Nutrisystem 2005 Annual Report Download - page 11

Promotion. We have had success generating visibility for our program in various press, television and
radio outlets. For example, our promotional success includes receiving favorable mentions in popular consumer
publications such as People,Women’s World,First For Women and Men’s Health. Moreover, we have promoted
our brand and product by engaging individuals who have appeared in various reality television programs
including Fox Television’s “Joe Millionaire” (Zora Andrich) and “The Swan II” (all contestants).
Sales and Counseling
A majority of our direct business sales occur on our website. The remaining sales are by telephone and our
call center processes virtually all of them, with a nominal percentage handled by third party call centers that
manage volume spikes and periods outside of normal operating hours. Our weight loss program is also sold
through QVC, which represented 7% of revenue in 2005.
As of January 31, 2006, we employed approximately 90 weight loss counselors and 170 sales agents.
Staffing levels for counselors and sales agents are largely a function of the volume of revenue and orders, and
staffing increased substantially in 2005 as revenue and orders increased. Sales agents are responsible for
in-bound sales calls and will initiate out-bound sales calls to our leads and other targeted potential customers.
Counselors handle some in-bound sales calls but primarily focus on in-bound counseling calls, email and
voicemails. Counselors also handle online web conversations from new visitors and appointments with existing
customers. Sales agents and counselors typically operate from as early as 5 a.m. to 12 midnight, seven days per
week. Sales agents are paid primarily on commission while counselors receive an hourly wage.
Counselors typically come from our sales program and have suitable backgrounds and temperaments to talk
with our customers. Our counselors are more experienced and have more training than our sales agents.
Counselors are trained in our meal plan, our internet chat service, email, voicemail, motivational techniques and
customer service problem solving.
Customer Service
As of January 31, 2006, we employed approximately 120 customer service representatives. Customer
service representatives are trained to handle in-bound calls and email from customers that have questions or
problems with an order after the sale transaction is completed. Typical customer inquiries relate to arrival date of
their order shipment, report of missing or damaged items, credits and exchanges and requests to end Autoship
deliveries. For email inquiries, we have a software system that scans the customer’s email message for key words
and automatically supplies the representative with a form response that is reviewed, edited and sent back to the
customer. Customer service representatives are typically available from 8 a.m. to 12 midnight, Monday through
Friday, and 8:30 a.m. to 5 p.m. on Saturday. Customer service representatives are paid an hourly wage.
Fulfillment
We operate an integrated order receipt, billing, picking, shipping and delivery tracking system comprised of
proprietary and third party components. This system integrates the front end, or website customer interface, with
order processing and shipping, and allows internet customers to access shippers’ order tracking numbers online.
Our computer-assisted picking system allows for virtually paperless order picking in all warehouse facilities.
Management believes the integration of our shipping systems with the operations of our outsourced fulfillment
operations is satisfactory.
Except in periods of unusually high demand, management believes that virtually all direct customer orders
are shipped within two days of the day received. Direct customers are not charged for their orders until the
ordered product is shipped. Management estimates that we can ship to 90% of the domestic population from our
owned or outsourced warehouse facilities within four business days using standard ground transportation. We
ship to our customers using Federal Express, United Parcel Service or the United States Postal Service. We do
not currently charge customers for shipping and handling on Autoship food orders.
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