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.