We all know that Peloton has been an absolute monster this year, as gyms closed around the world and people tried to figure out how to stay active at home. In this article, I’ll share three insights that I’ve gathered since becoming a Peloton member in early September. We’ll dig into what Peloton does so effectively to grow their business.
Lesson #1: Your community is invaluable.
Peloton is highly effective at cultivating a sense of community and aligning towards their goal of being the center of somebody’s connected fitness journey.
We can look at this in two different ways. From a product standpoint, as well as from a website positioning standpoint. When it comes to the product, there are so many different features that highlight this point on community.
For example, you can follow your friends and work out either synchronously or asynchronously. You can also earn different badges over the course of the month for their challenges or for different rides that are part of different collections that they’ve curated. With newer beta features like sessions, they’re starting to replicate more of what a traditional gym environment is by putting you in a group of fellow Peloton members that are riding that same ride in the same timeline as you.
As a result, you’re able to compete with each other and feel those more traditional senses of community that you used to get in an in-person gym. Within the class themselves, the instructors are always quick to remind you about how you are one of the few that decided to get on a bike today and exercise to better yourself.
It’s never a message about your body image or some other thing that traditional fitness coaches might emphasize, but instead, the fact that you showed up as part of this community of other people that are coming together to become better versions of themselves.
The content library gets new classes added to it that are relevant to the time of year, whether that’s Halloween, the holidays, or even World Mental Health Day. All of these product features coupled with additional things like your ability to view your stat during and after your ride and also compare them to the overall community adds to that sense of the strong community of one that Peloton tries to create.
Next, we can look at things from my website positioning standpoint. The first thing we might notice is how Peloton is hosted on onepeloton.com. Again, emphasizing that idea that we are one community. The other thing that you’ll notice is that when you go to their membership page, they don’t talk about themselves as a company, but they refer to themselves as a movement. And the reason why is because they want to represent something bigger than a company, they want to represent an idea, and that is even more powerful from a marketing positioning standpoint.
Lastly, as you work your way through their website, you’ll notice that all of the pictures that they have are of people that are either together in a physical sense or in a virtual sense. Ultimately, these things that Peloton does are not accidents. Communities are only as strong as their members and how in their members feel about it. So when somebody buys into the Peloton experience, they’re going to want to get other people into the experience as well. That helps validate their decision to do so.
Couple that with a great endorphin rush that you get every single time that you work out and you get really great outcomes. I’ve noticed this lesson on the value of community within the YouTube side of things as well. There are all sorts of sub communities of YouTube creators that try to help each other out. And oftentimes you’ll find more value in the comments of a video than actually the video itself.
Lesson #2: Compounding user engagement leads to rabid fandom.
Peloton makes it super easy for you to engage with their product and their brand. For example, whether you haven’t even started to work out or you just finished a workout, they make it super simple for you to share that particular workout with a friend or with your social networks.
They also integrate with other fitness apps like Strava or Fitbit in order to make the data sinking really simple and also make it so that it’s super easy for you to leverage the friends that you might have on either of those platforms. I remember when I earned my first streak and the next thing I knew, I didn’t want to break my streak.
In fact, several months later now I still have this thing going on in which I have a streak for every single day, since I’ve owned the Peloton. And it’s because I want to make sure that I keep the streak alive and I don’t want to lose it. It actually relates back to the popular productivity method of don’t break the chain in which once you get something going, you don’t want to break the chain because otherwise you have to restart that streak.
I am fully aware that every single time I checked my Fitbit app for all the different workouts that I’ve done at Peloton, like the calories burned, my heart rate, and so on that I’m low key reaffirming my decision to purchase this bike. And the reason why is because I’m getting this positive feedback loop of all the work I’ve done on myself and my health and that I want to keep doing it the next time that I jumped onto the bike.
Lastly, aside from all these stats and opportunities to share your workouts with your friends, Peloton also regularly engages you as a brand. They’ll send you weekly emails that summarize the upcoming classes or things to look out for, or new features that they are rolling out. By hitting you with multiple angles, they’re making sure that they remain relevant to your life.
These user engagement opportunities absolutely work. And the way we can look at this is by looking at the sorts of engagement statistics that Peloton has released in their recent quarterly earnings report. Ultimately all of these digital apps use the same sort of core metrics such as daily active users or monthly active users.
What they want is they want users to regularly be returning to these applications and investing time on these platforms. That ultimately test the stickiness and is a proxy for the value that the brand is delivering to the end user. So when we dig into the investor side of things, we noticed three big things.
The first thing is that Peloton has an NPS score of a 94, net promoter score of a 94 is other worldly. It’s on the level of Apple, which is really hard to achieve. So this really goes to show you that tons of customers love the Peloton experience. The second thing that we can notice when we look at the investor report is that Peloton highly values these user engages signals. In fact, they report that 248 million high fives were given in fiscal year 2020. And lastly from this high user engagement, we can see that Peloton has really low customer churn. In other words, not that many people leave the platform.
In fact, over the last three years, the average turn rate has been 0.64%. In other words, for every 100 Peloton users, less than one of them, every single month is leaving the platform. If you dig into their churn data even further, you’d see that even after three years of activating a Peloton product, four out of five of every Peloton customer that started three years ago is still with the company.
That’s an incredible retention rate that any physical gym in a large city would love to have over a three-year time period. After you experienced all of this sort of user engagement with Peloton as a brand, you start to become more willing to talk about Peloton and to share your experience with others.
When you pair that with a super powerful referral program, in which you give new users a hundred dollars off their purchase and you give existing users a hundred dollars off Peloton swag, it leads to a viral effect of a growth loop. As a result, new users start to have that same positive experience and then recruit new users, whereas existing users get free Peloton swag, and pretty much become free walking billboards for advertising Peloton.
It’s honestly brilliant. And one of the best marketing approaches that I’ve seen from a consumer-focused brand.
Lesson #3: Proper positioning leads to resonating
Peloton has a really broad customer profile. When we look at things from their investor report, we can see that they categorize their target audience as ages 18 through 70, with 50K or more in household income and access to broadband internet.
And then when they’re asked to size their market, they consider consumers who don’t see price. Why do they do this? Well, Peloton ultimately knows that they are a premium experience. It’s obvious when they price their products as more than a deck doubt MacBook Pro and tack on a monthly subscription fee that’s three to four times what people usually pay for monthly subscriptions.
Yet, despite the beef that some people might have about Peloton pricing, they don’t seem to have any issues with finding customers that are willing to fork this bill. Why is that? Well, it comes down to perceived value. There’s frankly, no competitor that’s remotely close to Peloton’s brand recognition, content library, technology or even their community engagement. Great product, great people and great process leads to great outcomes for a company. In fact, we can see that over the last six years, Peloton has done a great job of identifying which consumers are not concerned about the price and fit into their ideal customer profile.
In that time period, they’ve increased the percentage of subscribers that are earning under a 100K an annual household income by 17% to make up 46% of their overall connected fitness subscribers. Peloton pulled a play from Apple here in that they first targeted the wealthy, and then they opened up their product to the general public or to broader demographics.
We like to get what the wealthy have, because honestly it makes us feel good about ourselves. You might not like that reality and how that sounds, but it’s ultimately true. And it’s this exact fact that makes Apple so successful despite only owning 8.5% of the market share for computers.
Instead of positioning themselves like they weren’t sure they were worth the two grand plus the $40 a month subscription, Peloton looks for the consumers that will look past the price. Similar to Apple, Peloton rarely runs sales as well. In fact, this past year, they decided not to run their Black Friday sale because demand was so high.
The only way that you can consistently save money on a Peloton purchase is through the $100 off referral code that you get from another Peloton user. The point here though, that I want to emphasize is how Peloton successfully positions itself as a premium product with a high perceived value.
In fact, their marketing team even put together a pricing calculator where you can calculate how much in savings your family will stand to benefit from using Peloton as opposed to a conventional gym. Lastly, even their finance team has come up with clever ways to get people interested in financing their bikes so that they can get the bike today and pay it off over time with very little interest.
By taking all of these collective actions, Peloton is able to position itself in that upper echelon of products while also expanding their total addressable market.
Big takeaways
There are two things I want you to remember from this article:
- The first one is to focus on building a community around your brand. You can have a hundred thousand customers, but if none of them like you, then you become Comcast versus say for example, Instagram. The former is something that we can’t wait to leave whereas the latter is something that we are more than willing to engage with as a platform and with other people.
- The second big takeaway is to create multiple opportunities for engagement. In order to build up that community, you have to give your users a lot of different opportunities to actually engage with your brand. The best ways to do this might be to have them share personal stories with your brand or to create viral loops in which you incentivize them to share your brand with their friends. This is what we can see with Peloton and how easy it is to share a workout or to refer a friend for a hundred dollars off and a hundred dollars of Peloton swag.
If you found this article helpful, be sure to check out my YouTube channel to get new videos every single week. I’ll help take you from zero to self-starter as you grow your business, get more customers, and hone your business acumen. Also, feel free to share this with anybody that you think might also benefit from these marketing lessons I’ve learned from Peloton as a member.