Trimming the technology fat at Weight Watchers as the Oprah factor doesn't kick in

One of the more unexpectedly popular articles run on diginomica last year was a look at digital transformation within Weight Watchers.

That article looked at how CEO James Chambers was betting the farm on digital innovation, but coming from behind in a market sector increasingly dominated by wearables and apps. It noted:

Weight Watchers misjudged the long game trends in the market and now finds itself playing catch-up as a legacy providers of services and products.

On the plus side, it has a 50 year plus brand; on the negative side, it’s got an old, established business model and culture that’s going to be hard to shift.

Flash forward six months and we can see that the struggle to shed the weight of the past and find a slimline digital future is very real. Last week the firms turned in  an $11 million quarterly loss on a 21% drop in revenue.

That sent the share price tumbling 20% and, as the headlines observed gleefully, cost Weight Watchers most famous shareholder, Oprah Winfrey, $27 million.

Oprah last year became the public face of Weight Watchers after buying a 10% stake in the firm and fronting new weight management programs.

But that hasn’t delivered the uptick that the company expected. Chambers remains adamant though that part of the problem is one of perception and positioning against the competition, but he argues that the combination of offline and online activities is working. 

We do have a lot of feedback from consumers, both from development, but now importantly when they're experiencing the program in the real world and the satisfaction is very high. It's high on both the meetings product and the online product.

They're telling us that they're having very strong weight loss. They are telling us that upon coming into the program they had confidence that their participation in the program is going to get them the results that they want.

They are experiencing a better integration and better digital tool supporting that, and as we have said many times in the past, just the general positioning of Weight Watchers as not a diet, but more of a holistic program with integrated fitness. They're responding very, very well to that.

This is leading in turn to the delivery of new digital capabilities, he adds:

We have leveraged our insight's capabilities to launch the Beyond The Scale program and an associated improved service experience for both our digital and meeting room products.

We have improved the digital tools that are the online product and that support the meeting room product. And we are innovating in a different way there, and so we will be bringing feature enhancements and changes much more periodically to that product than we have in the past.

And that's all a function of having a new technology environment and a new development model. I would say that our relevance is there. It's been across both meetings and online and we have more to go.

One example of new digital offerings is Connect, a social platform embedded in the Weight Watchers mobile app that acts as collaborative community tool. Or as Chambers puts it:

[Connect] brings the support and magic of the Weight Watchers community to members anytime, any place. Connect is a safe, trusted place where members share their stories, inspire and encourage each other, and share tips and hacks for getting the most out of the Weight Watchers experience. It is simple and engaging and has experienced high penetration among our mobile member community since its launch and has generated nearly 1 million posts in less than 2.5 months.

But what about that elusive ‘Oprah factor’ that doesn’t appear to have delivered the goods to date? The firm’s winter advertising campaigns involved Oprah telling the world in her own words why she joined Weight Watchers and culminating in her urging others to join her on her ‘journey’. Chambers says:

This direct and emotional appeal resonated strongly with members and non-members alike and grabbed significant media attention.

In addition to having appeared in commercials, Oprah has posted updates and anecdotes about her journey on social media, including on the Connect feature of the Weight Watchers mobile app.

And she recently hosted a conference call with Weight Watchers members about shared member experiences. More than 40,000 members participated live and nearly double that listened in via replay. The response to Oprah's participation in the member community has been overwhelmingly positive.

The other thing that's been incredibly powerful and responsive is Oprah's engagement in the community. If you happen to go on the Connect tool and follow her, you'll see a little taste of what I'm describing. But her natural ability, her authenticity as a member sharing the journey has been a very, very positive thing.

Weight Watchers has also been addressing its front- and back-end technology infrastructure with a view to cutting the fat there. Chambers says:

Our technology environment is running at lower cost with higher capability, and improvements to our agile innovation model reflect our strategy to deliver continuous innovation validated through consumer exposure.

During 2015 we made significant progress on our technology transformation enabling us to launch our new program globally and laying a foundation for an increasingly tailored experience.

We rebuilt our consumer facing website and mobile platforms on new technologies, largely replacing our legacy dot com infrastructure with open source cloud-based technology. In addition, we implemented a new agile approach to product development which will allow us to shorten our innovation cycle.

What that means in practice is that the firm can look to cut spending on technology from $115 million a year in 2014 to $70 million in 2015. But in a warning perhaps of what such cuts can bring about, Chambers admits:

We did have a few technical difficulties with our website and apps around the time of the launch related to the upgrading of our tech infrastructure.

But he insists:

These issues were resolved by mid-December.

Which is more than can be said for the financial performance.

My take

The unanswered question is whether America has fallen out of love with Weight Watchers or whether it’s just fallen in love with Fitbits, Apple Watches and other sexy wearables.  While Oprah’s endorsement via Twitter last year of Weight Watchers sent the share price soaring, her presence seems to have added little else to date.