Cannabis Loyalty Program: Open vs Closed Membership Eligibilities

There are two types of membership eligibility:

  • Open membership: Everyone can join at any time. For example, anyone can download the McDonald’s loyalty app today and start to receive discounts and earn points.
  • Closed membership: Customers can only join if they have met certain requirements, or have received an invitation from you. For an extreme example, the Emirates Airlines’ has an invite-only program for its ultra-elite customers. If you are lucky enough to get invited, a senior executive would personally drive to your house to present the membership card. For less extreme examples, Chico’s, a women’s clothing chain, uses a closed program (5% off every purchase plus frequent mailer and coupons) in which customers become members after spending $500. Barnes & Noble charges members (who receive 10 percent off on all purchases) $25 to join its membership club.8

In addition to minimum purchase requirements and joining fees, dispensaries may consider imposing minimum purchase requirements for members to continue in the program.8

Open membership is useful if you want to reach more customers, but the drawback is the program benefits can be exploited by deal-seeking customers who tend to have low profitability.13 

On the other hand, closed programs are constrained by a smaller enrollment size, but can exclude the customer segments with the lowest profitability (who only purchase merchandise on sale, frequently request that the marketer match a discounter’s price, or often return merchandise) by not inviting them to join.8

Which membership eligibility should my dispensary use?

The best choice varies depending on your program’s objectives and budget:

ObjectiveRecommended Membership Eligibility
Increase retention rateOpen
Increase basket sizeDepend on the target customers. If targeting all customers, use open. If only targeting high-value customers, use closed.
Increase purchase frequencyIf targeting all customers, use open. If only targeting high-value customers, use closed.
Increase profitabilityClosed
Increase revenueOpen
Receive valuable market research dataDepend on whose data you want to collect. If targeting all customers, use open. If only targeting high-value customers, use closed.
Budget SizeRecommended Membership Eligibility
SmallClosed
LargeOpen
By Nora Chen