Weight Loss Programs Lauren Glasky, Nicole Nava, Ben Wainberg Agenda Industry Overview Major Players Primary Advertising Methods Raw Data Analysis Recommendations Why Weight Loss Program Industry? Growing industry because: Industry Overview Industry Overview - Definition Multi-billion dollar industry Provide nonmedical services to clients to assist them in losing weight or maintaining a desired weight. Services typically include individual or group counseling; menu and exercise planning; and weight and body measurement monitoring. Industry operators may also sell food supplements and other weight reduction products. This industry does not include fitness centers, health resorts and spas or medical or surgical weight reduction services. Industry Overview - Activities Primary Activities •Operating nonmedical weight loss centers •Individual or group counseling for weight loss •Diet workshops •Selling food supplements and other weight reduction products •Menu and exercise planning •Weight and body measurement Major Products and Sales •Merchandise sales •Weight loss services •Other Who are the main competitors? Industry Overview & Structure HHI = 1,915.74 Four Firm Concentration = 67% Number of Businesses = 24,901 Industry Overview - Barriers to Entry IBISWorld rates the degree of barriers to entry as: low and steady Barriers - High Competition - Medium concentration - Mature Life Cycle Stage Mitigating Factors - Strong consumer demand because an increasing number of Americans are overweight or obese - Low level of capital needed to enter the industry Industry Overview – Technology & Systems Level of Technology Change has been Medium Greater use of telephone and online services to deliver advice, ordering, etc. ◦ More companies operate delivery-based weight loss services through an online platform Industry Overview - Industry Assistance Level of Industry Assistance and the trend is Medium and increasing Tax deductions available for individuals who have conditions (i.e. heart disease, hypertension) that could benefit from weight loss treatment. Industry Overview - Industry Performance Life Cycle Stage: Moderate growth Stable number of companies are operating in the industry Worsening health trends and improving economic conditions are increasing demand Relatively untapped market of men's weight loss Increasing external competition from medical centers Industry Overview - Competition Competition is high and increasing Internal Competition • Based on price, quality of service, effectiveness and advertising • WOM and online reviews key to developing a steady revenue base • Marketing and advertising are key to generate sales External Competition •Do-it-yourself methods are most common substitute •Medical services offering weight reduction surgery. •Weight loss pills Industry Overview - Key Success Factors Ability to franchise operations Ability to effectively communicate and negotiate Undertaking technical research and development Ability to provide goods/services in diverse locations Receiving the benefit of WOM recommendation Willingness to outsource when appropriate Industry Growth Annual growth 07-12 = -2.4% Expected Annual Growth 12-17 = 2.5% 2012 Revenue = $2.7 billion 2012 Profit = $313.3 million Factors of weight loss program consumption Healthy Eating Index Per Capita Disposable Income National Unemployment Rate Demand from Offices of physicians Success? 2004 - Present Google Trends: Analyzing 2010 Major Market Segmentation Women are the largest purchasers of industry services ◦ Make up over 85.0% of members ◦ 70 million people are on a diet – 20 million are men However, higher percentage of American men are overweight or obese Spending on weight loss services also varies depending on a consumer’s age. Business Locations Dependent on population levels, as well as obesity rates and disposable income levels The Southeast ◦ 26.9% of industry establishments ◦ Highest obesity rates: Kentucky, Louisiana, Mississippi and Oklahoma all have obesity rates over 30.0%. Mid-Atlantic ◦ 17.6% of industry establishments ◦ Region has slightly higher-than-average per capita income level, making consumers more likely to spend on discretionary services. West ◦ ~16.5% of industry establishments ◦ California, alone has 13.2% Great Lakes ◦ 13.4% of industry establishments Business Locations Regulations Regulation in the industry is Medium and Steady ◦ The FTC regulates laws related to advertising, disclosures to consumers, privacy, consumer pricing and billing arrangements. ◦ Individuals under legal age require parental or guardian before beginning a professional weight loss program Major Players Major Players Weight Watchers Nestle (Jenny Craig) Nutrisystem Weight Watchers Market Share = 39.4% Began in NY in 1963 As of 2012, has 1.3 million members Meeting fees make up over 54.0% of the company's revenue Sells products (bars, snacks, cookbooks, food and restaurant guides) – 15.4% of revenue Internet revenue – 22.0% of revenue Jenny Craig Market Share = 11.6% Founded in 1983 in Melbourne, Australia Now owned by Nestle Has provided services to more than 5 million members Offers 80 entrées and snacks to clients Sells videos, cookbooks and exercise accessories Consultants offer advice and encouragement to members Nutrisystem Market Share = 15.1% Established in 1971 Typical customer is female and about 50 years old Offers home-delivery meal program with low-calorie and portion-controlled meals Counselors are available to answer questions and make recommendations to clients (online tools and counseling) Primary Advertising Methods Informative Advertising Price Ease Disclaimers Methods of Access ◦ Website ◦ Phone Number Science and Health Science in Weight Loss Ads Nutrisystem uses the science of the "glycemic index" to differentiate "good carbs" from "bad carbs" Celebrity Endorsements Weight Watchers "Expect Amazing" Campaign Use of celebrity endorsements (Jennifer Hudson, Jessica Simpson) Mention new "Weight Watchers 360" program which is "built for human nature" Relate to people who have failed at diets before Mention typical "non-diet" foods that you can eat on the program Expect Campaign Average People Testimonials Include Emotional Stories Try to relate to audience they are targeting Explain Product Attributes through narrative "The I'm only human and I did it Project" A compilation of video blogs from average people (and celebrity endorsers) giving unedited and unfiltered testimonials of their successes with Weight Watchers. As an experience good, these ads strive to enhance perceived quality and credibility of the service Targeted Audiences Young Women Mothers Men Targeting Moms: "We Know Moms" Campaign Launched by Jenny Craig with actress Nicole Sullivan Targeting Men: Weight Watchers for Men Feature celebrity NBA player Charles Barkley Frequent use of humor Mention of typical "man foods" such as beer, wings, pizza Break stereotype that diets are for women Humor Ads Less common Used more for ads targeting men Charles Moment Emotional Benefits Important for an Experience Good Confidence Happiness Reclaimed Youth Love Life Typically used in testimonials and are important for an Experience Good Valerie Bertinelli for Jenny Craig Product Placement Food Appeals Visuals Recipes Branded Food Sex Appeal Before and After Improved Sex Life Nutrisystem Campaign "A Different Approach" One testimonial: ◦ "Since nutrisystem, my sex life is excellent." Another ad questions: ◦ "Has your sex life slowed down or come to a screeching halt?" Internet Advertising Website with Online Tracking and tools Special Online Ads only and Video Blogs Online Calculators Weight Watchers’ Ana Gasteyer Online Campaign Exclusive online campaign featuring celebrity comedian Different approach from the usual uplifting, inspirational spokespeople that are normally used Social Media Comparative Ads Weight Watchers Comparisons ◦ 'No Counting!' Nutrisystem Comparison Website Advertising Expenditures Weight Watchers ◦ 2012 Advertising and Marketing Expenditures $27,437,000 (Source: Mergent Online) ◦ 2012 Ad-to-Sales Ratio of 18.31% Raw Data Analysis Advertising Strategy Data Analysis 1. Collecting Raw Data Watch a variety of commercials to get a feel of the industry and possible strategies ◦ create a comprehensive list of these strategies with a coding mechanism 0= no use of the strategy 1= use of the strategy Continuous count method also used for product characteristics Advertising Strategy Data Analysis 2. Watch Advertisements ◦ Weight Watchers= 10 Ads ◦ Jenny Craig= 10 Ads ◦ Nutrisystem= 7 Ads Coding scheme was employed while we watched the ads 3. Analysis of the Raw Data collected Results from Analysis- Weight Watchers Weight Watchers differentiates itself from competitors by more often employing these strategies in ads: ◦ ◦ ◦ ◦ ◦ ◦ Real People No mention of actual pounds lost Mobile App Mentioned Musical ads Humor ads Targets Men Results from Analysis- Jenny Craig Jenny Craig differentiates itself from competitors by more often employing these strategies in ads: ◦ ◦ ◦ ◦ ◦ Testimonials Waist size/dress size mention Use of emotional stories Support System Targets Mothers Results from Analysis - Nutrisystem Nutrisystem differentiates itself by more often employing these strategies in ads: ◦ Celebrities ◦ Average pounds lost was over 20 lbs ◦ Website mentioned ◦ High Product Characteristics count ◦ Mention of "non-diet" foods ◦ Disclaimers ◦ Before and Afters ◦ Mention of benefits other than weight loss ◦ Price ◦ Special Offers ◦ Own Branded Food Mentioned ◦ Ease of Use ◦ Visual of Foods ◦ Science of weight loss ◦ Variety Celebrity Targets Mothers Targets Men Real People Waist Size Mention Emotional Stories Humor Price Mentions Health Benefits Ease of Use Support System Mention Non-Diet Foods Investment and Advertising Recommendations Investment Strategy As with any investment, one must evaluate their portfolio and risk/return preferences That said, of the three, we would invest in Weight Watchers ◦ US based (Nestle based in Switzerland) ◦ Performing well and growing (less risky than Nutrisystem) ◦ Most flexible option to fit into everyday life Recommended Advertising Strategies Appeal to Older people ◦ Nutrisystem expected to expand food system and advertise the nutritious nature for aging bodies Appeal to Children ◦ Obesity in children is a growing epidemic. ◦ According to the CDC, it has more than doubled in the past 30 years Appeal to Men ◦ Higher percentage of American men are overweight or obese than adult women Questions? 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