What Will Happen to the Peloton Brand?

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Peloton Interactive, Inc. was founded in 2012. The firm offered exercise equipment, including stationary bicycles, treadmills, and monthly subscriptions to online classes and other digital content. Everything was designed to motivate and assist customers with their workout experiences. The company grew steadily and went public on September 27, 2019, closing at $25 per share. 

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By January 2021, one-year into the pandemic, the stock price rose to some $167, accompanied by substantial growth in customers and revenue. This corresponded to the behavior of people spending more time at home during the COVID-19 pandemic to exercise rather than going to a gym. Despite a series of missteps with product quality, customer injuries, and marketing communications, Peloton seemed to be on a treadmill of success. 

 

Unfortunately, by the summer of 2022, the good fortunes of the company and the stock price began to unravel. During July 2022 the stock was valued below $10 per share at times and some $5 per share in 2023. While stock price is not the best measure of a brand’s success, it provides a surrogate measure of the value of a brand to investors in the firm.

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​​Although several factors may have contributed to Peloton’s precipitous decline in revenue and shareholder value, the changing course of the pandemic to less life-threatening COVID-19 variants became one explanation why people moved from home exercising back to fitness gyms and outdoor activities. 

 

The company brought in a new CEO to address the business performance and the future of the brand. The first action was to suspend plans and investment for a new factory.  Then during 2023 there was a large recall of its original bike due to breakage of the posts holding the seat. The strength of the Peloton brand may enable it to recover from the decline, but it will require very thoughtful strategic moves to capitalize on the umbrella of brand equity it has built among its customers.

 

Putting yourself in the position of the CEO, which of the following actions might you consider, and in what sequence, to begin the process of reviving the business and the brand’s performance? 

 

• Should you segment the customer base and charge different prices to each segment to increase overall revenue? 

• Should you look for new market segments as a source of increased sales and usage?

• Should you layoff your installation support staff and replace them with subcontracted installers to reduce costs?

• Should you increase marketing communications and price incentives to develop new customers?

• Should you consider the Covid situation as one that is ongoing, possibly becoming more severe, and thereby postpone any other actions until the course of the pandemic is clear.

• Should you develop new products and services to meet the needs of different types of customers (e.g., the elderly)?

• What other actions might you consider going forward to continue building the brand and customers attracted to it?