1.1 million users, 97% satisfaction, and $607 million in earnings: How Peloton mastered user engagement to become the Apple of fitness

  • Peloton's business blossomed during the pandemic after lockdowns were imposed and fitness studios were temporarily closed.
  • On September 11, Peloton announced its sales jumped 172% year over year and that revenue increased to $607 million. Subscriptions more than doubled year over year to about 1.1 million. 
  • While Peloton was poised to thrive during the pandemic because of the nature of its offerings, its cult status among customers also gave the company an edge — 97% of users said they were satisfied with the product, according to a survey from the investment firm Wedbush. 
  • One tactic for boosting customer satisfaction is integrating user research into its platform to learn what its clients like, what they don't like, and what they want to see in the future.
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Peloton's business of stationary at-home bikes, treadmills, and subscription workout classes blossomed during the pandemic as people (including me, a user) searched for safe exercise options. The company capitalized on that fortuitous timing by meeting customers where they found themselves at the start of the pandemic — quarantined at home trying to establish new routines. 

In early September, Peloton announced its first profitable quarter: Sales had jumped 172% year over year, revenue increased to $607 million, and subscriptions more than doubled to about 1.1 million.

But to understand why Peloton is entering an exclusive rank of brands with cultlike status among users (think Apple and SoulCycle), Business Insider spoke with experts who dissected its high customer-satisfaction rates and what those say about the power of knowing your audience.

A survey from the consumer-research platform CivicScience found that only 2% of 3,298 Americans were Peloton users, but if you ask those 2% how they feel about their Peloton service, they'll likely ooze praise about the brand. A whopping 69% of Peloton bike users were "very satisfied" with their experience, while another 28% were "satisfied," totaling 97%, according to a survey of several hundred users from the investment firm Wedbush. 

What's more, a majority of Peloton users say the product works — customers report weight loss, an increase in energy, and elevated happiness, James Hardiman, a Wedbush analyst who coauthored the survey, said.

"If you think about all of the stuff you spend money on, not a whole lot of that stuff makes you feel happier," Hardiman said. "Very few of those things make you feel healthier and Peloton appears to be accomplishing both." 

And Peloton executives say this is just the beginning: They forecast subscriptions will rise another 90% and revenue will nearly double again this fiscal year, according to its most recent shareholder letter. 

Building cult status through customer satisfaction 

One of Peloton's tactics for boosting customer satisfaction is understanding what its clients like, what they don't, and what they want to see in the future. Peloton does this by integrating user research into its platform and learning from those metrics, said Andrea Wroble, a senior research analyst covering health and wellness at the market-research firm Mintel.

For example, Peloton tracks which classes are the most popular, the times of day people work out, what music their users are listening to, and what might be missing from the overall experience, Wroble said.

"They take that information and continue to optimize their products in a consumer-centric way," she added. "Peloton does a great job at listening to what customers want and responding in a meaningful way." 

Community is key 

Peloton also built a strong sense of community among users, Wroble said. Live classes tap into users' competitive spirit by comparing stats among participants, and prerecorded sessions provide a similar experience for people who want to take the same class at different times.

Customers can also connect with strangers by high-fiving each other in class or personalizing their profile by adding a hashtag such as #BlackLivesMatter. When users aren't working out, they can don Peloton-branded workout gear, follow instructors with active social-media accounts — like head instructor Robin Arzón, who has over half a million Instagram followers — and listen to their favorite class playlists on Spotify. 

Adapt or lose

Lastly, the brand thrives on its adaptability, Wroble said. When consumers complained about the high price point — the original Peloton bike cost $2,245 until recently — the company reduced the price by $350. 

It also added a higher-end option called the Bike Plus — which costs $2,495 — with new features that automatically change the resistance depending on the teacher's instructions and a larger screen that can be titled for floor workouts. Peloton also reduced the price of its monthly membership by $9 and plans on introducing a cheaper version of its $4,295 treadmill next year. 

How to translate cult status into long-term business success

Peloton can strategically use its cult status to grow by tapping its network for additional feedback. This includes maintaining the strategies that already work, such as listening to customers, innovating based on feedback, and keeping users engaged, Hardiman said. 

The company is also constantly offering themed rides, new types of classes, and fresh challenges that keep customers engaged, he added.

"I don't think any of their competitors are even close with an ability to do a similar thing right now," Hardiman said.

The competition is watching 

Meanwhile, other tech behemoths are trying to cash in on Peloton's success: Apple announced on Tuesday that it was introducing a new workout streaming service called Apple Fitness Plus later this year. Apple device owners can participate in guided workouts and track their metrics on an Apple Watch for $9.99 a month or $79.99 a year. 

Apple's price point is more attractive to consumers looking to save some cash, which is one of Peloton's biggest challenges. The company's future success hinges on its popularity and ability to reach consumers across all income brackets, Wroble said. While Peloton has already made strides in this direction, it must continue that effort to gain new customers, she added.

However, Peloton shouldn't fear Apple's new service right now, Hardiman said. For starters, Apple doesn't have hardware to sell or the robust library of classes that Peloton has already built, he added.

"That's a pretty big moat around Peloton's business and a big hurdle for Apple to get over to be realistically competitive with Peloton," he added.

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