The Only Two Marketing Metrics Cannabis Executives Need to Fuel Annual Business Planning

One of the most useful cannabis industry marketing insights I can offer is also one of the simplest. Many people think marketing is all colors, taglines and logos. And while that creative, psychological work is both important and memorable, the truth is that math tells the most objective version of your marketing story.

Sales data and customer retention rates aren’t as glamorous as a classic Don Draper speech about a great product name or campaign direction. But understanding your cannabis brand’s core marketing metrics and aligning with an optimized marketing budget are at the heart of effective business planning. These numbers are the foundation of a strong annual marketing plan that drives real, measurable growth for the future.

Knowing how much a business can invest in marketing is one thing, but understanding where to channel that energy for real results? Now that requires a blend of insight, intuition and, yes, comfort in the unknown.

When it comes down to it, only two numbers truly matter: customer acquisition cost (CAC) and customer lifetime value (LTV). Everything else in marketing ladders up to the relationship between these two metrics. 

The ideal marketing math ratio between CAC and LTV should be at least 1:3, meaning you easn $3 in revenue for every $1 spent acquiring that customer. If the ratio is too low, you have a product or service problem. If it's higher—especially above a 1:5—you should spend more on marketing to generate even higher returns. 

Customer Acquisition Cost and Customer Lifetime Value for Cannabis Brands

Customer acquisition cost (CAC) tells the story of what it takes to bring just one person or business into your brand's orbit. It includes the costs involved to inspire a purchase, bundled into one number: total marketing spend divided by the number of customers gained.

Customer lifetime value (LTV) is your window into how much a customer is worth over the lifetime of their relationship with your brand. You can find that number by multiplying the customer’s value or profitability by the duration of the relationship.

A customer that costs little to acquire but brings a high lifetime value is ideal. But reality is always a little more unpredictable. That’s what keeps brands and marketing professionals alike on their toes. 

To fully understand your CAC and LTV, it’s essential to also consider your churn and retention rates. Together, these metrics allow for a clearer picture of acquisition costs and the long-term value each customer brings. For cannabis brands, mastering these interconnected metrics is essential for making smart marketing investments that drive growth and maximize ROI.

Churn Rates for Cannabis Brands

Churn is the natural ebb and flow of customers entering and leaving your ecosystem. Calculating churn is simple enough. First, subtract the number of customers gained from the total customer count at the end of a given period. Then, divide by the starting customer count and multiply by 100. That percentage tells you how much turnover you’re experiencing.

Churn rates can vary widely by industry. Utility companies, for example, have a median churn rate of around 11% thanks to long contracts and minimal interaction with customers. Meanwhile, the consumer packaged goods (CPG) sector trends toward a median of 40% churn, and when you look at B2B wholesale, the rate skyrockets to around 56%.

Customer Retention Rates for Cannabis Brands

Of course, where there’s churn, there’s retention. And here’s where brands should lean in. While acquisition is exciting, retention is the quiet force that stretches a customer’s lifetime value—without racking up new acquisition costs. Long-term loyalty is truly where the outsized value of customer retention lies.

To calculate your brand’s customer retention rate (CRR), first subtract the number of new customers acquired during a period from the total number of customers at the end of the period. Divide that number by the number of customers at the start of the period. Multiply by 100. That percentage is the customer retention rate (CRR).

Cannabis customer retention rates can be used to understand exactly which parts of the business are pulling their weight, and which might need an adjustment. For example, cannabis marketing metrics like these can be useful for gaining important insights into product mix.

How Cannabis Customer Retention Rates Influence Cannabis Business Planning

In 2021, industry analyst Headset ran some numbers on how cannabis retailers and operators could improve customer retention. They found that between 2020 and 2021, capsules, topicals, tinctures and beverages had some of the highest median customer retention rates across the top 50 brands for each product category, averaging around 65%. Flower, pre-rolls and edibles had some of the lowest customer retention rates, averaging around 29.4%. 

Those numbers show how much churn and retention can vary significantly, not only between industries but also across different product categories and business types within the same industry. The key is to establish your own baseline—know your cannabis brand’s customer acquisition costs, and lifetime value, informed by churn and retention. When one of those numbers feels out of alignment, it’s time to recalibrate.

Calculating Marketing and PR Return on Investment (ROI) for Cannabis Brands

Then there’s ROI—the holy grail of marketing. But let’s not oversimplify it. Marketing and PR are as much about human psychology as they are about numbers. Take, for example, a dispensary that puts up a billboard. You can estimate how many people might see it and even measure sales lift, but it’s impossible to measure exactly how many eyeballs turned into new customers.

What you can track, though, are shifts in your benchmarks. Maybe there were 5.5% more weekday sales during the billboard's run. Maybe one location with a billboard saw a jump in acquisition compared to others. These are the subtle signals that help guide your strategy.

In addition to gauging overall return on investment from marketing efforts, marketing and sales data can be used to refine a brand’s marketing mix—aka the “four Ps,” which are product, price, placement and promotion. 

Something I often see is cannabis retail brands giving loyalty programs too much consideration. There is absolutely a time and a place for customer care initiatives like these. But from my perspective, investing a substantial portion of a brand’s marketing budget into loyalty programs effectively subsidizes customer behavior you can already count on.

It can feel intuitive and even orthodox to invest time, talent and treasure in increasing purchases with a brand’s most committed 20% of consumers. I’d like to offer a different perspective, however. What would happen if brands instead directed their marketing spend toward inspiring the majority of occasional, infrequent customers to come back for a few more purchases? 

Scaling Cannabis Brands with PR and SEO

The smarter investment might just be in public relations, display advertising and search engine optimization (SEO)—the tools that help you expand your top-of-funnel reach. By building brand awareness, you bring more light and medium buyers into the fold, which ultimately drives revenue growth.

PR is the hidden gem here. Not only does good cannabis PR boost customer acquisition, it also extends lifetime value by building organic awareness and word-of-mouth trust, all within the bounds of cannabis advertising regulations. That’s how you scale a brand without hitting a point of diminishing returns—by constantly getting in front of that brand’s total addressable market, while also reminding existing customer segments of the brand’s consistent value.

Ultimately, getting marketing spend right is less of an existential “to invest or not to invest” question. Brands should always invest in marcomms, even when it’s a down or slow-to-grow market. Success lies in working backward from strategic business goals to find the right tactics for the brand’s current and potential customer acquisition cost and lifetime value. 

Once you know that, you can build a strategy that’s not just numbers-driven but energetically aligned for growth. The rest? It’s a dance between the known and the unknown—a balance that, when you get it right, feels like flow.

‍Ready to turn your cannabis brand’s metrics into measurable growth? Grasslands can help you decode the numbers, optimize your CAC and LTV, and build a strategy that resonates. Let’s work together to elevate your brand and drive real results. Reach out today to start the conversation.