Booming marijuana sales and spotty legalization present an opportunity to study the cannabis marketplace

Photo by Matthew Modoono/Northeastern University

It’s been two weeks since recreational marijuana became legal in Illinois, and, according to the Chicago Sun-Times, shoppers in the state have spent more than $20 million on the product in that short time. It’s not just Illinois, either. Shoppers in Colorado have spent more than a billion dollars on marijuana since it was legalized in 2014. In Massachusetts, where recreational marijuana was legalized in 2016, people have spent nearly $400 million on the product. 

Keith Smith is an assistant professor of marketing in the D’Amore-McKim School of Business at Northeastern. Photo by Ruby Wallau/Northeastern University

Such booming sales—and the piecemeal legality of both recreational and medical marijuana use in the United States—have created a novel marketplace that is ripe for study by marketing scholars, says Keith Smith, who is an assistant professor of marketing at Northeastern.

Marijuana is legal in 11 states for adults over the age of 21, and legal for medical use in 33 states, but remains illegal at the federal level.

The legal mismatch has created “a patchwork marketplace, where marketing tactics you would traditionally take for granted can’t really be done,” says Smith, who recently published a paper that he hopes will serve as a catalyst for more intensive study of the cannabis market.

For example: Online advertising is a pervasive marketing method for nearly every company that sells products in the 21st century, Smith says. But, because marijuana is an illegal, Schedule 1 drug (according to the federal Controlled Substances Act) platforms that offer prime advertising space such as Facebook and Google are off-limits to cannabis companies, he says.

Cannabis companies are also largely shut out of the traditional banking system, Smith says. Banks that are federally insured can be prosecuted for money laundering if they handle money made from the sale of an illegal drug such as marijuana.

Another challenge cannabis companies face is their inability to cross U.S. state lines with their products, Smith says. State-licensed cannabis companies must cultivate, produce, and sell their products all within the confines of the state in which they are licensed. This makes it difficult for brands to assure quality standards from state to state, Smith says.

“When you’re buying Crest toothpaste, you take for granted that the tube you buy in Massachusetts will be exactly the same as the tube you buy in Vermont,” Smith says. “Cannabis brands can’t ship from state to state, which means that even if a product has the same name in two different states, you’re getting a different product in each state.”

Such challenges create a rare opportunity for marketing researchers, Smith says. Cannabis represents a chance to study a brand new market, and one with a lot of money behind it. 

“This is a call to my fellow researchers: We need to take advantage of this new field; this new opportunity to help cannabis firms in the long term,” he says. 

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