8 Facts About Peloton’s Marketing Strategy You Need to Know

Photo of Peloton treadmill
 

By Tricia McKinnon

When did Peloton become a household name? Was it that ad featuring a mythical “Peloton Wife” or was it during lockdown when more and more people were tweeting about cycling at home? Who would have thought a stationary bike could become a status symbol? Clearly Peloton got its vision right when it launched back in 2012. 

Fuelled by the COVID-19 pandemic Peloton is on a tear. In its 2021 second quarter, Peloton’s revenue surged to $1.06 billion up 128%, giving the brand its first billion dollar quarter. With over 4.4 million members much can be learned from Peloton’s approach to marketing. If you are looking to emulate Peloton’s growth consider these eight factors that have contributed to its success. 

1. In the beginning Peloton’s marketing focused primarily on the features of its stationary bike. Peloton focused on how the bike worked, and its slick digital interface. Often when a brand has a great product it wants to focus on facts and figures so consumers can fall in love with the performance of the product. But consumers often have an affinity to a brand for different reasons. You don’t have to have the best product to be the most successful. It sounds counterintuitive but it happens all the time. 

Take Coke vs. Pepsi. In 1975 Pepsi launched the famous Pepsi Challenge during which consumers underwent a blind taste test and were given both Coke and Pepsi to taste. Pepsi came out the clear winner as the better tasting drink but today Coke has a much larger market share.  Why do most consumers choose to drink Coke when Pepsi tastes better? Coke has done a better job of marketing its brand. As former President of the United States, Barack Obama, writes in A Promised Land “whether I liked it or not, people were moved by emotion, not facts”. Take it from him tapping into someone’s emotions makes a difference.

2. Generating brand awareness can be costly. Throughout most of its history Peloton has incurred eye watering marketing expenses which it has used to fund its growth. In Peloton’s 2020 and 2019 fiscal year its marketing costs were $477 million and $324 million respectively. It made $1.5 billion in 2020 and $734 million in 2019. These costs are one of the primary reasons why Peloton has struggled with profitability. 

But Peloton’s marketing costs have become more productive. In the first quarter of 2021 Peloton’s sales and marketing expenses comprised 15.1% of total revenue versus the prior-year period where they comprised 34%. A healthy rate of sales and marketing expenses as a percentage of revenue is around 10%.

Peloton’s long-term goal is to acquire customers via word of mouth which should reduce costs. With millions of people working out from home during the COVID-19 pandemic it was easier for Peloton to make more effective use of its marketing dollars as sales were buoyed by word of mouth.

3. Peloton has a strong ability to adapt. Do you remember the “Peloton Wife” ad? It’s the ad where a husband gives his fit wife a Peloton bike for Christmas and then she takes selfies as she uses the bike over the course of a year to become…even more fit. After this ad aired critics pummelled the brand calling it sexist and elitist. Since then Peloton has released ads with actual Peloton users who represent a diverse range of races, ages and body types. These customers are also shown using Peloton bikes in their homes of various sizes, illustrating that customers come from different walks of life.

What is interesting about the criticism Peloton received is if you take a step back and watch the ad again it feels eerily similar to content that is often posted by lifestyle YouTubers. They receive a fancy new treadmill or a stationary bike (sometimes sponsored) and over the course of a year they post various videos of themselves using the product (while their partners sometimes cheer them on) and in many cases they are already in top shape.  

The difference here is the way Peloton put together the video made it more obvious that some of these “lifestyle” videos are not real. It also shows how much power has shifted away from marketers to consumers that often use social media to voice their frustrations. It wasn’t too long ago that a brand could easily get away with an ad like that. But things are different now, social media users have more power as does the diversity and inclusion movement.  

4. Having big name celebrities on your payroll never hurts. Earlier this year Peloton entered a partnership with Beyonce which will see her music featured in new classes focused on movement and wellness.

Before the deal Beyonce’s music was not on Peloton’s platform yet it was the most requested by Peloton customers. As part of the partnership Peloton and Beyonce will give Peloton two year digital memberships to students at ten historically black colleges and universities. This is a great way to market Peloton’s offering to a diverse set of consumers. By getting these consumers affiliated with Peloton while they are young Peloton has an opportunity to increase the lifetime value of its customers

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5.  Peloton believes word of mouth is key to its success. Clearly Peloton’s strategy is working as a survey by CivicScience found that only 28% of those surveyed had not heard of the brand. 

“In mid-March [2020], we paused all advertising in the majority of our markets, allowing us to see the benefit from many years of marketing assessments in brand awareness and high customer satisfaction, driving word of mouth referrals,” said Jill Woodworth Peloton’s CFO during Peloton’s third quarter 2020 earnings call.

6. To spur demand Peloton offered a free 90-day trial of its app. Like free samples at Costco, offering a free trial is beneficial if you have a great product. Peloton’s free trial which it offered last March for 90 days instead of the standard 30 days provided users with access to classes that do not require a bike or treadmill. “Early in the COVID crisis, we extended the digital subscription free trial period from 30 days to 90 days resulting in over 1.1 million downloads of Peloton Digital in the past six weeks,” said John Foley, Peloton’s CEO and Co-Founder on Peloton’s third quarter 2020 earnings call.

7. Initially Peloton was laser focused on what it thought was its core market while missing an opportunity to serve a broader community. “We had this idea of a very affluent rider who many of our early adopters were,” said Carolyn Tisch Blodgett, Peloton’s former Head of Global Marketing. “We realized, through conversations with our community, that there was a huge opportunity with people who thought $2,000 was a huge investment but were [buying] it over and over again because the product is so important to them,” 

Peloton’s misstep shows that a brand doesn’t always know at first who its core customer is going to be. It takes time and trial and error. 

8. Peloton has built a strong community which helps it to attract and retain customers. One of the reasons many people go to a gym is to take group fitness classes. I can recall being at my gym one day and overhearing that a group fitness class was cancelled. Then one of the gym patrons asked her friend if they should just go home instead of working out on their own. Human beings love being around others and feeling like they are part of something bigger than themselves. This is more evident now than ever during the pandemic. They say you don’t really appreciate something until it is taken way. Now people have a deeper appreciation for being connected with others. 

If you have a Peloton membership you can take classes with others and to make you feel special, once you have completed 100 workouts Peloton sends you a T-shirt that says you are part of the “Century Club.” "Even though we're all isolated right now, we can still tap into these connections with other people," said Alixandra Barasch, an assistant professor of marketing at New York University's Stern School of Business. "It's serving as a substitute for this community that many of us are missing and that's really powerful." 

Then there’s Peloton’s popular fitness instructors. “The way that Peloton has built their instructors into their brand, with many of their instructors achieving a sort of cult status among the Peloton following, I’d say is definitely one of their biggest advantages over alternative at-home fitness equipment and gym and cycling classes,” says Marisa Lifschutz, lead industry analyst at research firm IBISWorld.

Peloton’s focus on community is reminiscent of how lululemon grew into prominence. Lululemon started out by focusing on the yoga community and over time with its Sweatlife community it created a valuable cult like following.

Tricia McKinnonStrategy & GrowthComment