WeightWatchers needs to put weight behind digital transformation as it sheds pounds (and other currencies) from the bottom line

 

We are eyes wide open that our turnaround will take time.

So says Sima Sistani, CEO at WeightWatchers International. Given the shocking numbers the firm’s just turned in, she’s clearly quite correct. The company, now heading into its 60th year, saw Q3 revenues shrink 14.9% from $293.5 million to $249.7 million year-on-year, while profits of $46.3 million this time last year have collapsed by 544.7% to a loss of $206 million .

Ouch!

The digital transformation progress - or otherwise - of WeightWatchers has been long tracked by diginomica. Last time we checked in, there was much management talk of a need to move away from the “lonely experience” of digital and back towards the old-style group meetings in the real world.

Under Sistani as CEO, the company had engaged on what it calls a “data-informed approach to product development”, focused on four pillars of community, accountability, coaching and yielding positive results.  Flash forward to this week and she argues:

As we move into our 60th year, we must evolve to deliver the experience of today. The consumer has changed. Culture has changed. Technology is changing. To maintain our position as the global leader in sustainable science-backed weight management, we have to better meet consumer needs across education and tools, human led support, health indicators and insights and clinical intervention. And our growth strategy must mimic those needs.

She adds:

We have a program that works, members who love us, 60 years of efficacy in a space where new entrants come and go. We are turning that solid foundation into a best-in-class digital experience for the future. We have been consistent that 2022 would be a year of transition, shifting focus and resources back to what we do better than anyone else, waive off and away from initiatives that were not driving an impact and complicating the member experience. We have done that with urgency.

 

But with some 80% of members now digital-only thanks to the push made by previous management regimes, there are some uncomfortable stats of note:

• Subscribers in Q3 2022 were down 15.0% versus the prior year, primarily driven by declines in the digital business in all geographic markets.
• Q3 2022 digital Subscribers decreased 17.7% year-on-year.
• Digital ‘Paid Weeks’ decreased 17.3% versus the prior year.

What to do?

The key to turning this around is data, data, data, insists Sistani:

We are seeing positive impacts from the shift from traditional media buying to data-driven global performance marketing. By in-housing our team in North America, we are faster to market, responsive to media and creative trends and more efficient with spend, and we will be leveraging all of these learnings as we head to our peak season.

But while we are making progress on sign-up trends, we also saw a modest uptick in cancellations during the quarter, largely related to six-month commitment plans that ended in July. We have found that member engagement and satisfaction has declined with personal points compared to prior programs, an issue we are actively following for. This simply reinforces what we already knew that our program and our product must provide a simple and engaging member experience.

Some of the conclusions coming out of this data-focus do indeed seem to be fairly simple. For example, Sistani states:

Our data shows that activated members churn at a rate that is roughly half of a non-activated member. In addition, the science and our data supports that these members will be more successful on Weight Watchers over the long term.

So, basically, if you use your membership, you’re more likely to hang on to it than if you don’t? And if you use it, you’re more likely to lose weight than if you don’t? Astonishing revelations indeed.

Sistani insists that there are more sophisticated deliverables coming through:

Now that we are measuring activation rates, we have observed a promising uptick in recent months, demonstrating that the changes we have made to the app are working. Driving the behaviors and connections that lead to member success will create a network effect that delivers efficient acquisition and longer retention. We are now better able to calibrate our product road map moving forward. With that in mind, we have considerably increased our technical velocity, choosing future improvements to increase engagement and retention in our products.

Recent changes include a meaningful update to our food search algorithm, with test results showing a double-digit reduction in customer service contact and a reduction in churn; streamlining weight tracking to drive consistent accountability, demonstrated by a material increase in the usage of this feature. Last month, we rolled out a new onboarding funnel in the US, increasing the share of line-ups choosing our premium products; and we enhanced our in-app encouragement of weight and food tracking activity, which has contributed to the increase in our activation rate. This has demonstrated that our gamification techniques are a meaningful lever, and we are excited about future iterations planned in the coming quarters.

OK, so given that it’s accepted that this is very much a marathon, not a sprint, what’s coming up in the next year? Sistani says:

We are looking ahead to 2023 and focus on the following - improving our sign-up trends over the course of the year and returning to a year-over-year growth trajectory in the second half of 2023; improving new member activation, which would translate into gains and retention; shipping key digital product milestones, including new in-app community features in the first half of 2023.

She concludes:

As we look ahead to the peak winter season, we have the essentials in place to deliver a strong member experience that will put us on a path for improved performance. However, we still have a good deal of work to do to deliver the connected community at the intersection of digital and IRL that I believe is our future, which will drive subscriber growth.

My take

We are committed to instilling a company culture with bias to action, data-informed decision-making and evergreen innovation.

There’s a lot of flowery management speak on show at present with nice sounding mission statements underpinning it. That’s all good and well and there’s no doubt that the firm’s current pursuit of an online/offline omni-channel balance to its operating model is the right way to go and far more likely to deliver results than a digital-only obsession that was previously on show.

But unfortunately the turnaround is indeed an immense one and will take a long time to put in place. While the pandemic has made many more of us health-conscious, success is not guaranteed. Hitch a downhill ride on Pelaton to check that out.

WeightWatchers has a powerful brand that despite some highly questionable antics in recent years, still has clout. But ironically it needs to be putting weight onto that brand. Or as Sistani puts it:

There is no question that the Weight Watchers program works. That has been well documented in more than 130 peer-reviewed studies and 35 randomized controlled trials. We just need to deliver it better, both from a product and brand standpoint.