North American legal marijuana sales totaled $6.7 billion in 2016, and that number is only expected to grow in 2017 and beyond. Twenty-six states and Washington, D.C. have passed laws to legalize cannabis in some form. Threat of federal enforcement notwithstanding, we’re looking at an already booming economic sector.
If you break it down on a town-by-town level, think about what this means for dispensaries: more products, more customers, and more money to manage in an increasingly competitive market. That’s where platforms such as Baker come in, giving dispensaries customer relationship management (CRM) capabilities, marketing automation tools, and analytics at the point-of-sale (POS) to not only attract new customers but to also retain existing ones.
Baker is a Software-as-a-Service (SaaS) platform that helps dispensaries manage the whole front end of the business: customer loyalty programs and promotions, texting and email marketing campaigns, along with online shopping and a host of analytics on everything from popular products to customer buying cycles. The platform is now active in more than 250 dispensaries across 10 states and Canada. It equips dispensaries with a customized iPad for in-store customer check-ins and engagement, and an online dashboard for “budtenders” and entrepreneurs. Altogether, Baker gives dispensaries a Salesforce-sized arsenal of commerce, marketing, and sales tools to keep customers coming back for that free edible they won in a prize drawing or in a ridiculously good deal on their favorite strain.
From On-Demand to B2B
Baker launched in 2014 in the middle of the on-demand economy boom; this was when every startup wanted to be the next Airbnb, Doordash, or Uber . Baker Technologies co-founder and CEO Joel Milton was living in New York City where he was building applications and investing in early stage startups. Colorado had just passed recreational marijuana use, but there were still a lot of POS problems. An order-ahead weed app seemed like a good idea.
“There were long lines at dispensaries and there was a segmented customer base,” Milton explained. “Some customers knew exactly what they wanted, but a lot of tourists and first-timers would come in and ask what indica and sativa were and how many milligrams they should eat in an edible. Being in New York City where everything was on-demand, we initially pitched Baker as an idea to order ahead.”
Milton co-founded Baker Technologies with Chief Product Officer (CPO) David Champion and Chief Technology Officer (CTO) Roger Obando. They initially built a minimum viable product and then quickly realized there was a far bigger market there than on-demand deliveries. Baker was accepted into the 500 Startups accelerator in Silicon Valley in 2015. In 2016, it raised the first half of its seed funding (around $1.9 million) and refocused from an online ordering app into a set of tools for dispensaries. The company completed raising another $1.6 million this month, bringing its total funding to $3.5 million.
“We took a step back and realized there’s a lot of competition in the space for customers: listing sites like Leafly and Weedmaps and delivery apps like Eaze, Meadow, and SpeedWeed. Every startup wants to be a brand and own the customer, but no one is actually helping dispensaries retain customers,” said Milton.
“If you’re just running deals without a customer retention tool, then by the time you advertise the deal and a customer comes in and buys a product that’s on sale, a lot of dispensaries will lose money on that,” Milton added. “It’s like a Groupon. They go in, get their $10 haircut, and never come back. So we shifted to a B2B model and built a suite of tools that helps dispensaries retain customers and build their brand.”
Inside the Platform
Baker’s platform is made up of a number of different tools, but the customer’s first touchpoint is through marketing automation. Customers fill out a profile on strain preferences, favorite products, and preferred edibles, and then Baker blasts out personalized emails and texts with call-to-action (CTA) links to order ahead or take advantage of a deal. In its 250-plus dispensaries, the company says targeted SMS campaigns have increased conversion rates and daily revenue by 10 percent.
The bulk of the dispensaries running Baker are in Colorado, with around 75 to 80 stores in the Denver area. Milton said the Pacific Northwest is the company’s next strongest market, with dispensaries in Oregon and Washington running the startup’s software. Baker is beginning to ramp up in California after the state legalized recreational use this past November. Baker also works with dispensaries in Arizona, Hawaii, Nevada, New Mexico, and Ontario. Milton said Baker is working with a couple of shops in Connecticut and Massachusetts as well and is looking to expand on the East Coast. The company has grown from six to 27 full-time employees in the past year. One of the dispensary brands with which the startup works is Native Roots, the biggest dispensary chain in Colorado.
“We send personalized messages based on interest. Think about logging into Amazon and seeing products of interest to you based on purchase history,” said Milton. “So, you might get a text about Wax Wednesday if you dab, but if you don’t, you wouldn’t subscribe to that. Instead, maybe you’d sign up for texts about Munchie Mondays.”
The in-store experience begins with the customized iPad that Baker provides to each dispensary. When a customer walks in, they check in on the tablet and get an update on their loyalty program, current deals, and reward points available. The dispensary employees manage everything from a web dashboard, which gives them interactive data visualizations and analytics on metrics such as online sales versus in-store check-ins, average order size, category-by-category product breakdowns, and popular in-store hours. Milton said Baker also analyzes the data on a macro level (anonymized data with no customer Personally Identifiable Information or PII) to recommend additional marketing ideas and track conversions.
“We see a ton of data, and work with dispensaries on how they should structure their loyalty programs or come up with a messaging strategy,” said Milton. “The analytics will help dispensaries figure out things like what day of the week is most effective for a $5-off sale versus a 20 percent-off deal.”
In the past month alone, Milton said Baker’s industry-specific CRM platform has helped generate a total of $3.1 million in incremental revenue across its active dispensaries. This includes both in-store and online sales. The company has an e-commerce widget that dispensaries can embed on their websites, and is currently working on a revamped e-commerce experience that’s scheduled to roll out later this year.
Where Baker Fits in the Weed Economy
In the larger scheme of the constantly evolving cannabis space, it’s also important to discuss what the platform doesn’t do. If Baker is to have a Salesforce-sized presence in the weed economy, a telling indicator is how the startup works with the industry around it. On that subject, one of the key questions I had for Milton is how Baker differentiates itself from seed-to-sale players.
There’s a whole category of cannabis tech companies that track each plant and cannabis-infused product from the growing and packaging process through shipping and sale through dispensaries. Seed-to-sale companies such as Flowhub track plants and products in accordance with state-by-state compliance systems, but that also includes a POS component that helps dispensaries manage retail transactions, deals and discounts. It also helps them compile analytics reports on sales trends through a cloud-based dashboard. On its face, that sounds a lot like what Baker does.
Milton said Baker actually integrates with a number of the major seed-to-sale and POS software platforms, including Blackbird, Flowhub, Greenbits, Guardian Data Systems, and MJ Freeway, among others. The CRM also offers an application programming interface (API) integration with Leafly to pull strain data and reviews into its system.
“It’s about focus. Rather than keep rolling out features, we’re working on improving the ones we have. Our goal is to help dispensaries build their brand and connect with customers. By focusing solely on the marketing automation platform, we were able to build it much better than a POS could,” said Milton. “There was some reluctance from the seed-to-sale and POS companies to accept that originally but, when it came down to it, the dispensaries really liked the product. So we went to them and said, hey, why don’t we integrate with your seed-to-sale transaction recording systems and free us both up resources to focus on other components of the business.”
Fresh off a new round of funding, Milton doesn’t plan to spread Baker’s capital too thin. It’s the same reason Baker isn’t trying to solve the marijuana banking problem. There are a number of banking and payments startups already building solutions to help “cannabusinesses” work around federal regulatory restrictions that are preventing them from using traditional banking. Milton said Baker is actively monitoring that space for possible partnerships.
Baker isn’t terribly worried about how the new US administration will affect the industry, either. While new Attorney General Jeff Sessions has made no secret of his opposition to marijuana legalization, Milton–along with the vast majority of entrepreneurs I’ve spoken with in the space–believe the state-by-state majority and the economic impact of legal cannabis are too strong to stop the momentum.
“At this point, it’s pretty clear the states are in favor of legalization. States like Florida voted Trump and also passed [medical] cannabis by a significant margin. States realize this is a lot of tax revenue and lots of good jobs in these communities,” said Milton.
“We’re no longer in the early days of whether this will work; we know it works,” he continued. “Conservatives are known for respecting states’ rights and they would face an uphill battle trying to override them. This administration has proved to be a bit of a wild card, but the threat of federal marijuana enforcement is not keeping us up at night.”