Experientially diverse customers and organizational adaptation in changing demand landscapes: A study of US cannabis markets, 2014–2016

Research Summary In this study, we contribute to strategy and organizational theories of organizational adaptation by developing theory about the kinds of customers that facilitate an organization's ability to adapt to changing demand‐side conditions. We propose that customers who have previously interacted with diverse types of organizations in the market convey informationally rich feedback that better enables organizations to understand and adapt to change—particularly in more rapidly changing contexts. We further expect that organizations that position themselves congruently with market preferences will be stronger market competitors. We test and find support for our arguments using a unique dataset of over 8,000 cannabis dispensaries operating in seven states that were listed on Weedmaps.com between July 2014 and June 2016. Managerial Summary Performance of organizations in changing markets depends on their ability to adapt to evolving customer preferences. Such adaptation requires understanding how preferences evolve—not only among existing customers, but also in the broader market in which the organization competes. We propose that feedback from customers who have previously interacted with diverse types of organizations in the market enables organizations to understand customer expectations and adapt to changing demand landscapes by positioning themselves accordingly. We find support for these arguments in legalized cannabis markets within seven U.S. states. Dispensaries that get more feedback from experientially diverse customers position themselves in ways that are more congruent with the preferences of customers in their market. Furthermore, dispensaries who are more congruent with market preferences survive longer, bring in a greater number of new consumers, and are generally more appealing to those consumers.