings can deliver (first time) on the product benefits they were bought for, they stand a good chance of winning loyalty, growing their following, and securing a larger slice of this rapidly growing market. Conversely, the presence of well-known household brand names may also hold more credibility amongst would-be buyers who have yet to enter the market.
It’s a universal truth that humans are creatures of habit and the big brand names have the added advantage that they have broad distribution channels that do not require a change to shopping habits. High Yield research found that seven in ten adults have changed their shopping habits as a direct result of the pandemic. More than half (53%) have reduced the number of shops they go into (instore) and almost half (46%) now do more shopping online since the pandemic began. This, combined with the fact that the pandemic has left almost a third of adults feeling more depressed than usual and three in ten experiencing sleep issues presents a timely opportunity to launch products that respond to heightened demand for products that help to relax, de-stress and find calm. Being able to pick up products touting these benefits in usual retail channels from familiar brands could be key to driving CBD trial and purchase. In fact, almost one in five CBD-only users say they are more likely to purchase CBD-only products from a drugstore or grocery store than a dispensary.
Some 40% of CBD consumers report that they would be open to well-known companies launching CBD products. High Yield research can reveal that 20% believe that established brands would help set better standards within the industry and the same proportion (20%) would prefer to purchase CBD products from established brand names. However, despite a likely warm reception, only 10% of CBD consumers would be prepared to pay more for CBD-only products from household brands.
Topicals are set to represent the most successful entry category for well-known brands given that CBD topicals users are the most likely to say that they are still trying to find the best product/brand for their needs. Furthermore, almost one in five CBD topicals users say they would be more likely to purchase from a brand they know. Finally, as has been observed, regulatory bodies in the United States approach topicals differently than supplements, tinctures, and other products that are ingested.
Technology to take customization to the next level.
Where customization was once a brand USP, if it becomes more commonplace, then the process (whether that is a quiz, a consultation, or a detailed questionnaire) rather than the customization itself will become the differentiator. Would-be customers would need to provide more detailed information about their reasons for purchase, their health issues, or product expectations as well as flavor and format preferences in order to receive their purchase recommendation. With bespoke recommended doses, retailers will also be better able to time communications to drive repeat purchases.
Customization also creates an opportunity for customers to crowdsource feedback on product efficacy and side effects. With people less likely to browse in stores (43%) as a result of the pandemic, online reviews will become more powerful purchase influencers. Almost four in ten CBD users identify online reviews as a trustworthy way to learn about CBD products and this is particularly the case in the topicals category with 34% of users saying that they are more likely to try a new product if it has good reviews online. However, for it to be successful, High Yield predicts that customization will become more dependent on technology and consumer feedback. There is no doubt that, done properly, it could create a powerful tool for brands operating in this space and perhaps help boost company valuations ahead of the likely consolidation that we would expect to see as the market matures.
Of course, nothing is static, consumer needs change and regular follow up would not only create more touchpoints between brands and consumers but could also provide the data needed to identify emerging trends. This depth of information could leave the established household names on the back foot. Looking forward, we would expect to see CBD brands that have strategic personalized offerings being top of the wish list for the bigger brand names looking to enter the market via acquisition.