Competition for patients increasing among MMJ shops

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Every day Jack Myers opens his medical marijuana shop and hopes to get one new patient.

He puts his daily specials on the website; sends out text message blasts; and offers big sales, like buy one ounce, get one free.

He must, like all small businesses, grow or die on the vine.

But his is a business that is highly regulated, still carries a stigma and is limited by the fact that there are only about 12,300 people in El Paso County who can buy his products. And, he’s got a lot of competition — about 100 dispensaries in the county are all vying for the same patients.

It’s made for marketing mania as medical marijuana businesses turn to websites, Facebook and text message blasts to sell, sell, sell.

“There have not been a lot of blue ocean opportunities,” said Mark Slaugh, Colorado Springs Medical Cannabis Council director of membership, referring to the business strategy that says the high growth and profits an organization can generate comes from creating new demand in an uncontested market space.

Instead, medical marijuana dispensaries find themselves competing head-to-head for the same small pool of clients.

Some dispensary owners take a low-key Internet-only marketing approach to grow their business, saying it’s the only way to legitimize the industry. Only small signs on the door mark their off-the-beaten-path shops. Others have more aggressive outdoor signs, print advertisement strategies and social media campaigns with discounts, specials and promises to pay half the doctor bill to get their referral.

No matter which approach a medical marijuana business chooses, all of them find themselves in an all-out battle for business, Myers said. And, not every business will win.

“The challenge I see with advertising is the fact that there is a price war going on and that hurts everybody,” Myers said.

Low key vs. high profile

In the Colorado medical marijuana industry, still in its infancy, there are no state or city rules that govern the advertising and marketing campaigns for medical marijuana products, centers or grow houses. These small businesses can put up green crosses, use flashing neon lights and even hire sign spinners to attract clients. They can slash prices and give away accessories with medical marijuana purchases.

But, the Colorado Springs Medical Cannabis Council discourages “in your face” advertising and marketing, Slaugh said.

“You don’t’ see other medicines advertised that way,” he said.

The driving philosophy behind a more low-key advertising campaign is to legitimize the industry, he said. In Denver, the Medical Marijuana Industry Group is pushing the Denver City Council to ban billboards and sign flippers in an effort to make the industry more legitimate, Slaugh said. A green cross on the business is pretty standard to indicate that it is a medical marijuana dispensary.

In a 2011 economic analysis of the industry, Slaugh found that about 15 percent of medical marijuana cardholders are price conscious. The rest, he said, are more interested in quality.

“The people (dispensaries) need to work on are the people still on prescription drugs,” Slaugh said. “You want to help them get into the system — the patient you attract that is brand new will develop a lasting relationship.”

That’s not always an easy sell, said Alex Vazquez, co-owner of Tree of Wellness. There still is a stigma attached to medical marijuana. Some advertising sales reps have told him there is a potential for 80,000 clients in El Paso County, he said. But, he would rather focus his attentions on the 12,000 folks who already have a medical marijuana cards.

He offers discounts for first-time customers and daily specials. He advertises on WeedMaps.com, where customers can write reviews and he can post coupons. His specialty is organic marijuana grown under LED lights — a process that does not zap plants of nutrients, he said.

Like all small businesses, he sets sales goals and he tries a variety of marketing strategies to reach those goals. Some clients want the discreet text to let them know of sales and new products.

But, occasionally, his strategy includes a more open campaign with live music in front of the store or sponsorship at local nightclubs to get his store’s name out there. Tree of Wellness even sponsored a hash contest for the recent 4/20 festival at America the Beautiful Park.

“Where we get most of our advertising is word of mouth,” Vazquez said. “It’s really hard to get those people who have never tried it.”

Not a blue ocean

It’s been less than two years since the state issued its first business license for medical marijuana dispensaries. And, it hasn’t been easy street for the businesses. They’ve had changing regulations; increasing state and city licensing fees; banks that shut out their business; and lingering threats by the Drug Enforcement Administration of shutting their businesses down.

Still, the Colorado Springs medical marijuana business is growing. The city has collected 34 percent more in sales and use tax from medical marijuana businesses in the first three months of this year, over the same three months last year. It’s still the smallest category of businesses, representing about .7 percent of all sales and use tax collected.

With every dispensary competing for the same clients, the price wars have taken off. In California, for example, the average price for one ounce of medical marijuana is about $400. In Colorado Springs, the average cost is $200.

“It’s good for the customer,” said Don McKay, co-owner of Southern Colorado Medical Marijuana. “It’s a competitive market — the strong will survive.”

McKay takes a more laid-back advertising approach. His shop is only marked by small lettering on the front door. He said the industry must live through these first years of learning the rules, staying in line with state and local regulations and making the industry about health care and wellness.

“We go back to grass roots business model: take care of customers you have,” he said. “Develop a good reputation — a good portion of business is from referral.”

It’s a business-balancing act, McKay said, of trying to be low-key and trying to get the store’s name out there. He leaves business cards and fliers in doctor’s offices; he advertises on Weedmaps.com; and he gives military veterans 20 percent off all products.

“Our big deal is to get them in the door one time,” McKay said. “We work hard to keep them happy.”

McKay has 220 clients on his books. He can grow six plants for each client. But, he needs more to clients to keep his business growing.

“Being a new industry like this, it’s difficult to figure out where to draw the line,” he said. “We try everything from the backside . . . working on our own customer base.”

Dispensary owners seem to agree that over time, state and city regulations and all the other hurdles will get the best of some dispensaries and some will close under the pressure. As the competition wanes, there will be more opportunities to grow.

Discreet Treats gets new clients everyday from dispensaries that are closing shop, said William Prince, who co-owns Discreet Treats and two other medical marijuana businesses with Gilbert Serna and Jim Prince.

The business partners plan to buy a second grow house this summer. But, his marketing strategy is still low-key, he said. Rather than wave signs out his front door to lure customers, he makes cold calls to dispensaries across the state to sell edible marijuana products. Discreet Treats has one of the few marijuana-licensed kitchens.

“Everybody buys from us,” he said. “That helps us a lot.”

At the near two-year mark of doing business, Prince and his partners — like others in the business — still have not turned a profit. He estimates that of the 100 dispensaries in the area, about 30 to 40 will survive.

“I hope that everybody who tried it made it,” Prince said. “But, it’s not going to happen that way.”

MMJ, by the numbers:

93,393 people in the state have a registered medical marijuana ID card

42 is the average age of person with card

68 percent of those with cards are men

56 percent of those with cards live in the Denver-metro area

94 percent of those with cards say it is for severe pain

900 physicians have signed patients

$35 is the current fee for the ID card, to renewed annually

12,368 people in El Paso County have a medical marijuana card

Source: Colorado Department of Health and Environment