Methodology Behind Archetypes Yields Insights by Confirming Consumer Habits
By J.J. McCoy, Senior Managing Editor, New Frontier Data
Who are today’s legal cannabis consumers?
To industry outsiders, what may seem like a straightforward question to ponder too often reflexively raises tired stereotypes ranging from Cheech and Chong to Harold and Kumar. Yet, to stakeholders competing in a burgeoning industry worth $10.3 billion in 2018 and projecting to more than $25 billion by 2025, ascertaining the properly framed realities is to drink from a Holy Grail of marketing and brand development.
As detailed in the forthcoming study The 2018-2019 Cannabis Consumer Report: Archetypes, Preferences & Trends, nine distinct consumer archetypes offer valuable takeaways from previously overlooked or under-examined consumption groups. In addition to usage patterns, the consumer categories also differ by their procurement sources, spending habits, preferred products, reasons for use, social openness, and other key variables.
To mine them, New Frontier Data teamed up with point-of-sale platform MJ Freeway to analyze data points culled from nearly $5 billion worth of transactions recorded since 2015, along with an online survey of more than 3,100 cannabis consumers across the U.S.
By asking up to 80 questions and generating nearly 4x more data points, the exercise mathematically teased out the archetypes according to replies and resemblances. The surveys introduced some demographic variables, and then a battery of individualized questions involving consumption behaviors, income, gender, age, policy opinions, etc., filled in the context of the respondents’ lifestyle patterns.
“Based on analysis of the respective points, the results revealed not just the respondents’ consumer preferences, but also their behavioral habits,” explained Industry Analyst Molly McCann of New Frontier Data. “That lends depth to the subjects beyond just medical use or adult use, etc. The three groups of three overall are pretty evenly distributed between 30% and 40% apiece for each of the three tiers of archetypes (heavy consumers were 29%, moderate consumers were 31%, and light consumers were 40%). I am pleasantly surprised by how evenly split their usage patterns proved to be, and how similar they were in the meta.”
Math alert: K-means clustering analysis was the method used for the study. It is an established, standardized approach (similar to Lloyd-Forgy) to vector quantization which is popular for cluster analysis in data mining. Clusters are built on inputs like each respondent’s reasons for using or how much money they spent, and then given numeric values, with a variety of other factors teased out for several differentiators. Among the nine archetypes, demographic ranges between 5% to 17% were determined by the algorithm.
“It adds more validity to confirm that they were all arrived at through purely mathematical means,” added McCann. “It’s refreshing to see that they made sense of real people’s habits and lives.”
Indeed. The validation was reflected in the response via a tweet from Los Angeles about the archetypes, “Been waiting forever for something so beautiful as this. @NewFrontierData #cannabis”.