Innovation is only accelerating in the cannabis technology field and true experts are starting to emerge. Don’t forget the concept that 10,000 hours is the baseline for what makes an expert in a field of study. That’s four-plus years of work, and that’s what I’m now seeing in the cannabis technology field: the emergence of true experts. I recently got a first look at the solutions from the team at Purple Fog Enterprises, based in Bellevue, Washington, and talked with co-founders Craig Owenby and Ted Hatcher about their portfolio of products. “We are building a company that will use technology to drive innovation and better solutions across the cannabis industry,” Hatcher says.
Innovation
Owenby calls Purple Fog a technology company focused on cannabis. “The cannabis industry is rife for innovation,” he says, “in part because it’s an entrepreneurial opportunity with the big ISVs like Microsoft, IBM, Google and Amazon sitting on the sidelines with the Schedule I status at the federal level. This has created a unique space for companies like ours and others to come in and innovate and build something from the ground up. ”Purple Fog’s development paradigm is to work collaboratively with its customers (primarily cannabis dispensaries) and solve problems, not dictate what a solution should be. “At a lot of places, they build a product, and then they try to sell it to people,” he says. “But we build a product with people, so that they want it. And I think that’s really what makes what we do stand out because we understand that coming to someone with a solution is not fixing their exact problem.”
Marketing
Purple Fog has teamed up with one of Seattle’s largest and best-known cannabis retailers, Uncle Ike’s, to create a technology solution that allows the company to better communicate with its customers. To be successful and drive sales, Uncle Ike’s needed to be able to target its best repeat customers, because it’s always cheaper to sell to a current customer than acquire a new customer — that is a basic customer acquisition cost model. There are a lot of restrictions around cannabis advertising, so you can’t approach it like you would with other types of consumer brands. Dispensary owners also must deal with the rules of multiple government bodies. They must comply with rules imposed by the Federal Communications Commission, including the Telephone Consumer Protection Act and the CAN-SPAM Act. If you get caught breaking any of these rules, you could be looking at fines in the range of $500 to $1,500 per message. Many dispensaries have broken these rules and, for example, signed customers up to a text-messaging list without their consent, leading to heavy fines levied against them. For a long time, dispensaries have tried to work around these rules to communicate via text messaging, which is not nearly as feasible or easy to use as it has been in the past. With texting, you can’t reference anything cannabis-related. The text messaging will get blocked because it runs afoul of federal regulations against promoting the sale of illegal drugs. As a result of all the restrictions, many dispensaries still rely heavily on email communications to reach their customers. If this were 20 years ago, they would probably have a pretty good response rate. But as you well know, most people do not really respond to marketing emails. They just delete them, or they unsubscribe. “I get probably 75 junk emails a day, and unless it’s something very specific that I’m looking for, I don’t open it,” Owenby says. “It gets deleted. ”Purple Fog started using federally mandated rules as guidelines to help create a solution for a better marketing platform. The solution needed to be able to abide by current laws and regulations, communicate with loyalty program members, communicate deals and sales — and do all of this via customers’ smart phones. It turned out the company was developing this platform at just the right time. In July, Apple changed its rules to allow cannabis apps and in-app ordering through the App Store.
“This change has allowed us to do more than we previously could with the development of the solution for Uncle Ike’s,” Owenby says. “We’re now helping them bring their communications directly to their consumers’ phones in a way that does not require them to have special code words, or you must click a link somewhere. ”The solution also had to be able to handle scale, as many cannabis retailers have databases with 10,000 to 60,000 customers. “The magic sauce with our solution is that we facilitate customer communications without running afoul of the FCC’s CAN-SPAM Act,” he says. “We created an app for the Uncle lke’s chain of dispensaries that’s on both the iOS and Android app platforms, that lets them communicate more directly with their customers in a compliant way.” Purple Fog’s marketing platform goes through the internet, not through text messaging, and avoids breaking government-imposed rules. By using the mobile app, the user verifies their age and gives consent to be marketed to at the time of download, Owenby says.
Excited about the Future
Looking forward, the team at Purple Fog is tremendously excited about the future of the cannabis consumer market. With the acceleration of states legalizing cannabis for recreational use, along with future international markets considering legalization, including Western Europe and Australia/New Zealand, “this is going to be a $100 billion market faster than we think,” Hatcher says. “Most of us have never witnessed a new industry form and your kid’s kids will never know what the black market was like.”
