Nutrisystem 2005 Annual Report Download - page 10

Based on these factors, we believe that we can compete effectively in the weight management industry. We,
however, have no control over how successful competitors will be in addressing these factors. By providing a
well-recognized food-based program using the direct channel, we believe that we have a competitive advantage
in our market.
Our Products and Services
For 30 years, the NutriSystem name has been recognized as a leader in the weight loss industry. We provide
a comprehensive weight management program, consisting primarily of a pre-packaged food program and
counseling. Trained counselors are available an average of 19 hours per day, 7 days per week to answer questions
and make recommendations to help each customer achieve his or her weight loss goals. Customers support,
encourage and share information with each other through hosted chat rooms and bulletin boards. These services
are complemented with relevant information on diet, nutrition and exercise, which is provided on our website and
emailed to our customers weekly.
In December 2003, we introduced NutriSystem Nourish, our current line of pre-packaged, portion-
controlled food sold under the NutriSystem brand. Our NutriSystem Nourish program consists of over 130 food
items that are designed to rank low on the glycemic index, thereby providing dieters with a balanced intake of
“good” carbohydrates, proteins and fats. NutriSystem Nourish also features new, easy-to-use exercise and
behavior modification programs. Dieters also receive our checkbook-sized meal planner, dining out guide and
food catalog.
Typically, our customers purchase monthly food packages containing 28 breakfasts, lunches, dinners and
desserts, which they supplement with fresh milk, fruit and vegetables. Most customers order on an Autoship
basis in which we send food to the customers on a monthly basis until notified by the customer to cease
shipments. With the Autoship program, a full day’s supply of entrees and desserts currently is priced at about
$10.00 a day. The food is shelf stable at room temperature, making it relatively inexpensive to ship and store. On
our website, customers can order food 24 hours a day, seven days a week.
The features of our weight loss program address many of the most common limitations of traditional weight
loss programs, including high initiation and recurring membership fees, the inconvenience of traveling to weight
loss centers for scheduled appointments and lack of privacy. In addition, our prepared meals provide our
customers with a structured program in which they do not have to weigh or measure foods or count calories,
carbohydrates or points.
Marketing
Our primary marketing objective is to cost-effectively promote our established brand and to build sales of
our weight management program through our direct channel. We use a combination of online and traditional
offline advertising and promotional strategies to accomplish this objective.
Offline Advertising. Offline advertising is used to encourage qualified customers to call or visit our
website and increase awareness of the program. We reach our target audiences primarily through a combination
of television, print and direct mail advertising. We use unique toll-free numbers and URLs to individually track
the response of our advertisements. On television and in print, direct response—focused advertisements
capitalize on our brand name and focus on “before and after” comparisons and/or the program’s simplicity,
convenience and “good” carbohydrate features. Direct mail and outbound telemarketing are companions to the
media advertising and consist of mailings and calls to direct customers who have purchased or others who have
signed up for access to our services.
Online Advertising. Our online advertising strategy includes the use of keyword search terms, affiliate
programs, email newsletters and targeted direct email programs. We currently place the bulk of our online banner
advertising through affiliate programs that compensate advertisers on a cost per customer acquired basis.
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