Peloton, the fitness company known for its digitally connected indoor bikes and treadmills, halted production to address excess inventory amid waning sales. The company’s fortunes rose with the advent of the pandemic as gyms closed and at-home activities increased. In 2020, Peloton had trouble meeting demand as extraordinary market shifts favored its offerings. Now, contraction matches the rapidity of that expansion.
An assessment of Peloton’s position entails several key marketing concepts:
Situational Analysis: The situational analysis confirms internal and external realities for the organization that will dictate marketing decisions. Market environmental forces are prominent external factors, namely sociological, technological, and economic trends. Peloton appears to have forecasted demand remaining at early pandemic levels. While the history-changing event has brought significant changes in consumer preferences (e.g., increased acceptance of telehealth), other companies like Netflix that prospered during the pandemic are seeing declines.
Competitive Analysis: Competitive analysis is a component of the overall situational analysis. Peloton’s competitors have strengthened their positions due to Peloton’s lack of differentiation. Peloton enjoyed first-mover status in “connected fitness products,” in-home exercise equipment with touchscreens, digital content, and specialized software. Accordingly, it adopted a price skimming strategy, charging high prices for new products. Competitors have joined the connected fitness product space, demonstrating technology parity. Increased competition invariably leads to lower prices, undercutting Peloton’s price skimming approach. Apple has been successful with price skimming over the years, building a premium brand in the process. Peloton’s attempts at similar price justification are faltering.
Services Marketing: Services marketing is a crucial addition for companies offering hardware, as it provides a steady revenue stream beyond the one-time purchase. Looking again to Apple, the company has been building its servicesofferings to grow revenue and strengthen loyalty to its signature products, primarily the iPhone. Peloton uses a similar model as users pay monthly fees for access to workouts and related programs and content. Their success in services marketing is measured a low churn rate, indicating customer retention. Services also do not create inventory and delivery issues, as seen with Peloton’s physical products.
Public Relations: The announcement of the production stand-down is the latest of a string of negative stories for Peloton. Weakness in public relations undermines credibility with customers and other stakeholders. PR missteps for Peloton include:
Executives selling personal holdings of company stock prior to the company’s announcement of suspended production, raising issues of insider trading.
On the show ”And Just Like That,” the character Mr. Big dies of a heart attack triggered by riding a Peloton. Peloton countered by creating an ad with Mr. Big actor Chris Noth, only to have Noth accused of sexual abuse, compelling the company to pull the ad.
A six-year-old boy died in an accident with a Peloton treadmill. The company resisted a recall before relenting.
Peloton has enjoyed high visibility for the past decade, but achieved its only year of profitability in 2020 due to pandemic sales. The company faces multiple challenges when assessed through the model of Porter’s Five Forces—competitors gaining share with penetration pricing, and the threat of substitution as gyms regain customers. Can Peloton adapt?
You were running the race so well. Who has held you back from following the truth?
Galatians 5:7 NLT
Should Peloton cut prices in the face of less-expensive competition? Would this hurt its high-end positioning?
Is Peloton a content company with its touchscreen workouts? If so, does this place it in competition with more experienced content companies?
Has Peloton lost its reputation with its PR missteps? What does the Bible teach us about reputation?
JASON WILLIAM KARPF 