Why Technology Won’t Kill These Weight Management Companies

Many industries have been disrupted by technology, and a lot of people bet that the weight management industry will be next. With free apps acting as weight loss planners, it seems that weight loss programs, gyms, and diet programs could fade into history. However, this one-sided view fails to take into account the critical success factor in weight loss: changing human behavior. Therefore, companies like Weight Watchers (NYSE: WTW  ) , Town Sports (NASDAQ: CLUB  ) and NutriSystem (NASDAQ: NTRI  ) still have a big part to play in helping people shed extra pounds.

Changing behavior
According to research done by the American Journal of Preventive Medicine in October 2013, current weight loss apps don't have sufficient features to help people change their behavior. These apps don't adequately deal with common problems that dieters face such as increased stress and reduced motivation. In contrast, Weight Watchers, a weight management services provider, has long proven itself. Based on a study by the Medical Research Council in the U.K., participants in Weight Watchers' weight loss programs lost twice as much weight as those who participated in programs run by general practitioners. The magic formula that has helped Weight Watchers beat the doctors lies in the unique design of its weight loss meeting programs.

Firstly, the weight loss meetings are led by mentors who provide living examples of the effectiveness of the programs. Role models are extremely motivating for participants, as they can visualize their future success. Secondly, weekly weigh-ins mean that participants can not escape from reality. People can look at themselves in the mirror (or not even look in the mirror) and lie to themselves that they haven't gained weight. However, the scale doesn't lie. Thirdly, peers, as part of Weight Watchers' meetings, provide both the carrot and the stick. If you make good progress, you will receive encouragement from your mentor and peers. If you don't, the mere fact of seeing your peers getting thinner will be a strong motivating force.

While Weight Watchers complements its physical meetings programs with apps and features on its websites, there is no denying that the physical and interactive nature of the programs makes the difference.

Added convenience
One of the biggest selling points of apps is their convenience. People want to have a good rest after a hard day's work on weekdays; some are lazy and don't want to leave their homes on weekends, or simply want to spend more time with their loved ones. Technological advances mean that you don't have to be constrained by time and venue. While sports clubs will never be as convenient as training at home (because of traveling), Town Sports, the largest sports club operator in the Northeastern U.S., wants to ease the pain of traveling for its customers.

Town Sports calls this the "where you live, where you work" concept, where its sports clubs are clustered within its area of operations. As a result, its members are more likely to find Town Sports clubs near both their homes and offices. Town Sports' strategy works well. The data shows that its members visit 1.4 clubs per month on average, which suggests that members like the idea of exercising where and when it's convenient for them. In addition, the high customer retention rate also validates the success of Town Sports' location-clustering strategy. For the past five years from 2009 to 2013, the monthly attrition rate for Town Sports has stayed fairly consistent between 3% and 4%.

Increase quitting costs
Free is not always better, at least from a behavioral standpoint. When there are zero costs to quitting with free apps, you are less likely to persevere with your weight loss plan. On the flip side, if one isn't willing to invest in a paid weight loss program, one probably isn't committed to losing weight in the first place. NutriSystem, which provides home-delivered weight loss meal plans, ironically benefits from the fact that its products aren't free.

Subscribing to NutriSystem's meal pack program costs about a few hundred bucks per month. While this isn't a very large sum of money, it helps to reinforce the commitment. Once one has committed to something, one is more inclined to complete it. The results speak for themselves. An average NutriSystem customer loses 1.5 to 2.0 pounds per week and stays on the program for about three months.

Foolish final thoughts
While technology and consumer preferences are rapidly changing, human behavior, which is at the heart of weight management, rarely changes that much. Peer pressure, convenience, and quitting costs are major factors in the success of weight loss programs, which is something that technology alone can't replicate.

Notwithstanding the recent loss of market share to free apps, the business models of the weight management companies will remain intact. As long as human behavior remains the same, there will always be demand for assisted off-line weight loss programs.

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