EDiets tries to combat that handicap with chat rooms and bulletin boards on its website, as well as a toll free number dieters can call for help or a kick in the pants. If a member calls to say she’s having trouble staying on the diet because she’s hungry all the time, eDiets’ staff can access the member’s information through a Web-based application that is linked to the diet engine and the customer database. They can see the meal plan the customer is currently using and adjust her caloric intake.

The personalized approach seems to be paying off. EDiets celebrated its first profit one year after it launched online in November 1999 and has been in the black ever since. The company earned approximately $11.4 million in revenues in 2000 and an estimated $25 million in 2001, 90 percent of which were generated through paid subscriptions.

The Beauty of Integration

Like eDiets, Reflect.com also developed proprietary technology to customize its products?in this case, skin and hair care products and cosmetics. When the online company (which is majority-owned by Procter & Gamble and 15 percent owned by venture capital firm Institutional Venture Partners) launched in 1999, many onlookers were skeptical that the company could actually do such a thing, says Jonathan Grayson, Reflect’s CIO. Besides convincing women that customizing beauty products is possible, Reflect.com also has to carve a niche for itself in the highly competitive beauty care space.

Now, when a customer wanders on to Reflect.com and indicates an interest in buying eye cream, she is prompted to fill out a questionnaire that will help Reflect.com create a product that suits her needs. She indicates, for example, whether she gets dark circles or puffiness under her eyes, whether she would like the skin under her eyes to be smoother, if she has laugh lines that she wants to reduce, and if her eyes are sensitive.

Once she completes the questionnaire, it is transmitted to Reflect.com’s homegrown matrix system and its IBM Websphere transaction system, which processes the order. The matrix system is a connected system that learns from example rather than following preset programs. The matrix determines which active ingredients should or should not be included in a product given the parameters the customer has provided. So if the customer purchasing the eye cream indicates she wants to minimize dark circles under her eyes but thinks her crow’s feet give her character, her eye cream will be made with vitamin C to treat the dark circles, but vitamins A and K, which supposedly reduce wrinkles, will be left out.