Like a lot of people, when the pandemic kicked off, I picked up a few home fitness stocks expecting some short term gains. Those who held PTON to around December of 2020 saw around a 5x gain. I wish I bought more. I dipped out right around the time the vaccine started to hit the streets. Made the same moves with Nautilus (NLS) as well. The NLS spike mirrored PTON.
Both are now (Oct 2023) sitting below where they were in February of 2020…by a lot!
Peloton is a great brand selling a great product. They are also in a growing fitness vertical. So what went wrong?
The Standard Customer Research
Peloton, rightly so, went after people generally interested in fitness which are the right customers. They clearly did great research here as they hit a home run with them. The created a strong brand and turned their customers into evangelists. Sounds like a product team’s dream!
But LTV is an issue in the fitness space as large swaths of people get into fitness in fits and starts. Think new year’s resolutions. They were able to extend that beyond the traditional stationary bicycle that eventually becomes a place to hang laundry by creating an ecosystem of content delivered by attractive humans and, let’s not forget, subscription revenue. Peloton was able to extend the length of the new year’s resolution by enhancing a product, and experience, that has existed for decades.
Hit The Extremes And Get The Margins For Free
The design firm, Ideo, is famous for this method of user research. When they start putting prototypes in the hands of users they focus heavily on the extreme ends of the curve of potential users. They theory is that if the users on the margins are delighted by the product the “rank and file” customers will also like it. One example from Ideo is the OXO line of kitchen tools which were revolutionary in terms of ergonomics. There margin users were elderly people, children, and people with disabilities. If they can use the product average adults can most certainly use them.
What this would look like in Peloton’s world would have been to work with those with almost no experience with exercise equipment and highly committed cyclists. It’s that second one I think they may have missed, or at least didn’t pay enough attention to. In fact I would imagine they spent most of their time in the middle part of the curve because it’s the easiest and makes for good presentations on research findings because there are simply more people.
What would they have learned if they talked to very experienced cyclists? They would have learned that riding on a stationary bike will get old quick. Even with the best equipment, content, apps, plans, reminders, and all the sex appeal. Even if you are a highly motivated professional, who needs to be in elite shape by spending hours on hours on a stationary bike in the winter, you will get to the point where you will burn out.
Even a contender for the Tour De France will eventually hang laundry on their Peloton.
I’m sure I’m mostly wrong – Peloton is a great company with incredibly intelligent product and marketing people and by all normal measures they are a very successful company.
It is imperative that you consider the margins of your users and not simply right them off as another “corner case”. You can learn a lot from the unlikely.
