Pandemic darling Peloton has come crashing back to earth, and experts say marketing could play a role in how the company, which is said to be evaluating its business structure, rebounds.

In recent weeks, the brand has been caught in a negative news cycle that seems to be spinning faster than the pedals on its stationary bicycles. First, Mr. Big died after riding a Peloton in HBO Max’s "Sex and the City" reboot. Then, the brand’s clever response ad, created by Ryan Reynolds’ agency Maximum Effort and starring Mr. Big, was pulled amid sexual assault allegations against the actor who portrays him, Chris Noth. A more recent heart attack of a TV character from Showtime's "Billions" on a Peloton bike was overshadowed by bigger news: reports that Peloton is cutting back production amid plummeting demand and that the brand has deployed the help of McKinsey & Co. to review its cost structure.

Those challenges follow a year in which Peloton dealt with an expensive recall of its treadmill after numerous safety issues.

“There’s a laundry list of items where all of them on a one-off basis can be explained, but they’re all piling up at the same time,” said Bernie McTernan, a senior analyst at investment banker Needham & Co.

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Once high-flying Peloton—the decade-old brand saw revenue double during the first year of the pandemic—now faces what could be its biggest test yet. As the company faces excessive supply and few new customers, the brand’s marketing department—helmed by Dara Treseder, who joined as senior VP and head of global marketing and communications two years ago—is under pressure to deliver. Success could mean focusing less on costly campaigns to acquire new customers and instead investing in keeping current loyalists satisfied with new offerings and incentives.

“The business needs to return to being entirely engagement brand-building the community, enhancing discussions, even if that comes at the expense of bringing in new customers,” said Simeon Siegel, managing director and senior analyst at BMO Capital Markets. “Because we are finding that new customers are incredibly expensive. New customers are what’s triggering a material cash burn in the company.”

Agency changes

Already, Peloton appears to be shaking up its agency structure. For years, the brand had worked with New York-based Mekanism, the shop behind the much-maligned “Peloton Wife” spot of holiday 2019. But last year, Peloton brought on Adam & Eve to handle its summer Olympics work; the agency also created Peloton’s recent holiday campaign, its biggest marketing investment to date that starred actor Brett Gelman as Scrooge. Last month, Peloton announced it had agreed to be part of a new “Creative-as-a-Subscription” service that more closely aligns creative and media offered by MNTN, the new ad tech parent of Maximum Effort. That offering is what Treseder said helped the brand pivot so quickly following its “Sex and the City” appearance.

“Peloton or any brand can use this creative style of culturally relevant advertising to address image and perceptual issues—to help them deal with an identity crisis with their brand and product being portrayed as it was in the ‘Sex and the City’ reboot,’” said Jay Pattisall, principal analyst at Forrester. “What we’re seeing here is more of a tried-and-true approach for advertising to latch on to or leverage popular culture in its idea creation and presentation.”

Slowing ride

Peloton, which declined to comment for this story due to a quiet period ahead of its earnings report on Feb. 8, has failed to impress Wall Street of late. In November, the New York City-based brand reported first-quarter earnings below analyst expectations along with a net loss of $376 million; revenue, while up 6% to $805.2 million, was a stark comedown from the 172% revenue rise of little more than a year earlier.

During the first part of the pandemic, and even earlier, Peloton, enjoyed uber-trendy status. It had no use for marketing as consumers lined up to deliver more than $2,000 for its high-end products. Indeed, at this time last year, the brand could not keep up with demand, with many customers waiting months for their deliveries due to supply chain constraints. Yet now, unlike in early 2020, when home fitness was often the only option for exercise, many consumers have a plethora of choices, including Peloton rivals such as Hydrow, the rowing brand, and Mirror, the Lululemon-owned interactive mirror. There are also health clubs, which have been operating with social distance guidelines in place for over a year in some regions. Peloton's business model mostly relies on continuing to lure new buyers to make a costly one-time purchase of a bike, which runs for upwards of $1,500.

“That’s the problem when you make world-class products—you might make the point of the way they build products is that you never have to buy it again,” said McTernan.

The brand hardly seems to be on consumer radar of late, even though it has been more vocal in recent months about ramping up its marketing. A recent analyst report from Raymond James noted Google Trends data showing searches for “Peloton” have been down 40% year over year for the first two weeks of 2022.

“They became such good storytellers,” said Siegel. “They bought into their own narratives and the story they were spinning made them believe the pandemic was not a demand, a pull forward, but an expansion of their market and that’s where they got into trouble.”

Along with news of the McKinsey hire came reports last month that Peloton is considering a cut of 41% to its sales and marketing staff. The new ad model, particularly deploying Reynolds’ Maximum Effort agency, could help with costs. A source close to Peloton said that the “Sex and the City” response ad, which went viral on social media platforms after taking less than 48 hours to put together, cost less than six figures to produce. “Maximum Effort has really seized this fundamental reason for advertising and one of fundamental purposes—which is to create commerce, generate commerce and impact culture,” said Pattisall. But he noted that the role of MNTN, as an ad tech firm in addressable television, makes the relationship more lucrative. “There is a synergy in the format that Maximum Effort tends to work in, which is video, and using MNTN’s technology to scale that content in addressable formats.”

Engaging the community

In January, Peloton seemed to be focused on retention marketing, unveiling new offerings and experiences for its existing customer base. For example, a round of live boxing classes featuring the music of Eminem was shared by the musician himself on his social channels. The brand also targeted older customers with an age-positive Instagram post highlighting senior Peloton user Dr. Mae. The post, which was created with Mekanism, was viewed nearly 700,000 times.

The fitness product purveyor also has the opportunity to maximize two of its core strengths—its instructors, many of whom are mini-celebrities with their own social followings, and its music roster. One recent spot for Peloton’s bikes and treadmills debuted on Jan. 8, what would have been David Bowie’s 75th birthday, and was set to “Let’s Dance.”

Instructor Jess King is so well-known she starred in the “Sex and the City” response ad, and fan-favorite Cody Rigsby was just on “Dancing with the Stars.”

“They should be able to get the best talent out there—talent is not only to put people through the best workout but it’s also being engaging—that’s the kind of instructors they attract and that’s one of the things they really benefited from in the pandemic when they shut down marketing,” said McTernan. “Maybe getting back to that grassroots marketing, that’s the way to go in the near-term.”

Peloton has earned loyalty from its community, and that’s a power it should remain invested in, suggests  Andy Bateman, chief executive of the ad agency Sid Lee USA, which studies younger consumers. The brand recently topped the agency’s “Belong Index” list of top brands that most effectively engage with Gen Z.

"For Peloton, the platform is its community, not its technology. It’s a strongly bonded community because they change people's lives, connect them and have them feel a part of something that matters,” Bateman wrote via email, noting that Peloton should keep its community in mind and use customer insights to propel product development and keep loyalists engaged. “There’s a lot of resilience in the base because of this—and that helps make them a strong brand. It’s a social platform and a fitness category player that's managed to aggregate communities. That’s its real power." 

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