Cannabis Entrepreneurship 101: How well do you know your consumer?

Before legalization in Canada, the cannabis industry generally struggled to conceptualize its audience. There were many initial assumptions about its anticipated customers. 

With Canada’s legal industry in full swing, data is helping to paint a more accurate picture of who is making cannabis purchasing decisions. We also have a better understanding of what is appealing to them. No matter who you’re targeting, knowing your audience is a key aspect of building your business. 

What we assumed about cannabis consumers pre-legalization

Much of the industry’s understanding of Canada’s cannabis consumers came from a widely distributed 2018 Deloitte whitepaper. The paper identified two types of cannabis consumers: “risk takers” and “conservative experimenters.” The first group represented the pre-legalization cannabis user.  They skewed younger, consumed more, and were less educated on cannabis. The “conservative experimenters” were the opposite. This group was a larger proportion of the population, and were "likely" to become consumers as legalization hit. 

We spoke to MiQ, an independent marketing intelligence company who have been doing ongoing research on the development of the Canadian cannabis industry. “When working with a cannabis company, we help them identify and better understand their target audience,” says Skai Spooner, MiQ Canada marketing director. “In some cases, our partners have found they’ve been targeting the wrong audience all along and work with us to adjust their entire strategy.”

 “In some cases, our partners have found they’ve been targeting the wrong audience all along."

What we know about cannabis consumers today

According to Spooner, and as detailed in a new paper published by MiQ, there are three distinct groups of cannabis consumers. Their data challenges many assumptions made pre-legalization. “At MiQ we looked at data from a sample of more than 550,000 consumers visiting cannabis websites and identified three audience types who are all consuming cannabis differently from one another,” Spooner explains.  

Those three audience types are: 

Active Users 

This group comprises over 34 per cent of the total cannabis user base. Active users are typically over the age of 35 with a moderate household income. They tend to represent an audience who has been consuming cannabis products for some time. This group often knows exactly what they’re after. They also have a strong sense of the different formats, cultivars and varieties of cannabis.  Active Users are typically attracted to higher THC products, and are open to experimenting with formats. 

Experimenters 

Experimenters are a mix of the experienced Active Users and new customers make up 41 per cent of the total cannabis population. They are often searching for the formats, strengths and cultivars that work best for them. Almost half of this group are in the 18 and 34 age range. Data points to some uncertainty in this group when it comes to knowing different forms of cannabis available. 

Researchers 

This consumer group is typically motivated to stay informed on new developments around cannabis offerings. Making up 25 per cent of the cannabis user base, Researchers tend to consume a considerable amount of cannabis news in comparison to the other two types. Spooner says this group also skews more female, and while they don’t purchase the most in volume, this group still has potential as the industry develops. 

Educating your core audience is the key to making inroads in the cannabis industry

Even within these three distinct groups, there are some nuances. Take age as an example.   “While there is no typical consumer, our research has helped us to identify two primary groups of users – Canadians ages 18-24 and those 45 plus,” Spooner says. “The older audiences are 1.8 times more likely to search for medical cannabis compared to younger audiences, and they are primarily focused on the health impacts of cannabis and the benefits of the different product varieties.”  

The dissonance between the Deloitte profiles and ones supported by MiQ’s research is interesting because the intender audience identified by Deloitte was described as individuals who possessed some degree of existing knowledge.

"Older audiences are 1.8 times more likely to search for medical cannabis compared to younger audiences."

In contrast, the MiQ study suggests that education remains a key factor for consumers navigating this industry. MiQ's profiles give a strong sense about the kind of information Canadians are curious about, and therefore potential areas for start-ups to fill a need.

“Our latest research from May 2020 showed that 32% of people still don’t understand the difference between THC and CBD,” Spooner reveals. The MiQ study says that there are more than 300,000 cannabis product searches a day by Canadian consumers. This suggests that many Canadians are actively trying to engage with and learn more about the cannabis industry as it develops. 

“Since legalization, there has been a 32 per cent increase in search interest for different forms of cannabis,” Spooner says. “It is important for start-ups to invest time in understanding potential customers and what they care about.”

In our view, it is integral that cannabis start-ups stay ready for the changes that come with that expected growth. Start-ups can also use data to help develop their understanding of the Canadian cannabis market and the consumers driving it. In less than two years, that understanding has fundamentally shifted and will likely continue to do so as the industry matures.

“Our latest research from May 2020 showed that 32% of people still don’t understand the difference between THC and CBD." 

Right now, the emphasis of the cannabis industry is on discovery and education. More than 90,000 Canadian consumers search for information about cannabis products every day (between Q4 2018 and Q3 2019), leaving an opportunity for new cannabis companies to reach out to people who are trying to navigate the new cannabis industry. 

“A friend of mine recently reminded me of an old adage, ‘a confused buyer doesn’t buy’ and I think that is what we are still seeing here in Canada,” Spooner explains. “Companies need to invest in figuring out who their ideal customer is, and what they need – and then communicate with them in the most effective way. The sales will follow.”

“Companies need to invest in figuring out who their ideal customer is, and what they need – and then communicate with them in the most effective way. The sales will follow.”

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