Weight Reduction Services
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Industry Overview
The US weight reduction services industry includes about 1,300 companies with combined annual revenue of almost $2 billion. Major companies include Weight Watchers, Nestlé's Jenny Craig, NutriSystem, and the online-only eDiets. The industry is highly concentrated: the 50 largest companies account for 80 percent of industry revenue and the four largest, for 60 percent.
The industry doesn't include companies that provide primarily medical or surgical weight reduction, or those that operate physical fitness facilities, health resorts, or spas.
Competitive Landscape
Consumers' excess weight, personal income, and leisure time drive demand. The profitability of individual companies depends on effective marketing, customer acquisition and retention, and efficient operations. Large companies have advantages of scale in marketing, infrastructure, and partnerships. Small companies can compete effectively by offering individualized services or upscale facilities. The industry is labor-intensive: average annual revenue per worker is under $50,000.
Products, Operations & Technology
Major product lines are program fees, food supplements, and other merchandise sales related to diet and weight reduction. Fees account for almost 60 percent of industry revenue, and food and other merchandise sales for about 40 percent. Products include DVDs, CDs, food scales, journals and other record-keeping materials, cookbooks, and motivational and self-help guides. Specialty products include exercise accessories, magazines, and packaged food, often available for home delivery. Weight Watchers' branded magazine had about 7 million US readers per copy in a recent year, according to MediaMark.
Industry operations consist of providing customers with diet and weight management plans, advice, and monitoring. Companies provide a meeting place, meeting leader, and administrative staff. Staff evaluate a customer's weight against age and height guidelines and develop an individualized diet plan. Staff weigh and record the customer's progress relative to individual goals, usually at weekly meetings. Typical meetings include personal weigh-in, a lecture by the meeting leader, and group discussion and sharing of diet and exercise hints, weight-loss problems, and possible solutions. Many companies emphasize in-person participation and group support, which they say help customers' success, and offer online tools to supplement handouts. Some companies offer full online programs as an alternative to in-person events, but other firms operate solely via websites.
The industry is subject to seasonal demand, which peaks during the post-holiday "winter diet season" in January and lasts through the "spring diet season," as consumers prepare for summertime. Most industry companies are small: about 95 percent are single-unit operations and only about 15 firms have 10 or more facilities. Industry metrics include customer acquisition cost, fees and product sales per customer, and customer renewal rates. For online services, additional metrics include click-through and conversion-to-customer rates. NutriSystem reported that average acquisition costs for new meal program customers varied from $147 to $156 per person over a recent three-year period.
Industry companies either fund nutritional studies and develop proprietary diet programs based on the results, license programs from other organizations, or function as a franchisee. Weight reduction services companies often sell private-label or co-branded products. For interaction with customers, companies hire employees who are highly personable, motivational, and sensitive to weight issues. Sales skills are important for staff who work on commission to recruit and enroll new members and sell products.
The industry uses websites for marketing, sales, and online operations. Websites provide program details, self-management tools, recipes, support groups, articles, products for sale, and payment capability. Opt-in email newsletters help companies stay in touch with customers. By moving more marketing and program functions to the Internet, companies reach larger numbers of consumers, service more customers, and reduce cost-per-customer for acquisition and retention. The largest companies have extensive consumer databases that are a considerable asset and marketing advantage. Large companies use advanced data modeling software with consumer and operational data to help determine the content and timing of sales promotions. Most firms use third-party technology providers.
