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The 80/20 Rule and Cannabis marketing 101.

In graduate school, one of the first things I learned was the 80/20 Rule. It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients." 

 

This rule as it applies to healthcare translates into 80% of patients getting well regardless of what you do. 10% percent of patients will respond moderately well, and the top 10% of patients will not respond at all. My Ancestors the Choctaw Shaman waved bones and other items over their patients, 80% responded well and went back on the battlefield.

 

This rule resonates in almost every avenue of your life and drives our marketing strategies today. When all things are equal:

 

·     We target the largest group and sell the most products to the most people, the 80%. Pricing is based on volume, and these groups of people usually have more time than money and prefer an inexpensive product.

 

·     10% of people will pay more money for a “better” quality product. These groups of people usually have equal amounts of time and money and will pay extra for that product.

 

·     The "top tier" remaining 10% of the buying group has more money than time and will pay for specificity and convenience. These people will buy the best product, a name brand when possible, and what is the most convenient to use. These people pay for convenience; as time is an ever-decreasing commodity.

The same trends are seen in the vitamin market:

 

·     80% of people that buy vitamins, buy them at economically price stores, i.e. WalMart or Costco, regardless of their limited effectiveness.

 

·     10% percent of people buy their vitamins at more prestigious stores such as GNC and the Vitamin Shoppe to name a few. 

 

·     The last upper 10% of people buy their Vitamins & nutraceuticals from or through their medical doctors, chiropractors or other complementary and alternative medicine (CAM) providers.

 

Case in point, David Hults of Full Spectrum Advisors introduced me to a new cannabis product line they designed. The product was moderately priced, and it was customized with specific Terpenoids. They surmised that the addition of more Terpenes equates to a better more effective product. This "higher quality, more complicated product," intentionally or unintentionally was targeted to the middle and top 10-20% of the patient population (that purchase these products).

The largest and most price conscious group of people, the 80% that buy these products, will not see the advantage in a higher priced more complicated product. These people are cost conscious and won't understand the added value of the Terpenes, leaning towards the cheaper product.     

I started this by saying, “all things being equal,” but they’re not. A new predator has entered the game, BIG PHARMA! AMA & FDA approved synthetic Cannabis product i.e. CBD’s & THC are on the market. One of many prescription drugs called Dronabinol is a schedule III man-made form of cannabis (also known as marijuana). Dronabinol is used to treat loss of appetite that causes weight loss in people with AIDS. It is also used to treat severe nausea and vomiting caused by cancer chemotherapy. 60 10 mg tablets of Dronabinol are covered by insurance and costs $1221.24 a bottle. 

 

Why is this important? Two reasons:

1.    When a symptom specific drug is available, most physicians will recommend the prescription product. There is limited liability, it’s mainstream, and they've been taught how to prescribe it. They would rather have ease of use, rather than take the time to educate and learn the natural alternative. There is no law that states doctors cannot recommend the natural form. However they rarely research the natural alternative. With the inconsistencies of the Cannabis products: manufacturing, regulation and licensing issues, only reduce Doctors recommending the product. Big Pharma, through the AMA regulates what they approve for patient treatment. FDA has been trying to eliminate private sales of nutraceuticals and nutritional products for years.

 

2.    As a rule, people paying for medical care covered by insurance will choose insurance covered products over natural. It's more cost effective. Even with co-pay, the pharmaceutical products are cost effective, if not free.

 

To sum up:

•   Doctors will prescribe pharmaceutical products over natural insurance covered products.

•   Pharmaceutical products are covered by insurance, and the patient has little to no out of pocket expense.

•   Pharmaceutical companies will increase the spectrum of symptoms these drugs treat.

•   The more symptoms the drug "treats" eliminates the natural equivalent being recommended by physicians.

 

The special Terpene-rich mixture lost more of the buying population and it’s decreasing every day.

 

In closing, many advocates pushed to legalize Cannabis as a medicinal product. This was, in my opinion, a tragic mistake; I think it should have been brought on as a Nutraceutical product, a less restrictive way to help more people. Regardless, now that it is a medicine it has to compete against its pharmaceutical insurance covered alternative. Natural products will take a backseat to synthetic pharmaceutical products, as history has shown.

Ironically, the majority of the Cannabis public supports universal healthcare. Universal Healthcare will only pay for evidenced pharmaceutical products that are medically necessary. Now that synthetic Cannabis, like FDA approved Dronabinol will be the product of choice for Universal Healthcare. Big Pharma is methodically taking your market share, customers, and your profits.

If the Cannabis consultants, and advisors, keep leading the manufacturers down this path, you will experience short-term success, and watch what you have built, eliminated by others. You are making your products for a decreasing amount of people and losing sight of customer demand.

 

Without change, you will become irrelevant.

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