[Case study] What makes a $2500 exercise bike stand out? We're going to tell you...
- The value of Peloton is to provide a complete set of fitness service solutions in the form of “hardware equipment + software subscription courses + online coaching guidance”;
- User operation: Community maintains a high user retention rate and drives the growth of digital training;
- The high cost of market education, extensive social media marketing and reduced customer acquisition costs are the key to subsequent profitability.
The epidemic has made people’s lives no longer only focus on economy and work, and their own physical and mental health is now a topic of great concern to consumers around the world. From numerous survey reports, we can see that during the COVID-19 epidemic, more and more people have begun to put physical and mental health first, looking for products that can help them maintain a healthier body and mind and a more positive mental state. Invisibly, home fitness products have become more popular. Today, the shopkeeper will introduce to you a product that has received a lot of attention recently-exercise bike, which was named one of the 100 coolest products in 2020 by TheVerge (American technology media). Through the category development trend and the practice of the star DTC brand, seek opportunities for newcomers to break the game.
1. How hot are stationary exercise bikes?
Last year, the stationary exercise bike search popularity peaked in April, after a whole summer of stable growth momentum continued to develop. After Christmas, search interest began to climb again and reached its peak at the beginning of the new year. Since 2021, searches for exercise bikes have doubled compared to the same period last year. If a similar trend is followed in 2021, it is expected that the hot wave of exercise bikes in the coming months will be unstoppable.
2 Fitness star company Peloton takes advantage of the explosive growth
Family fitness has become the hottest topic in the fitness industry due to the epidemic. Peloton, a home fitness star company on the other side of the ocean, has attracted much attention from its inception, especially to its performance and growth during the epidemic.
Different from traditional fitness companies, the exercise bikes and treadmills provided by Peloton are more intelligent, and they can also recommend appropriate online courses based on the user’s physical fitness. Thus, a closed loop of user consumption and experience is formed between hardware and software. Therefore, it is also known as the “Apple” in the fitness field.
The software service refers to subscription-type content products.
The first type of subscription is for consumers who have purchased equipment, and the price is 39 USD/month; the second is a content subscription that only enjoys online fitness courses, and the price is 19.49 USD/month. The former is only for users who own Peloton networked fitness equipment, and membership rights can be shared within a family. The latter is aimed at users who subscribe to fitness courses individually and can broadcast live on 3 devices at the same time.
Compared with the second package, the first subscription method can display real-time exercise data (including distance, heart rate, etc.) for consumers through the device, and then has in-class exercise rankings, display of other exercise effects, etc., so it has social attributes . What are the outstanding achievements of this company?
From 35,000 users in 2016, 510,000 users in 2019, and 1.09 million subscribers in 2020, Peloton can be described as explosive growth. Not only that, through refined operations, the monthly churn rate of subscription content users in the past three fiscal years has averaged within 0.7% per month, and user stickiness is very high.
In 2020, Peloton’s revenue will reach 915 million US dollars, with an annual growth rate of 61%. However, due to the early need for market education, its marketing and marketing costs are relatively high, so it is reported that Peloton is not yet profitable. It spent 324 million US dollars on marketing in 2019, mainly for effect placement, brand creative content, showrooms, etc.
3 The “addiction” of the product makes Peloton marketing more confident
Peloton considers a long-term marketing strategy. The high marketing cost is not a decision made without a reason. The results have proved its effect. Taking into account the high LTV (lifetime value) of users in the fitness industry, in the rapid growth period, active customer acquisition and brand building have contributed to the subsequent scale efficiency. But for Peloton, it is more important that the company’s products are designed to comply with the principle of “addiction”.
- Peloton builds a great user experience and creates a community atmosphere. The design of user experience follows “To-The-Point-Of-Addiction”. Subscribers can watch fitness classes broadcasted by coaches in Peloton’s offline Studio. The platform also creates a live community by allowing users to connect with other “Peloton friends” and compete in real-time ranking.
- The offline exercise bike boutique studio in the United States has cultivated many loyal users of bike fitness. Peloton uses online visual courses to replicate the offline experience like Soulcycle to the greatest extent, which has become a more convenient and time-saving choice for users .
- Cost saving. The offline bicycle lesson price (30-40 US dollars/session) is compared to 2,245 US dollars for a Peloton exercise bike. If you calculate according to the 5-year depreciation, the monthly depreciation cost is 37 US dollars. The bicycle shared by a whole family.
4 Peloton with high marketing expenses, what exactly is worth learning?
Peloton pays high costs to brand marketing and user operations. These two major points have brought dazzling results. What are we worth learning from?
- Build Community & Group users with events
Peloton spends a great amount of effort to organize events and build user communities. Users can communicate in their communities and form stickiness to the brand. As of September 2020, its number of fitness subscription users exceeded 1.09 million, an increase of 113% over the same period last year. Peloton has a dedicated retention operation and user support team, they are responsible for a series of user operation activities, including setting online challenge goals, badge system, achievement system (such as after the user’s 100th lesson is completed, send the brand Sponsored cultural T-shirts), online operations and community operations. In addition, Peloton has a special annual event – Pelothon (a new word created with the brand word Peloton+marathon). This is a 4-week challenge. More than 30 coaches are divided into 6 teams. Users can choose one of the 6 coaching teams to join, and practice together for four weeks. You need to complete various subtasks and challenge. Finally, Peloton will sponsor public welfare and charitable organizations. There were a total of 324,790 users participating. The data on user engagement and online exposure during the same period are really impressive. And not only online platforms can be played like this, the same idea can also be variably applied to offline fitness brands.
- Build a business model with strong network effect
1) Attracting the best fitness coaches in the United States through high salaries, and these high-quality coaches have also led to a surge in membership; 2) Attracting many artists & Stars through brand power. They design derivative products for the brand, such as clothing and other recorded courses, and also expand the scope of the brand’s influence. Peloton teaching coaches are divided into Peloton Instructor and Guest Instructor. At present, dozens of coaches can complete the development, recording and shooting of all courses. The per capita efficiency of coaches is very high, management costs are greatly reduced, and better brand resources can be given to help coaches’ personal brand building and exposure. The media exposure brings back traffic to Peloton.
Peloton promotes their coaches as a celebrities. It put a great effort to social media platforms such as Ins. It has produced a large number of exquisite content and connected media resources to help coaches’ exposure. The average celebrity coaches has an average of over 100,000 followers, and the hashtag of #onePeloton also has 305K. In just a few years, its social media influence is stronger than that of offline fitness brands such as soulcycle and equinox. Now Peloton also invites stars to record some courses and design sportswear series to achieve higher attention and larger influence circle.
3. Provide a complete set of fitness solutions to help users get positive feedback
We often say that fitness is the fair to everyone: if you put in a sweat, you get a reward. The biggest difference between fitness service products and other consumer products is that “fitness is against the nature”. so the key point of the new fitness brand is special: it requires someone around the user to complete this pull action. For example, when you are tired after work and don’t want to move, many users need the call of coaches and fitness partners to make it possible to do a good job of mental construction and fitness. Is it possible for the brand to complete this pull action? Not easy for a company to achieve it by itself at scale. It is necessary to establish a community to allow users to form an influential network of relationships. Only through mutual social needs, partner incentives, and collective effects can the fitness frequency be maintained until the habit is established. During the epidemic, Peloton has another new action: it took the opportunity to launch a 90-day free trial plan, opening the application for free for a limited time, in order to attract a specific user group. After implementing this free plan, Peloton’s ranking in the App Store rose rapidly.