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Join Our Research Team at DMA 2014
Aug 17, 2001
Case Study

eDiets Profitably Sells Millions of $65 Diet Counseling Subscriptions Online

SUMMARY: Learn how eDiets became the most successful -- and profitable -- subscription site selling dieting advice online.
(Note: Marketer Caporale's banner advertising lessons are definitely worth checking out.)
CHALLENGE

eDiets was never supposed to be a Web-based service. Back in 1996, founder and CEO David Humble's idea was to put interactive kiosks into real-world supermarkets.

EVP Business Development Ronald Caporale explains, "The theory was you would walk up to a kiosk, like an ATM machine, and you would plug in your weight and things like you like to eat, and it would spit out a week's meal plan plus shopping list. You'd tear it off and go."

60 days before the kiosk launch date, eDiets' development team, almost incidentally, popped the interface up online as a Web site to test user interface. They intended to drive a quick 20,000 visitors, note the results and pull it down. The results were thrilling. Caporale says, "People were going nuts on the Web site, it was a smash."

Next with much excitement, eDiets placed their first prototype kiosk in a local Winn-Dixie supermarket. It was a complete failure. Caporale explains, "Nobody would go near the damn thing."

So, eDiets quickly scrapped their real world plans and went 100% online. Immediately after having "the pleasure of dumping the kiosk in the dumpster," Caporale received a battlefield promotion. Now he was in charge of Internet marketing.

He had a product that Web surfers loved, but he was hamstrung by two factors. He'd never done an online campaign before, and indeed had almost no prior direct marketing experience. Plus, he didn't have any money to waste. eDiets never took on any outside investor money. From day one, Caporale's customer acquisition marketing campaigns had to break even -- or better.

CAMPAIGN

eDiets' online plan was to become the virtual version of Weight Watchers and Jenny Craig, for dieters who were too busy (or just unwilling) to drive to a real-world center. The service is sold on a subscription-basis. Pricing generally is around $35 for the first three months and $10 a month thereafter.

Caporale explains, "I think it's an impulse purchase. Everyone wants to lose 10 pounds at some time. We have to have that call to action in front of them when they're ready to commit, ready to do it." But how do you reach "everybody" online without wasting millions?

He started by setting up a detailed measurement system. He says, "We calculate the ROI on everything we do. Impressions, click rate, conversion rate, average sale at the end of the day, whether that purchase is profitable or not. We manage each campaign on literally a day-by-day basis." Like eBags, eDiets also developed a system that serves parallel Web sites to see which design and offer tests achieve the best conversion rates. These tests are monitored in real time.

Caporale decided to invest only in media where he could both measure results and alter creative to improve results within a day or sooner. This meant TV, radio, print and out-of-home media were out of the question. Online ads were the way to go.

He carefully tested hundreds of banners and email newsletter ads on media from portals and online ad networks to 3rd tier women's sites. He also tested doing the media buying in-house versus allowing an agency to do it for him. He tested a wide variety of offers, price points and creative approaches just as thoroughly.

Initially, Caporale bought online media on a CPM basis, just like everyone else. However, as the ad market took a downturn last year, he took advantage of it and created a series of CPA deals with key portals and sites. He notes, "We see it as a partnership. We require our partners to bring a lot of marketing muscle to bear."

In exchange for this muscle, eDiets offers partners a "pretty decent bounty", strong conversion efforts and constant feedback on how they can optimize their results ('These placements really aren't working, don't waste your impressions, goose these higher performing ones instead.') Caporale says, "This deal is really a two-way street. It's in our best interest to make their campaign more effective than selling by CPM. We want them to renew the deal." Even when the ad market gets better someday.

The eDiets home page is not its primary conversion tool. It's more of a corporate home page. Instead, Caporale drives new traffic to carefully developed landing pages. He explains the key to landing page success, "People either like a lot of explanation or the shortest possible pathway. There's a happy medium, if you give people too much they don't make it all the way through, but too little information doesn't look like there's enough meat there to what they're buying."

Originally, the eDiets team worried that their key tool, a lengthy personal profile quiz, would hurt conversion rates. Caporale says, "It takes people 10-15 minutes to fill out to begin with. They really invest themselves in the process. Once you've invested and bought into it, you're less likely to dump out and say, 'Forget it.' Plus that process can show them, better than just marketing words, the types of things we take into account, the level of choice and personalization. It really became the major conversion tool."

Once visitors convert to paying subscribers, Caporale's next goal is to get them to continue paying a monthly fee for as long as possible. His key tactic in this battle is online community. Many of eDiets' message boards and chats are fully accessible by subscribers only. Caporale explains, "You want to keep the meat of the premium service behind the pay wall. You also want to create a safe environment for members themselves. Clearly there's some fairly personal stuff being shared. It's a safe, nurturing environment."

eDiets' community is truly and profoundly member-driven. Caporale is proud of the fact that "the only message board we initiated was the first one. We let members tell us what they wanted. You want to corral it and manage it, but the key is listening to members and giving them a forum to discuss the things they told us they want to discuss."

In order to aid conversion, lengthen average subscription terms, and resell lapsed subscribers, Caporale started an opt-in email newsletter, eDiets News. He explains, "Their permission enables you to have an ongoing dialog so when they are ready to purchase, they'll come back to you."

This newsletter contains almost no marketing content. Caporale explains, "The unproductive way to do a newsletter is to continually send marketing propositions. It's common sense -- what you'd like to see in your email box and what you wouldn't like to see. Instead, we send health and diet information that resonates with them."



RESULTS

eDiets had more than 250,000 paying members in the first quarter of 2001. Its average subscription term is six-seven months, a sale of $65-$75. So, although Caporale can't reveal a specific total, MarketingSherpa estimates the company has sold close to two million paid subscriptions so far.

Here's what Caporale has learned over the past five years:

- Call-to-action banners, such as "Lose 10 pounds in six weeks, click here", outperform branding banners, such as "eDiets is the leading weight loss solution", by four or fivefold.

- Pop-up campaigns have worked well as part of a "healthy mix", but pop-unders have not. Caporale explains, "They're high clicking, but very, very poor converting. I think most people click on it to try and figure out where the hell did this come from, and not necessarily because they interested in what they're seeing."

- Skyscrapers and large rectangular banners have been clear winners. "You can have the first couple of fields of the questionnaire on the ad, and if you follow these it's been the best performing for us."

- Slick, cool ad creative consistently loses tests. "It constantly frustrates our creative team. Image-wise cool creative is the greatest thing, but it underperforms against the tried and true 'Lose ten pounds, start now' with the age and weight field in the creative."

- Although he notes, "There are no hard and fast rules" Caporale says results from campaigns on "class A" sites and portals tend to do better than lower tier sites.

- Ad agency creative and media buys have consistently unperformed against in-house created campaigns.

- By constantly running tests on the parallel landing page system, and tweaking based on results, eDiets' sales conversion rate has more than quadrupled over time.

- Almost six million eDiets visitors and members have opted in for the email newsletter. Its information vs. marketing copy editorial tactic proved highly effective. Caporale says, "Early on we would have a tech glitch and the newsletter was delayed, and we'd get a flood of letters saying 'Where's my newsletter?' People want this stuff."

- According to Caporale, eDiets' average subscription term of six-to-seven months is nearly double his competitors' lengths. He gives much of the credit for this success to the community.

- 90% of eDiets online marketing is now on a CPA basis, however Caporale does not expect things to stay this way forever. He notes, "Eventually the ad market will pick up. It's inevitable, we're managing against that and we'll be fine when the recovery comes."

Caporale wants to be sure that all marketers reading this Case Study take what he's learned with a grain of salt. He says, "Diet is a unique animal with very, very high click through and very high conversions. It does not seem to behave in the same was as other verticals." He adds, "In my next life I'd like to go to a company that has a non-competing, completely different subscription offering and see if those rules really work the same way on completely different products."

[Follow-up Note:]

In Feb 2002, six months after this Case Study was originally published, eDiets announced their 4th quarter earnings for 2001.

We were struck by the fact that they continue to be profitable, and their statement, "Revenue growth was driven by growth in program attendance, which reached 10 million in fiscal 2001..." Were the 10 million free registered users? Paid users? Weeks of paid membership sold?

eDiet's Manager Marketing Communications Merilee Kern clarified this for us. She said, "It was determined that on any given week throughout the year of 2001, eDiets had an AVERAGE of 191,000 unique paid members active. So, the 10 million was derived by multiplying 191,000 average "membership weeks" by 52 weeks in the year, totaling almost 10 million (9,932,00 to be exact)."

eDiets didn't pick this method of reporting figures to confuse us content folks, but to strike a pose in comparison to competitor WeightWatchers who publicly measure their sales the same way.

Interestingly the virtual world is catching up to the real world fast -- counted by weeks of attendance eDiets is 42% of WeightWatchers' size.

eDiets:
http://www.ediets.com

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