Soaring Highs & Sizzling Lows: Peloton’s Journey To Success

When you hear “Peloton”, what comes to mind? A big fitness brand? High-end, at-home workout equipment? Multiple lawsuits and safety recalls? The uncomfortable 2019 commercial where a husband gifted his wife a Peloton for Christmas (and she looked less than pleased)?

Or maybe that episode of And Just Like That… where Mr. Big dies of a heart attack after a grueling Peloton session? Or, perhaps… no, we’ve made our point: Clearly, Peloton has dealt with its fair share of issues over the last few years.

In many ways, the pandemic allowed Peloton to reach unprecedented heights. With the demand for at-home workout equipment skyrocketing in 2020 due to stay-at-home requirements, the brand actually had to up production to meet orders at a time when so many other companies were losing business.

But, the last few years also saw new lows for the brand — and were riddled with controversy. From tone-deaf commercials to tragic loss of life, Peloton has had to deal with some incredibly difficult situations. And while the brand’s responses haven't always been perfect, it has made an effort to make amends.

However, with post-pandemic demand having decreased and Peloton’s shares having dropped 76% from their pandemic high in 2020, the brand is now facing a new crisis: an oversupply of products.

So, this brand deep dive will take a look at Peloton’s controversial rise to fame, as well as the issues it previously faced and will have to face in the coming months. Plus, three lessons other brands can learn from Peloton’s actions.

Peloton’s Rise to Fame

Source: Good Housekeeping

In 2011, John Foley was an executive at Barnes & Noble when he came up with an idea: what if he could make it possible for people to have the full high-end studio cycling experience in the comfort of their own homes?

Foley saw technology as the answer to this quandary, and in January 2012, Peloton Interactive, LLC was officially founded. To get off the ground, the company raised $400,000 USD in seed money in February 2012 and another (much more impressive) $3.5 million in December of 2012.

With these first injections of capital, Peloton was able to create and sell its first bike on Kickstarter in 2013 — which offered an “early bird” price of $1500. Clearly, the Peloton bike was supposed to feel exclusive and luxurious with a price tag like that. And by 2014, the brand released its first stationary bicycle — perhaps what it's best known for.

Perhaps most importantly, Peloton showed up on the scene at a time when our collective obsession with stationary cycling was at an all-time high. Think SoulCycle and Equinox — everyone from your middle-aged, recently divorced neighbor to celebrities on social media were obsessed with cycling classes.

In many ways, brands like Peloton created a cult-like following. According to an article for CNBC Make It, there’s a good reason people were so invested in Peloton:

“The convenience of being able to take a top-notch studio cycling class on a high tech bike at home any time you want, combined with motivational instructors and a supportive but competitive community of users has created a devoted following”.

But it’s not just customer devotion to the Peloton experience, it’s also how much they’re prepared to pay to have and maintain this experience. After all, they’re “willing to pay $1,995 for an exercise bike, not including the $250 delivery fee or the $39-per-month subscription to stream the company’s live and on-demand classes.”

Sure, you could buy a Peloton bike and then just use it to do your own, individual workouts. But that’s not what Peloton’s selling — they’re selling a brand experience. When you buy a Peloton bike or treadmill, you become a part of the Peloton community. Dubbed “the Apple of fitness” by Business Insider, Peloton’s goal is to control the user’s workout experience from start to finish.

In 2018, the brand unveiled its new Tread+ — a $4000 treadmill that came with a 32-inch touchscreen and soundbar mounted to the front of the machine that streamed Peloton classes and audio. Like the stationary bike, Tread+ allowed customers to become fully immersed in the Peloton community — providing a sensory experience far superior to your average treadmill.

Later the same year, the brand announced its plans to expand to the UK and Canada, as well as the construction of a flagship studio in New York City — where it could film its high-energy classes.

However, 2019 ushered in some real problems for the brand. In March, Peloton was sued by the National Music Publishers Association. The complaint was filed by Ultra Music, Downtown Music Publishing, and eight other publishing groups, and it claimed that Peloton had been “using their musical works for years in its workout videos without proper licensing, resulting in income lost for songwriters.”

Source: CNN

The main issue was that Peloton “used more than 1,000 musical works owned or administered by Plaintiffs over a period of years in the videos that it makes available to its hundreds of thousands of customers without a synchronization (or “sync”) license.” Thus, the plaintiffs asked for $150 million in damages.

This lawsuit forced Peloton to change the music used in its sessions, as well as remove certain workout sessions that used music specifically mentioned in the lawsuit — which made a real impact on the user experience.

According to an article from The Verge, with the changes brought about by the NMPA lawsuit, workout playlists no longer “flow like they used to”. One Peloton customer went as far as to say:

“It has affected the way I work out. I find myself scrolling through classes for at least five minutes before I can find a playlist with 50 percent decent songs. It’s annoying. (...) I paid a considerable amount of money (for Peloton) and I expect a premium experience.”

This sentiment was shared by many Peloton customers, and, understandably, this did some damage to the company’s brand image. Later that year, the lawsuit was amended and increased to $300 million — putting even more pressure on the brand. Shortly thereafter, Peloton settled the lawsuit, but the terms were never made public.

2019 also saw Peloton become a public company via an IPO, which raised $1.6 billion and brought the company’s value up to $8.1 billion. However, although the company’s sales did grow between 2018 and 2019, so did its costs.

While sales rose 110% from $435 million in 2018 to $915 million in 2019 — the 2019 net loss “widened to $245.7 million, from a net loss of $47.9 million in the prior year, amid growing sales and marketing costs.” Clearly, growing the Peloton brand was an expensive endeavor.

The brand’s next faux pas came in the form of a cringe-worthy holiday commercial, titled “The Gift That Gives Back.” In the ad, a woman receives a Peloton from her husband and begins recording a video diary of herself using the bike. Towards the end of the ad, she states that she “didn’t realize how much it would change” her.

Source: Distractify

While the commercial was meant to spotlight and celebrate a “fitness and wellness journey”, consumers saw it as “dystopian” and “sexist”. Not only did the woman herself look less than pleased while using the product, but critics also pointed out that “the woman was already slim at the start and the implication that her partner thinks she needs to get fitter and lose weight was patronising and damaging.”

In response to the ad, Peloton’s value dropped by almost $1.5 billion USD and the brand’s share price was also negatively impacted. The commercial was also spoofed by the likes of Ryan Reynolds, in his Aviation Gin ad entitled “The Gift That Doesn’t Give Back”.

Cut to 2020, and Peloton was in the midst of another lawsuit — but this time, they were the complainants. In February, competitor Flywheel stopped offering its at-home cycling services after Peloton “accused Flywheel of corporate espionage and intellectual property theft”. As part of the settlement, Flywheel “admitted that it copied elements of the Peloton bike in developing its Fly Anywhere bike” under an initiative called “Project Magnum”.

Not only did Peloton rid itself of a rival, but it also took the opportunity to gain new customers. After Flywheel shut down, Peloton offered Flywheel customers the opportunity to exchange their bikes for refurbished Peloton bikes — at no cost. This was a smart move and showed Peloton to be “the bigger person”.

Over the last two years, Peloton also saw an increased demand for its products — as, with gyms shut down, working out at home became a necessity for many consumers around the world. However, Peloton wasn’t able to keep up with the rapid increase in demand, which lead to shipping delays and canceled orders.

Thus, in December 2020, the brand invested $100 million in shipping solutions with the goal of decreasing shipping times and accelerating manufacturing. This made sense as a solution to the increased demand of 2020 and 2021. However, since early 2022, demand decreased quite a bit — leaving Peloton with an abundance of unsold bikes and treadmills.

Additionally, Peloton’s shares dropped 80% from their pandemic high in 2021, which lead CEO John Foley to lay off 2,800 employees in an effort to save $800 million annually. Following the layoffs, Foley stepped down as CEO but still retained 80% voting power.

In 2022, Peloton seems to be shifting focus and has announced a comprehensive program to “reduce costs and drive growth, profitability, and free cash flow”. Whether or not this plan will work has yet to be seen.

3 Lessons You Can Learn From Peloton

Source: 24me

When looking at a brand like Peloton, there’s a lot to learn from — both positives and negatives. While the company has made mistakes over the years, it’s also managed to build up a tight-knit, cult-like community who are dedicated to the brand.

So, what can you learn from Peloton? Let’s take a look.

1. Make Customer Safety A Priority

This may seem like a fairly obvious tip, but looking at Peloton’s history, it’s clearly still one that some brands need to learn.

In May 2021, the U.S. Consumer Product Safety Commission made an official statement warning consumers with pets and children to immediately stop using the Tread+ — as one child had died and 40+ had been injured because of the treadmill.

They had received multiple reports of children and pets being “pulled, pinned and entrapped under the rear roller of the Tread+ treadmill, leading to fractures, scrapes and the death of one child.”

Peloton’s response to this incident was less than impressive. Instead of erring on the side of caution, the brand claimed that there was “no reason to stop using the treadmill as long as children and pets are kept away from it at all times, it is turned off when not in use, and a safety key is removed.”

Understandably, many consumers were not impressed with Peloton’s response to such serious and upsetting claims — and shares fell by 14%. Thankfully, the brand reconsidered and decided to voluntarily recall the Tread and Tread+ models in May 2021.

CEO John Foley also apologized publicly, saying:

“I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission's request that we recall the Tread+. We should have engaged more productively with them from the outset. For that, I apologise.”

Peloton also offered to move customers’ treadmills free of charge to a room where children and pets have no access, and the brand reintroduced an updated version of the Tread that included a removable safety key. Furthermore, Peloton introduced the Tread Lock feature, to prevent children from being able to use the treadmills when alone.

While this was a much better response to the issue at hand, some consumers still felt it was too little, too late — and the brand’s image took another hit. Additionally, as of August 2021, the brand was also under investigation by the Securities and Exchange Commission concerning customer injuries and has also been subpoenaed by the Department of Justice.

The Takeaway: When it comes to a brand’s priorities, customer safety must come first. If your products or services are causing consumers harm, the only course of action is to recall and see how you can make amends.

Peloton didn’t approach this situation correctly and, thus, ended up looking like a brand that cares more about profit than human life. This damaged its reputation and share prices, which eventually led to the brand taking a different approach — but it never should have gone down this way.

2. Lean Into Community & Gamification

One of the most appealing aspects of Peloton is the close-knit community it created. Peloton users LOVE the brand — everything from the bikes and treadmills themselves to the live-streamed classes.

To own a Peloton product is to be a part of the Peloton community — and this is an impressive allure for many consumers who enjoy this feeling of belonging. It’s one of the reasons why Peloton has managed to become so successful in such a short period of time.

In addition to the community the brand has created, it also uses gamification features in smart, fun ways. Users can compete with one another on a live leaderboard based on output (aka the total wattage of energy expended) — which taps into humans’ natural sense of competition.

Source: Peloton

Users can also tap on others’ usernames to give them a virtual “high five” — a nice way to show encouragement in a digital setup. Additionally, in July 2021, Peloton launched a game for its stationary bike, called Lanebreak.

The game featured an obstacle course where players can control a tire by pedaling and use the resistance knob to switch lanes and avoid obstacles. This added a whole new layer of fun and excitement to using a Peloton bike and likely enticed more consumers to give it a go.

The Takeaway: When creating a product or service, it’s always a good idea to search for ways to build up a community. When a brand can successfully foster a community around its goods or services, it becomes more than just a purchase — it becomes a part of customers’ lives.

Finding ways to connect with consumers and integrate your brand into their lives isn’t an easy feat, but using community and gamification features is a smart way to go about it.

3. Make Strategic Use of Relevant Influencers

They may not have started out as well-known influencers, but many a Peloton instructor has become one over time. From Christopher Meloni to Jess King — Peloton’s association with these influencers has helped strengthen its brand over time.

These fitness instructors/influencers are a huge part of Peloton’s allure — and the brand has made good use of them.

But, not only has Peloton built up a cult following around its charismatic, high-energy instructors, it’s also tapped into the power of famous faces.

Just consider the brand’s , which are special formated classes that feature playlists from featured musicians — such as Britney Spears, Alicia Keys, and Jennifer Lopez. Associating the Peloton brand with these famous figures actually improves consumer perception of the brand.

Source: Sports Insider

Furthermore, there are quite a few celebrities that are active members of the Peloton community. From Usain Bolt to Hugh Jackman to Richard Branson — their use of Peloton’s equipment makes the brand more attractive to many consumers.

The Takeaway: Never underestimate the power of a famous face. Seeing a big-time celebrity using a product or service can increase brand awareness and even brand consideration.

Of course, you have to ensure that you’re using the right influencers in the right ways — but, celebrity endorsements and influencer partnerships can be an effective way to connect with your target audience.

Final Thoughts

There’s no getting around it, Peloton is a polarizing brand — but, for many consumers, that’s part of the appeal. If you love Peloton, then you really love it. And if you don’t like Peloton, then you think it’s a joke.

Either way, consumers feel strongly about the brand — and Peloton has used this friction to build brand awareness and grow. Though it experienced a boom in demand thanks to the global pandemic, the brand is not struggling as the world opens up again.

To make it through this slump and come back stronger than before, we would recommend that Peloton taps into consumer insights via the use of brand monitoring software. Providing reliable, accurate data on what the brand’s target audience likes and dislikes, brand tracking would allow Peloton to make smarter, more data-driven decisions.

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