Marijuana Shop in Denver - Essay Example

Marijuana Shop in Denver Introduction Marijuana, also referred to as pot, grass, and reefer, is a mixture of leaves, stems, seed and flowers of the cannabis plant. The use of marijuana and its impact on human health has been a contentious issue. The substance has some medicinal values and is therefore approved for sale as a medical treatment in 20 states across the United States (RTT News, 2013). The western states of Colorado and Washington have approved the sale of marijuana for recreational use recently (Asia News Monitor, 2014). As a result of the new strictures that permit people aged 21 and above to consumer recreational marijuana, there has been a spurt in demand for the substance. The attitude of the general public has changed and marijuana is being viewed as a useful product. Consumers have realized that marijuana can accord certain health benefits if consumed in the right quantity. At present, demand for marijuana exceeds its supply in Denver. The aforesaid discussion establishes that a budding entrepreneur can enter the marijuana retail industry in Denver and run a profitable business. The present paper carries out a market analysis and competitive analysis of the licensed retail marijuana industry in Denver, Colorado as the entrepreneur intends to set up a marijuana store in that territory. The marijuana shop, named MPR, would cater to both medical and recreational customers. It will be located at the Brighton Boulevard in Denver. Core Product and Supplementary Services The core offering of MPR will be high quality cannabis in 1/8ounce, 1/4ounce, 1/2ounce and one ounce packages. MPR will strive to provide high quality marijuana and exceptional customer service to its customers. Thus, the determinant attributes of MPR’s offering would be quality and service and would create the ‘pull’ factor on the customers. After the first year of operations, MPR will start retailing marijuana-infused foods after obtaining the Denver MIP (Marijuana Infused Products) license. MPR will be a well-lit shop with a comfortable waiting lounge. In addition to this, small stools would be placed inside the stores that customers can pull up while having a look at the pot. All the plants will be tagged with a bar code that enables the tracking from seed to the store. As a supplementary service, MPR will educate the customers about the pros and cons of consuming marijuana. The shop will operate as a responsible corporate citizen and urge its customers to consumer marijuana in reasonable quantities only. A huge poster stating that ‘Consumption of marijuana in public places’ is illegal will also be prominently displayed inside the shop. Market Analysis MPR will cater to two types of customers; medical customers and recreational customers. The law stipulates that a patient who needs marijuana for a particular debilitating medical condition needs to possess a state red card. Thus medical marijuana customers will have to produce the state red card to purchase marijuana from MPR. MPR would also cater to the recreational customer. These customers must be 21 and above and must have a government-issued photo ID as a proof of their age. In addition to the local residents, non-residents can also purchase marijuana from MPR. Demographic, Economic and Psychographic Aspects The household composition will determine the quantity of marijuana purchased from MPR. A family with kids aged 21 and above may turn out to be the biggest purchasers as all the members of the household would be the legal consumers of marijuana. In terms of demographic profile, people aged 21 and above, irrespective of gender, are the target market for recreational marijuana. Income of the consumers will be a key factor in determining the footfall at MPR. The state licensed stores sell one ounce of marijuana for $400. The same quantity can be had for $225 to $300 in the black market. The marijuana sold at authorized outlets costs more because of the sales tax burden. Given the hefty prices, only the middle and high income group is expected to buy marijuana from MPR. Consumers who have money constraints will hunt for the product in the black market. In addition to the demographic and economic factors, the psychographic aspects will play a key role in generating demand. An important demand driver for MPR is the attitude people have towards the product. There is a school of thought that marijuana is not good for human health. People who subscribe to this view will never visit MPR. The positive news for MPR is that marijuana has done well in recent public opinion polls. To that extent people have started viewing the pot as a useful product. There has been a tremendous spurt in demand since Jan 1, 20014, the day when recreational marijuana was legalized in Denver. 3D Cannabis Center, which has been serving, on average 25 medical marijuana clients for the last 3 years, attended 450 customers on Jan 1, 2014 (Mendoza, 2014). Competitive Analysis Businesses intending to open licensed marijuana retail stores in Denver were granted licenses in December 2013 (Spartanburg Herald – Journal, 2013). At that time licenses were given to eight retail shops. Since then, numerous authorized shops have opened in Denver in order to cash in on the humungous demand for the product. According to some reports, the tally of licensed marijuana shops in Denver had spiked to 47 by the end of February, 2014. Natural Remedies, Wellness Center of Denver, Advanced Medical Alternatives, Native Roots Apothecary, iVita Wellness, Cannamart, Denver Med Stop., Lodo Wellness Center, The Shelter, Green Man Cannabis, 3D Cannabis Center and The Grove are some of the marijuana stores that are up and running in the county. The Plank of Differentiation Feedback from customers suggests that there are certain aspects that need to change/improve so far as the existing marijuana shops are concerned. MPR recognizes the fact that it is extremely important to address the grievances of the customers and keep them happy. First and foremost, MPR will differentiate itself on the basis of product quality and customer service. It will recruit people who are welcoming and cheerful. As a part of the induction program, the employees will be given comprehensive knowledge about marijuana and the law pertaining to the product. This will enable the employees of MPR to address all customer queries and help them make informed decisions on marijuana purchase. MPR will stock a vast array of quality strains so that customers have ample choice. Other Important Aspects The ambience and décor of MPR will be given a lot of importance. In the service industry, customers judge the quality of the service by gauging the physical evidence (Goi, 2009). The interior decoration of MPR will reinforce MPR’s positioning of high quality and supreme service. The shop will be spic and span and all the merchandize will be stocked in an orderly manner. The sparkling glass shelves will enable customers peep and see the marijuana. Sample jars with a few grams of each strain would be kept at the reception area in case any customer wants to try the marijuana before purchasing. A common complaint of customers is the dingy waiting area that most marijuana shops have. MPR will overcome this limitation by specially designing and decorating the waiting area and giving it a semblance of a hotel lobby. The walls will be decorated with antique paintings and hand crafted wall hangings. MPR will purchase furniture that makes customers comfortable and enables them have a pleasurable experience at the shop. To create and maintain a loyal set of customers, MPR will offer subscriptions for as low as $50 per year. Subscribers will be offered a discount of 5 percent on purchases made at MPR. At the same time, these subscribers will be given a loyalty card. This loyalty card will help customers earn 10 points for every $500 worth of spends. The customers will be able to redeem these points for a marijuana strain of their choice. Service Delivery The core product marijuana will be sold at the brick and mortar store of MPR. In addition to this customers will be able to place an order on MPR’s website. The product will be delivered within 24 hours of receiving the order. A customer needs to place a minimum order of $1000 to avail home delivery service. To begin with MPR will hire a delivery boy. Subsequently, if the volumes increase, MPR will enter into an agreement with a parcel delivery firm/courier company. The supplementary service of marijuana education will be provided on MPR’s website by way of Frequently Asked Questions (FAQs). There will be in-store display of educational material for the customers. MPR intends also intends to develop an app for promotional and educational purposes. Service Quality MPR intends to provide high service quality to its customers. To achieve this objective, the management of the shop will strive to avoid all gaps put forth in the ‘Gap Model’. Gap 1 occurs when the management does not correctly perceive the needs and wants of the customer. In order to eliminate this gap, MPR will carry out marketing research and understand the requirements of the customers. Information on the type of strains, package size, and prices etc. will be collected by way of a questionnaire. The respondents will also be questioned on what kind of service settings do they prefer and how much time they think is ideal for fulfilling the order in brick-and-mortar marijuana shop. These findings will be incorporated in the marketing mix of MPR. The difference between service quality specification and service delivery is referred to as Gap 3. This gap arises primarily due to capability or willingness issue of the service personnel. To ensure the eradication of Gap 3, MPR will be careful right from the recruitment stage. It will hire people who are motivated and have the zeal to work. MPR will focus on the training and development of these personnel as well. The training programs will revolve around the following major themes; imparting product knowledge, regulatory framework surrounding marijuana, interpersonal skills, and communication skills. Pricing Strategy Licensed retail marijuana appears to have leapfrogged from the introduction stage to the growth stage of the product life cycle in no time. There is no dearth of demand and new shops are mushrooming across the county of Denver. Demand has outpaced supply and the policy of price skimming appears to be an obvious choice. This strategy will enable a company to generate high revenues instantaneously. However, MPR intends to develop and maintain a loyal set of customers. The shop intends to be a leader in the market in the long run. The business is not aiming at instant profits and therefore MPR has decided not to pursue the policy of price skimming. The ultimate objective of MPR is to be seen as the ‘preferred destination’ for marijuana purchase. At the same time, MPR does not want to drop its prices significantly. The policy of price penetration is therefore ruled out. At this juncture, MPR will adopt a competitive pricing model and will attract customers by competing on the plank of differentiation; quality and service. Fluctuations in Demand MPR is likely to witness a large crowd on the day of its inauguration. The management will hire extra security and part-time personnel to deal with this rush. The inventory of marijuana will also be ramped up for this day (Meltzer, 2014). One sales person will specifically involve the kids in games and other activities so that the adults can spend time exploring and purchasing marijuana. Gradually, the footfalls in MPR are likely to stabilize. After the initial craze, customers who have had a good experience, have liked the quality or marijuana and are located nearby will return to the physical store. Customers in far flung areas are more likely to use the online services of the store. In terms of numbers, medical marijuana customers are most likely to remain stable throughout the year. The tally of recreational customers will increase steadily throughout the year as the positive word-of-mouth about MPR spreads. The shop will increase its capacity including sales persons from time to time depending on the actual business requirement. References Goi, C. L. (2009). A review of marketing mix: 4Ps or more? International Journal of Marketing Studies, 1(1), 2-15. Retrieved from http://search.proquest.com/docview/821640869? Denver-based tech start-up putting marijuana rewards in customers pockets. (2014, Feb 04). PR Newswire. Retrieved from http://search.proquest.com/docview/1494048516? Denver gives out first recreational pot sales licenses. (2013, Dec 27). Spartanburg Herald - Journal. Retrieved from http://search.proquest.com/docview/1471029032? Marijuana use on the rise in united states. (2013, Sep 04). RTTNews. Retrieved from http://search.proquest.com/docview/1502613274? Meltzer, E. (2014, Jan 30). Boulder could get first recreational marijuana shop around Feb. 18. McClatchy - Tribune Business News. Retrieved from http://search.proquest.com/docview/1492746801? Mendoza, M. (2014, Jan 03). High demand has marijuana shops running low on supplies. McClatchy - Tribune Business News. Retrieved from http://search.proquest.com/docview/1473915236? Prater, E., & Schrader, M. (2014, Jan 01). Legal recreational marijuana industry opens in Colorado. McClatchy - Tribune Business News. Retrieved from http://search.proquest.com/docview/1473343719? United States: Obama says marijuana no worse than alcohol. (2014, Jan 23). Asia News Monitor. Retrieved from http://search.proquest.com/docview/1490967859? Read More