Peloton’s Dilemma

Executive Summary

Peloton is a lifestyle company that was founded by Foley in 2012. While working as the head of the digital at the US bookstore chain Barnes & Noble, he had the desire to exercise, but due to his tight schedule and personal habits, he could not get enough time for that. This motivated him to come up with an idea of a stationary bicycle, which was to be accompanied by a screen. For three years, he traveled across the globe trying to find quality hardware and investors to fund his idea and development but was hardly successful. Foley then resorted to a Kick-starter campaign, which raised only $250,000 with an average, unstable stationary bike. Eventually, an improved model was produced. This model was sold and marketed via pop-up stores in high-end malls. The sales assistant could assign instructors, difficulty, and music to a client based on their assumptions, which in most cases were correct. In 2013, Peloton made a breakthrough by delivering its fully complete bike. By 2016, the sale of this bike generated revenue of about $150 million.

After fruitless efforts for partnership with content companies such as SoulCycle, Peloton opted to pursue its talent by first advertising for the “best instructors in the world” campaigns, which enabled it to poach instructors from other fitness studios. By spring 2019, the sales were soaring to almost 500,000 bikes and large numbers of active members, which was approximately one million people. Initially, Peloton offered live cycling classes, with up to 60 people taking part in its New York City recording studio. Early Morning and evening hours were the prime hours, whereas odd hours such as midday were offered as pro- bono, on a first-come-first-serve basis. At the same time, several hundred others participated in the class remotely by streaming live. These numbers progressively increased to thousands. Peloton provided a library of thousands of classes to subscribers. The subscribers had options of picking the classes they wanted based on parameters provided, such as by instructor, class length, music genre, class difficulty, among others. Peloton diversified its business and introduced a treadmill in 2018, Peloton Digital on-demand app available to individuals with neither a treadmill nor a Peloton bike, 60-minute yoga classes to 10-minute pre-run warm-up stretches, weight classes targeting specific areas of the body, and audio-only content for running or walking outdoors. Peloton also created a large New York City production television facility to meet the demands of the rising remote users.

By 2019, the total cost of a bike and subscription amounted to approximately $3000 for the first year and $5000 in the subsequent years. Peloton developed a mechanism to become a profitable company that retained customers by establishing a community that was their success. Peloton’s instructors were energetic and motivational individuals, with each one of them having a unique persona, and each was a public figure with his or her fan base. These instructors were very instrumental in making Peloton’s community work. The instructors were major celebrities selected from various backgrounds, which included dancers, sports, and artists, among other stars in the entertainment industry. Most of Peloton’s instructors, however, came from dancing or entertainment backgrounds and were chosen for their massive following. These instructors developed cordial relations and had interaction moments with their viewers, sharing their personal experiences, and motivating their clients. For instance, one of the instructors had been previously involved in an accident, which prompted her to turn to fitness. Such scenarios of sharing enabled them to create strong bonds with their followers and strengthen the Peloton community. Before beginning their classes, instructors were put through hair and makeup before each filming, to represent the range of race, culture, and sexual orientation.

Since its launch, it has faced a great deal of competition from the continuous rice in of boutique fitness brands. During this period, period, new markets opened driven by technology: digitally distributed content, both paid and free, via start-ups such as Fitness Blender and Daily Burn, and also offered by big brands like Nike this gave Peloton a run for its own money hence this period is referred to as “the Peloton effect.” The primary source of competition was the SoulCycle, an immersive stationary cycling experience in a dark studio with booming music, candles, and a competitive screening process to identify instructors with a unique energy. Change in consumer taste and psychology also provided an opportunity for new consumer-facing fitness businesses to enter the market, including individual personalities.

While promoting the organization, Peloton’s instructors competed among themselves struck the delicate balance of prompting their classes to work hard by creating a sense of competition and personal drive while maintaining an atmosphere of encouraging exchanges. Peloton motivated and acknowledged its users by issuing badges” for achieving milestones like 100 rides, participating in a specific activity such as a 2018 Winter Olympics ride broadcast live from Pyeongchang, or exercising with Peloton for 30 days in a row. The wealthy stay-at-home moms have been its number-one customer.

The rise of online connectivity, social media, and mobile sharing, led to the importance of brand ambassadors to grow globally. Companies also utilized those influencers created their audiences and own celebrity through a specific niche, to capture their built-in audiences by compensating them for being a mouthpiece a brand. The use of Virtual influencers also emerged between 2018 and 2019. Interestingly for Peloton, its instructors operated as both brand ambassadors and social influencers. They represented the brand to consumers and, at the same time, were also influencers because they had a substantial social media presence, star aspirations of their own, and often did things online outside of their official duties as Peloton employees. These Instructors had massive followers on Instagram, which related to Peloton’s followers as well. However, Facebook is Peloton’s most critical social media platform with over 477,000 followers. This assisted each instructor in maintaining a company-sponsored community on Facebook. Customers credited the motivation, availability, privacy, and flexibility of their instructors.

Peloton’s significant challenges included competition such as Mirror, a company that entered the marketplace in 2018 and offered on-demand-content service delivered through a device that looked like a wall mirror when not in use. It capitalized on its size and portability as its advantage compared to massive bikes covering large spaces in houses. Most of these challenges arose from the digital sphere, and such attract extensive online criticism. Challenges have also risen from the reception of comments from instructors. Since instructors deal with a variety of people from various ethnicity and backgrounds, an instructor may unintentionally make comments that may offend the clients. Peloton designed and develops its software and hardware itself, and employees delivered parts and set up bikes, and a staff of 70 engineers kept it running. The online store sold tank tops, yoga pants, and add-on exercise equipment. The organization has extended its services internationally.

The Problem

In preparations for its IPO, Pelotons has opted to identify itself to media and investors as a tech-focused lifestyle company, rather than a fitness company. By 2019, it was finalizing for its IPO, and this created the dilemma of who would propel the company’s strategic position. They did not want their instructors to assume this role since they felt that they already had a huge task that would be interfered with if they were to be added another role.

Analysis

Peloton was stuck in identifying the best person who would steer the company’s strategic position. There was an option of their instructors, but they did not consider this since they presumed that Customers simply wanted to keep discussing what they always had: their progress; hence they probably would not be for the idea of their instructors preaching to them about the company’s strategic decisions. They simply wanted to be delivered to what they were paying and subscribing to, and indeed they had not subscribed to management issues. However, bringing a brand ambassador from outside the organization would also seem unfair since the instructors and other employees had equal or even capabilities as those from outside the company. Instructors are their most valuable assets, and losing them or assigning them different roles would mean losing the clients attached to the specific instructor. According to Peloton, instructors were its most valuable resources.

Options

To solve their dilemma, Peloton can consider the following options;

1. They can pick one or a number of their instructors to be their primary brand ambassador.
2. The Company’s CEO should assume the role of the of being the corporate’s traditional voice.

• Alternatively, the corporate can acquire the services of an external brand ambassador to foster its strategic management.

Recommendations

Having not identified its traditional corporate voice during its early years, Peloton is facing a challenge in deciding who should take the mantle. This is also because the company’s management is hardly known to its customers and the social community. The instructors were also known by only one of their names and some by stage names given to them by the fans. The instructors are the best fit for this job. The company should, therefore, identify specific instructors, especially those with good background and understanding of the company, to head its primary ambassador and spearhead the IPO and the other strategic decisions. However, the chosen instructor(s) should consult their devotees and get their views on their new roles. In case the customers are dissatisfied with their instructor’s role, the Company’s CEO should step up and assume this role. This will be advantageous because many people would be eager to see the person behind this successful international boutique fitness brand.