May 4, 2023
Written by Highlyte
When so many factors contribute to an operation’s ROI, it’s easy to overlook the importance of risk management as a way to protect a company’s balance sheet. Minimizing risk, however, is one of the simplest ways to reduce cannabis marketing costs and protect the investments you’re making in branding, packaging and marketing collateral, as well as earned and owned media.
As the classic maxim goes, “an ounce of prevention is worth a pound of cure.” That’s particularly true when the pound of cure can take the form of thousands or even millions of dollars in fines, not to mention having to pull spendy marketing activations, navigate bad press, or even lose a coveted, hard-won cannabis license.
Just look at what happened to Juul, the nicotine vape brand that was forced to settle thousands of lawsuits for $1.2 billion as a result of lax content compliance. Juul might have avoided paying out that company-sinking sum if it had better evaluated the risk of its marketing campaigns that featured overly youthful models, as well as its poor age-gating of online content and distribution of free samples to minors.
While Juul is an extreme example, cannabis companies should take note—and a more proactive approach. Not only do cannabis companies need to be mindful of advertising regulations in the states where they operate or are planning to expand, they should also keep future federal regulations in mind. Just because cannabis is still classified as a Schedule 1 drug by the FDA doesn’t mean potential plaintiffs aren’t gathering evidence of non-compliance now that may be used in future suits.
Ultimately, cannabis risk management comes down to making smart marketing investments now. If a cannabis company invests in branding assets, marketing partnerships or influencer agreements only to scrap that content because of non-compliance, limited distribution potential or consequences like social media shadow bans, those resources have been wasted. That also leaves fewer resources for Plan B marketing initiatives.
For example, a logo that’s compliant in a company’s state of origin may not be compliant in markets where they want to expand. Redesigning key brand materials on a state-by-state basis is expensive, time-consuming and dilutes brand integrity. It would be more prudent to design assets from the outset that are broadly compliant with the most conservative standards on the books.
There are a number of ways to future-proof your cannabis marketing strategy and execution. One is to run written and visual collateral through a tool like Highlyte to determine the degree of risk exposure in multiple states before sending anything to press. Once a campaign has developed collateral for review, Highlyte can be used as a final proof of compliance, allowing stakeholders to be confident in the overall strategic integrity of the work.
Another way to proactively safeguard your cannabis marketing operations is to retain the services of a regulatory or government affairs expert who can stand on the front lines of your organization’s cannabis risk management. This team member or consultant can anticipate strategic blunders like seemingly harmless partnerships that would expose a brand to scrutiny, such as collaborating with an ice cream or candy brand.
As for social media, this is one of the easiest venues for cannabis companies to expose themselves to risk and spin their wheels. Social media companies like Meta, Twitter, LinkedIn and others are notorious for having staunch policies restricting what cannabis-affiliated influencers and brands can post. Imagery depicting consumption, for example, is typically prohibited, as is marketing language that could imply cannabis is being bought and sold through the platform.
The reasons for this stringency largely stem from social media companies’ own risk mitigation strategies around things like the federal prohibition of cannabis and the prevalence of minors on their platforms. Social media platforms still represent a critical avenue for reaching target audiences, however, so cannabis companies must tread carefully with how they approach their social strategies.
Think of each Instagram follower, for example, as bringing a certain dollar amount to the business. Shadowbanning—when an account is still active but traffic to its content is throttled by a platform’s algorithm due to possible policy violations—directly impacts a company’s ability to leverage its valuable social media followers. But losing an Instagram account has other, less obvious costs, too.
Even if you can repurpose the photos and captions your business has posted on Instagram for another platform, you can’t necessarily replicate the valuable level of engagement your brand had before being banned. The entire community you’ve built through the platform will be lost, along with the time and resources spent cultivating that community. Ultimately, it’s crucial for cannabis companies to remember that social media accounts are rented platforms that balance great risk with the potential for great brand awareness.
These examples show why it’s important to have cannabis marketing compliance and risk management top-of-mind from the get-go when launching a new cannabis operation or rebranding an existing company. Future-proofing prevents the risk of incurring massive fines, like Juul did, and being blocked from new markets—including legal states with stricter or fluctuating regulations, as well as national and international markets as they open and expand.
Taking the strategic view that cannabis risk management is not just an extra expenditure, but a necessary investment, will protect the range of distribution and longevity of your valuable branding and marketing assets. The sooner cannabis brands begin to minimize risk, the sooner they can protect their long-term ROI.
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