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CBD Marketing Regulations Effect CBD Merchant Accounts

by Kimberly Baylies on December 13, 2019

How to approach CBD marketing rules responsibly.   

Merchants celebrate CBD's removal from list of controlled substances. When hemp-derived CBD was removed from the list of controlled substances it became legal on a federal level. That also brought with it a great deal of confusion surrounding what was and wasn't allowed in terms of creating CBD containing products. There weren't any CBD marketing rules to follow. This lead everyone and his brother to put it into anything and everything they could think of. Throw up a website and claim it is the cure-all everyone has been looking for. It may be but the FDA doesn't want to hear anything about that! 

Effectively, the Farm Bill took CBD out from under the thumb of one government entity, the DEA, and thrust it firmly under the thumb of a different branch, ultimately leaving oversight to the FDA. However, the FDA has no guidelines in effect for the use, marketing, and sale of CBD specifically. This leaves the FDA to treat the ingredient under already established guidelines created for other ingredients. At least until it creates new guidelines for CBD specifically. 

Just because hemp-derived CBD is legal does not mean that it is an FDA approved drug, food additive or supplement.  The FDA will not allow anything to be put into a food item, supplement, or touted as a cure unless they approve it first. 

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With CBD living within a myriad of local, state and Federal grey areas how is one to create and market CBD products responsibly?

Under FDA guidelines, when a product is  “intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease and/or are intended to affect the structure or any function of the body.” it is then defined as a drug. In addition, if a substance has been used as an ingredient in an FDA approved drug it is then, by default, considered a drug and must be FDA approved before it can be used in products.

Just because CBD is legal doesn't mean there aren’t rules about how it can be used and marketed. Rules that exist for many other products and CBD is no different.

The FDA has begun to take notice of companies who are making medical claims that CBD can help certain ailments. The FDA, aware of how quickly the CBD market is growing, is not being tolerant of companies they believe to be in violation of their guidelines. Over the past few months, several well known CBD companies have been served warning letters with regards to their claims about healing uses. Complicating things further is the unfortunate influx of less than ethical companies who are lying about what is in their product or whose products do not actually contain the levels of CBD that they are claiming.

Some of the claims that the FDA is particularly troubled by included stating that CBD “has been shown to” be effective in treating a known ailment, comparing the CBD product to a pharmaceutical-grade treatment as a “natural alternative”, and making claims that are “scientifically unsubstantiated”.

The CBD market is growing exponentially with new companies popping up constantly. And the gross lack of regulation makes it harder than ever to market effectively and set yourself apart from the crowd.

How can you effectively market your CBD product in an ever-changing market?

So, if you can't talk about what your product can do for a customer or what the product is good for, then how are you supposed to market your product? Furthermore, how can people choose which product they need if they are considering the use of CBD? How are people to know the product is real and contains what is stated on the label?

Start with your brand message. Consider what you want your brand message to be. Create a clear message and go from there to create a marketing strategy aimed at educating your customers on your brand.

Websites are more important than ever before as it is often the first place consumers turn for information. Your website should be professional and have clear and concise information. Your website is the face of your brand and where consumers will turn for their research. Clear, concise information along with a clean, professional-looking website helps to build consumer trust.

Talk about why your company is different, as well as what is special about your product over others like it on the market. You may want to talk about sourcing and commitment to best practices in order to help to set your product apart from the other “fly by night” companies out there just trying to take advantage of the market growth.

Choose effective marketing channels.Responsible CBD Marketing at the forfront in getting a merchant account to accept credit cards

Build your customer list and create an ongoing email campaign and monthly newsletter. This may sound daunting but there is almost no greater return on investment than with an email campaign. Recent stats show that the ROI of email is around 73%. These customers have chosen to receive information from you, giving you a much greater reach rate than you would find even through social media. Through email, you have the opportunity to speak much more openly about your product without the FDA breathing down your neck.

Know your marketing channels and the rules they maintain around promoting CBD. Many simply won't allow it. Pinterest clearly states that “Products made from CBD, hemp or their derivatives” are prohibited within their rules on the advertising guidelines page. Facebook, Instagram, and even Amazon will hold you to their regulations about the promotion of CBD products.

Strive to earn free publicity from sources such as magazines, television, even smaller trade publications. In this day and age, earned media can be a mention or tag on Twitter or even a good review from customers. This type of attention comes from a 3rd party that you have not paid, as opposed to advertising. It helps to reach the audience and develop trust with the public. Don't be afraid to ask your customers to talk about your product when they love it! People love to share!

The FDA clearly regards CBD as a drug.

Public safety and marketing clarity are the main reasons states need to create regulations and guidelines for merchants. And it is beginning to happen. For example, State Hemp Program SB1020 recently went into effect in Florida legalizing the sale of hemp extracts. It creates guidelines for “manufacturing, processing, packing, holding, preparing, or selling Food consisting of or containing Hemp Extract at wholesale or retail”. It even includes provisions for cosmetics and transportation of CBD containing products.

The FDA is moving forward with efforts to “evaluate the regulatory policies related to” CBD products. They are well aware of the high public demand for CBD products. However, they are moving with caution and still generally see CBD as unsafe for general use.

In addition, when the FDA recently spoke at the National Industrial Hemp Council 2019 Hemp Business Summit verbiage used clearly showed that the FDA continues to regard CBD as a drug that needs to go through the drug approval process to be marketed with claims of therapeutic benefit. They also vowed to continue to “monitor the market and take action” on any company in violation of FDA regulations.

In conclusion, businesses will want to make sure all disclaimers are being prominently displayed. Disclaimers commonly state 'products have not been evaluated by the FDA and are not intended to diagnose, treat, cure or prevent any disease'.

Why are we telling you about marketing CBD responsibly?

This way to responsible CBD Marketing = merchant account to accept credit cardsThis is by no means an exhaustive list of marketing strategies, and we are by no means marketing specialists. But, we are in the business of providing our clients with payment processing solutions so they can sell products. We want to do everything we can to help keep our clients from getting warning letters from the FDA. Or, even worse, the bank shuts down the CBD merchant account altogether.  

Processors and acquiring banks who provide the CBD industry with payment solutions are most interested in managing their own risk. If they feel the Federal government, who backs their services, might decide that the bank's risk ratio is not in line with their preferred levels than they will shut down programs and close merchant accounts. Many already have. As quickly as one solution becomes available, another gets shut down.

We strongly recommend taking a proactive approach to market your product legally and effectively. Make sure you know your state and local regulations, if they exist, regarding labeling, distribution, and sale of CBD products.  Follow all marketing and advertising guidelines set by the state.

You may want to call on an advertising specialist for help and, of course, don't forget to consult your lawyer.

In the meantime, to find out what payment options are available today for accepting CBD payments give us a call. One of our ETA Certified Payments Professionals will advise as so what will work best for your situation.  “Experience the BIG Difference!” We are the high risk merchant services experts.

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Topics: CBD