• Objective Measures of Cannabis Quality
• Subjective Measures of Cannabis Quality
• Perceived Quality and Price Are Interlinked
• Predominant Cannabis Factors
• In Short

What seems like a relatively straightforward question turns out to have several interesting nuances. 

I discovered that studies investigating the factors consumers care about when looking to buy cannabis products all list price and quality as two of the primary considerations. Yet, many of the studies didn’t define what’s meant by cannabis quality. As I continued to dig, I discovered a large body of interlinked research investigating consumers’ sensitivity to cannabis prices. In that area of research, quality was also an important consideration, but again, most studies did not define what is meant by cannabis quality.

I decided to ask my cannabis contacts on LinkedIn how they define cannabis quality. Their responses were varied, much like the nature of the research I had seen, but certain comments finally helped me make sense of all the pieces of information I had gathered. Additional insights were subsequently provided by Jennifer Whetzel. My thanks once again to the LinkedIn community for continuing to serve as a valuable source of information on all things cannabis.

Here's what I’ve puzzled together.

Rachel Colic and Denis Gertler helped me understand that when it comes to cannabis, there are two dimensions of quality, an objective dimension and a subjective one. 

Objective Measures of Cannabis Quality

The objective dimension of quality of a cannabis product captures how well that product was made. High quality cannabis flower is flower that’s grown organically; harvested at the optimal time; dried, cured, and trimmed well, without any stems or seeds; and where the bud is moist, colorful, aromatic, and rich in trichomes. 

Dwayne Bisson provided an insightful characterization of objective quality with his remark, “the best ‘quality’ cannabis products are those that score the highest in the sensory elements of appearance, aroma, flavor, and experience. In competitions you will not win unless high scores are received.”

Several of the studies I read used this objective measure of cannabis quality to instruct survey respondents in their responses. Here are two examples: 

• “Quality: Whether you can observe seeds, stems, and shake as well as dry, compacted nugs in the product.”^[1]
  
  
• “Definitions of Cannabis Quality Levels:
  • Low-quality marijuana flowers are very dry, full of seeds and stems, and more brown than green. 
  • Medium-quality marijuana flowers can be identified by their spectrum of green hues and the presence of colorful pistils. Seeds and stems are minimal, but the flowers can suffer from a number of quick-to-market techniques like improper flushing of nutrients, quick curing methods, and sloppy trim jobs.
  • High quality marijuana flowers are primarily green in color with a brilliant array of vibrant colors. Seeds and stems are extremely rare. The flowers themselves are typically dense and chunky.”^[2]

Subjective Measures of Cannabis Quality

The subjective dimension of a cannabis product is more complicated. People consume cannabis to fulfill different needs, and consumers rate products as being higher quality to the extent that those products better fill their needs. Said differently, high quality products are those products that create more value for consumers, and since consumers value different things, consumers will vary on their considerations of what constitutes quality. 

Components of Value

The different components of value that purchasing and consuming cannabis may create for users can be partitioned into 4 different categories (see my previous blog, Consumer Components of Product Value) (see Figure 1):

• Purchase Components of Value: These include aspects associated with selecting, purchasing, and receiving cannabis products. More value is created for consumers when: 
  • There are fewer legal and regulatory barriers to purchasing cannabis
  • There are more nearby locations, with longer hours of operation, and with delivery services
  • There is a greater selection of products
  • Sellers provide more guidance to consumers
  • Consumers are able to “interact” with products (e.g., see, smell) before buying them
  • There are more payment options available

• Consumption Components of Value: These include aspects associated with the setting, preparation, and consumption of cannabis. More value is created for consumers when:
  • There are fewer legal and regulatory barriers to consuming cannabis 
  • They’re able to consume cannabis in a friendly environment, say, a low-key cannabis consumption lounge with comfortable seating, good music, and a good vibe
  • They’re able to take their time and savor the process of looking at and smelling their resinous bud, pass it around for all to admire, roll it into joints, and smoke it with friends

• Effects Components of Value: These include aspects associated with the outcomes or effects realized by consuming cannabis. More value is created for consumers when cannabis provides the physical, emotional, and/or cognitive effects consumers seek, such as a sense of relaxation or an uplifted mood, freedom from pain or anxiety, or an ability to focus.
  
  
• Community Components of Value: These include aspects associated with the sense of belonging, identity, or connection with others that using cannabis provides consumers.

Figure 1

Of course, consumers vary as to the particular components of value they care about. Many consumers are very conscious of the legal and regulatory environment in which they purchase and consume cannabis, while others care less about whether or not cannabis has been legalized in their state. For many consumers, the consumption component of value is as important as the physical or cognitive effects that smoking cannabis produces. Alternatively, many users want the consumption aspect of cannabis to be as quick, easy, and discrete as possible, focusing predominantly on the ability of cannabis to address their health and wellness needs. And while some people highly value engaging in the cannabis lifestyle and the sense of belonging to and identification with the cannabis community that consuming cannabis brings, others have no interest in that component of value. 

Cannabis Is an Experience Good

The most highly valued aspect of cannabis undoubtedly involves the effects component of value, that is, its ability to generate physical, emotional, and/or cognitive effects in users. Yet, the personalized nature of cannabis makes cannabis an experience good, that is, consumers generally don’t know how well a cannabis product will fulfill their needs until they actually consume it. In this case, when deciding which cannabis products to purchase, consumers look to various factors they can observe (i.e., proxy features) that they think may be correlated with the effects they hope to achieve in order to better direct their purchases. These proxy features then have perceived value to the extent that consumers believe they are predictive of the effects they will achieve. 

In particular, THC has high perceived value because it is a predominant substance in cannabis responsible for creating cannabis’s cognitive effects. To the extent that consumers believe substances in cannabis other than THC will generate the experiences they want, they will value information on product contents, that is the profiles of compounds. As another example, to the extent that consumers believe sensory characteristics of cannabis products are predictive of effects, they will value products’ look and smell. And, to the extent that consumers value products that are free from pesticides, mold, and other potential toxins, they will value lab tests. Finally, to the extent that people believe particular brands are more likely to provide products that consistently generate desired experiences, they will seek out those brands.

Perceived Quality and Price Are Interlinked

When we put it all together, what we have is a bunch of features and components of value that are bundled together within the cannabis purchase and consumption experience, where different people put different weights on each of those features and components (i.e., assess quality differently), depending on which needs they’re using cannabis to fulfill. People who value a particular feature more will be willing to pay higher prices for that feature and be relatively less sensitive to increases in the prices of that feature. Conversely, people who care less about that feature will be more sensitive to increases in the prices of that feature and be more likely to switch to other products without that feature if/when prices get too high. 

It’s also important to understand that consumer sensitivity to price reflects not only how well a particular product serves consumers’ needs (i.e., its subjective quality), but also the availability of substitutes for that product. Medical users may have the choice of using other medications to address the same symptoms for which they use cannabis. If the price of cannabis is too high, or if cannabis does not address their symptoms very well, consumers may very well switch to those alternative medications. Likewise, if alcohol provides a good substitute for people who consume cannabis to relax or socialize, then raising the prices of cannabis may lead people to switch to alcohol. On the other hand, if cannabis addresses consumers’ needs much better than available substitutes do, or if there simply are not any good substitutes that address consumers’ needs, then consumers will be much less sensitive to increases in cannabis prices.

Predominant Cannabis Factors

Studies on the predominate factors about consumers themselves or the cannabis they buy that influence purchase and/or consumption decisions include the following (see Figure 2).^[3] [4]

Product Factors

1.  Profiles of Ingredients

Consumers care about the amounts of THC, CBD, and terpenes contained in products, since they generate effects for users. Studies suggest medical consumers tend to care more about CBD than THC – though not always – while the reverse is true for adult use consumers. According to the research, people generally consider products with higher THC or CBD content to be higher quality products.

2.  Price 

Obviously, higher product prices are less affordable for consumers. Higher product prices may reflect any combination of:

• Higher costs associated with higher product quality, 
• Higher costs associated with greater regulatory burdens 
• Greater demand 
• Less competition in supply
• Lower efficiency, e.g., suboptimal processes, small scales of operation 

Especially when it comes to experience goods, many people use price as a signal for quality. Yet, in cannabis, higher prices often reflect higher costs of regulations or perhaps suboptimal processes as much as they do high product quality, in which case consumers may believe they’re not sacrificing much quality by turning to lower-priced unlicensed sources of supply.

3.  Quality 

• Objective measures of quality were discussed above. Consumers are willing to pay higher prices for (objectively measured) higher quality products. At the same time, consumers tend to be more sensitive to prices of higher quality products than they are to medium or lower quality products, suggesting they’ll substitute down when prices get too high. In other words, there appears to be a basic demand for cannabis products generally, and when affordability permits, some people prefer higher quality products. 

Interestingly, consumers of unlicensed products tend to be less willing to pay for quality than consumers of licensed products, suggesting that consumers of unlicensed products are more focused on the basic cannabis experience, while consumers of licensed products are looking for higher level experiences. 

• Subjective measures of quality discussed in the research include, for example, products that are:
  • Purchased from a licensed source of supply (see below)
  • Lab tested
  • Purchased from a supplier with a knowledgeable sales staff
  • Supplied by a particular brand

People who value these subjective measures of quality are willing to pay more for products with these features, and they’re less sensitive to increases in the prices of products with these features.

4.  Licensed vs. Unlicensed Source of Supply

Buying and using licensed sources offer several potential benefits over unlicensed sources. First, it reduces the legal risks associated with unlicensed sources of supply, including fines and penalties. Also, consuming cannabis in legal states may reduce other risks, such as employment risks. Finally, buying and using licensed sources (theoretically) ensures products have been supplied according to minimum standards of health, and safety. 

For people who value products that are licensed, whether or not products are licensed is a measure of quality. Studies suggest consumers are less sensitive to increases in the price of licensed products and more sensitive to increases in prices of unlicensed products.  

5.  Accessibility

Consumers value having sources of supply in convenient locations, with convenient hours of operation, and/or offering delivery services.

Consumer Factors

6.  Medical vs. Adult Use

While both medical and adult use consumers value objective measures of quality, medical consumers tend to put more weight on the health and safety aspects of cannabis supplies than adult use consumers do. They’re more likely to seek out licensed products as an assurance that products conform with minimum standards of production, labeling, freshness, packaging, etc. Similarly, they put more weight on products that have been lab tested, and they value having access to knowledgeable budtenders. Furthermore, medical consumers tend to be less sensitive to increases in price than adult use consumers are. For medical users, then, products that are licensed and lab tested are perceived as being higher quality products.

7.  Age/Experience with Cannabis

Young consumers and those new to cannabis tend to be more price sensitive than consumers who are older and or have more experience with cannabis. People new to cannabis face a lot of uncertainty surrounding the purchase and consumption experience, most if not all of which has been resolved for older and more experienced users. Since risk creates sensitivity to price, It thus makes sense that newer users would be more price sensitive than more experienced users.

Figure 2

In Short

In cannabis, quality is not a clear-cut issue. There are both objective and subjective factors, and by their very nature, subjective measures of quality vary across consumers. So when talking about quality, it’s important to clarify which factors are being discussed, to make sure everyone’s participating in the same discussion. 

References

^[1] Zhu, Bin et al. Perceived Importance of Factors in Cannabis Purchase Decisions: A Best-worst Scaling Experiment. Int J Drug Policy. 2021. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7704653/pdf/nihms-1599446.pdf

^[2] Xing, J. and Shi, Y. Cannabis consumers’ preferences for legal and illegal cannabis: evidence from a discrete choice experiment. BMC Public Health. 2024. https://link.springer.com/article/10.1186/s12889-024-19640-1

^[3] Davis, A. et al. The price elasticity of marijuana demand: evidence from crowd-sourced transaction data. Empir Econ. 2015

^[4] Donnan, J. et al. Characteristics that influence purchase choice for cannabis products: a systematic review. Journal of Cannabis Research. 2022. https://jcannabisresearch.biomedcentral.com/articles/10.1186/s42238-022-00117-0