WeightWatchers 2002 Annual Report Download - page 13

WeightWatchers.com License
We granted an exclusive license to WeightWatchers.com to use our trademarks, copyrights and
domain names in electronic media in connection with its online weight-loss business. The license
agreement provides us with control over the use of our intellectual property. In particular we have the
right to approve WeightWatchers.com’s e-commerce activities, strategies and operational plans,
marketing programs, privacy policy and materials publicly displayed on the Internet. See
‘‘WeightWatchers.com Intellectual Property License’’ in Item 13.
We own 19.9% of WeightWatchers.com, or approximately 38% on a fully diluted basis (including
the exercise of all options and all warrants). In January 2002, we began receiving royalties of 10% of
WeightWatchers.com’s net revenues and during 2002, we received $4.2 million in royalties from
WeightWatchers.com.
Marketing and Promotion
Member Referrals
An important source of new members is through word-of-mouth generated by our current and
former members. Over our 40-year operating history, we have created a powerful referral network of
loyal members. These referrals, combined with our strong brand and the effectiveness of our program,
enable us to efficiently attract new and returning members.
Media Advertising
Our advertising enhances our brand image and awareness and motivates both former members and
potential new members to join our program. Our advertising schedule supports the three key
enrollment-generating diet seasons of the year: winter, spring and fall. We allocate our media
advertising on a market-by-market basis, as well as by media vehicle (television, radio, magazines and
newspapers), taking into account the target market and the effectiveness of the medium.
Direct Mail
Direct mail is a critical element of our marketing because it targets potential returning members.
We maintain databases of current and former members in each country in which we operate, which we
use to focus our direct mailings. During fiscal 2002 our NACO operations sent over 16 million pieces
of direct mail. Most of these mailings are timed to coincide with the start of the diet seasons and are
intended to encourage former members to re-enroll.
Pricing Structure and Promotions
Our most popular payment structure is a ‘‘pay-as-you-go’’ arrangement. Typically, a new member
pays an initial registration fee and then a weekly fee for each class attended, although free registration
is often offered as a promotion. Our Liberty/Loyalty payment plan in the United States provides
members with the option of committing to consecutive weekly attendance with a lower weekly fee with
penalties for missed classes or paying a higher weekly fee without the missed meeting penalties. We
also offer discounted prepayment plans.
Public Relations and Celebrity Endorsements
The focus of our public relations efforts is through our current and former members who have
successfully lost weight on our program. Classroom leaders and successful members engage in local
promotions, information presentations and charity events to promote Weight Watchers and demonstrate
the program’s efficacy.
For many years we have also used celebrities to promote and endorse the program. Since 1997, we
have retained Sarah Ferguson, the Duchess of York, to promote and endorse our program in North
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