Understanding Peloton members

In January 2021 I surveyed 45 Peloton members. This article shares the insights. Peloton’s position within the market is a good indicator of the shifting attitudes towards home fitness.

Peloton has boomed during the Covid-19 pandemic, with so many of us staying at home. Peloton has reported record results, with more than $1 billion in total revenue in the second quarter of fiscal year 2021, and subscribers to its monthly membership were up 134% YoY. What’s behind the growth? Why do members love Peloton? What’s the long term opportunities for the company, as well as, the potential short-term headwinds?

Peloton member demographics

Of those surveyed the majority are women, however 78% say they share their Peloton with other members of their household. If a Peloton member lives with others, then it’s likely it’s used by everyone in the household.

Peloton’s customers tend to be over 30 and affluent as shown by the chart below.

Given the pricing of the Peloton and despite the recent introduction of financing and cheaper models, purchasing a Peloton is a big investment and a large ticket item. It’s no surprise a large proportion of its customers are in the highest income bracket.

I wanted to get a sense of any limiting factors to Peloton ownership. You need considerable space in order to store the equipment. Given the large incomes we’re seeing, it’s no surprise many members live in large houses, offering ample room to store the Peloton. But it certainly hasn’t put off buyers that have smaller homes either.

The majority of Peloton members surveyed were in the US. Whilst my sample size is small, it does seem to match expectations; Peloton is a US company and it started within its home market. My survey was in English which limits appeal to Peloton’s German members but so does the lack of German language content within Peloton itself.

Understanding member usage

Given the Bike+ was launched most recently there’s a skew towards the older Bike model. The Bike is the cheapest Peloton product. Peloton’s Bike+ whilst more expensive does seem to offer big improvements in quality. Peloton’s biggest issue is securing strong supply and faster delivery times for all models. Peloton aren’t worrying about model mix and more about hitting install base targets.

Peloton isn’t just about indoor cycling

What stands out is just how diverse Peloton has made it’s activities. Whilst cycling continues to dominate, it’s encouraging to see members getting the most out of their memberships. One member commented:

“I love Chelsea Jackson Roberts. Her yoga flows have changed my life for the better. Lockdown has been one of the most positive experiences for me as I got to discover her teaching.”

Peloton offers more than just cycling for its members. This is key to any home fitness proposition. You need to offer variety to increase stickiness and keep things fresh.

Returning to the gym - Peloton a zero sum game?

I hypothesised that after purchasing a Peloton it’s unlikely you’ll return to the gym outside of your home. Is Peloton a zero sum game and has Covid accelerated the migration away from the gym? Members are split, with 53% saying they are unlikely to return now they have a Peloton.

This is a fascinating question and one that dictates Peloton’s long-term future. If it can replace gym memberships it’s market size is dramatically increased. For half of those surveyed they’ve replaced their gym memberships with Peloton.

Convenience is a big factor here, not having to leave the home in order to workout maximises the time you can spend doing just that. You can also workout around your own schedule.

“I’ve learned to love using my own music (at my volume preference) and working out when I want. I love not being tied to a schedule since I work from home, it’s easy to fit it in when I can in between meetings etc.” Peloton member, Jan 2021

When you consider that 78% of Peloton members share their Peloton with other household members, Peloton turns out to be a major cost saving versus going to the gym.

“I am saving money and getting more of a variety with Peloton. (Especially saving money because my husband and I both use the Peloton.)” Peloton member, Jan 2021

Piece of mind is also a major consideration. Many members comment on mandatory mask use as a reason not to go back, but also the unhygienic conditions of a shared gym environment. But not everyone agrees and for some the gym will remain:

“Nothing replaces in-studio yoga for me, especially when it's heated.” Peloton member, Jan 2021

The more specialist activities cannot be replaced by a Peloton membership. Another member commented that they use heavy barbells in the gym which they can’t use at home when weights dropped to the floor. We also should note that for many the gym is a social occasion where they meet others. Peloton isn’t a zero sum game.

Peloton members aren’t cyclists

To get a sense of what a Peloton member is like, I wanted to understand whether they also cycle outside. The short answer is no, 58% of members never cycle with only 31% occasionally cycling. Peloton isn’t competing with Zwift, TrainerRoad or similar cycling platforms.

Peloton competes with gyms and its members are typically replacing their gym membership with a Peloton for their entire household.

I’d question whether a tie-up between Peloton and Zwift would yield gains for Peloton. It’s something a minority of Peloton members would welcome. Zwift has it’s sweetspot and it’s different to Peloton.

I’m interpreting the data that indoor cycling is just that for Peloton members. They don’t see themselves as cyclists and don’t use Peloton to get better at cycling, rather to improve overall fitness and wellbeing as part of a wellness package.

What do members see as the main benefits of Peloton?

In its infamous advert, Peloton positioned itself as “A year ago I didn’t realise how much this would change me.” We all know Peloton got the ad completely wrong, so I won’t flog that dead horse, but Peloton does seem to be transforming its members. The biggest perceived benefit without doubt is convenience. Members indicated they’re far more likely to workout. Similarly, members chose when to workout around their schedule. Fitness levels and physical endurance also feature heavily - no surprise given the emphasise on cardio. What is interesting is the perceived affect on members weight. It’s firmly at the bottom of the list. What does this tell us about home fitness? It’s all about convenience and being able to workout more often. Peloton should really run ads that scream “our bikes/tread will make you workout more” and not adverts that say “lose weight with Peloton”.

Delivery times are still a major frustration

Peloton has been a victim of its own success due to the Covid-19 pandemic. Supply continues to outstrip demand and customers are (at the time of writing) having to wait 7-10 weeks for delivery. The $420m acquisition of Precor will likely boost production and decrease delivery times, but it takes time to change production lines and upskill teams. Verbatim feedback also points to poor quality within existing manufacturing:

“the delivery time and experience with how badly customer service was during it all has soured me on Peloton as a whole. Honestly I regret the purchase because of it. I also make every attempt possible to steer friends to other devices and at some point I will likely sell this and get something else.” Peloton member, Jan 2021

There are numerous reports on Peloton members forums of the Bike and Tread products reaching customers with defects. I’m sure Peloton is rushing to get bikes to customers and as a result this is leading to poor quality. Precor’s quality control and manufacturing expertise will solve this.

“You gotta get your customer service quality together. I get we’re in a pandemic but you’ve had plenty of time to figure this out.” Peloton member, Jan 2021

Again, a victim of its own success, Peloton has struggled to ramp up customer services to cope. It’s having a massive affect on customers. When things do go wrong Peloton should delight, but members are reporting long wait times to speak to customer services and not all faults can be resolved over the phone. Lead times for service technicians are months, when they should be days. Many customers have resorted to fixing bikes themselves, swapping tips and tricks on servicing and solving common faults within forums.

“Concerned with the long wait times for servicing the bike. It’s been clicking but I had to wait 2 months and still am waiting for the service appointment for the pedals.” Peloton member, Jan 2021

Many of the survey respondents wanted to express that Peloton wasn’t living up to their high expectations. Peloton works with partners to service bikes and must rapidly recruit to fix the issues its faced within the pandemic.

Net promoter score

Peloton’s NPS score of 60 reflects its high retention and astonishingly low level of churn at just 0.64%. To give some comparison of its performance relative to other technology companies, Netflix scores 68, Amazon scores 62, but its Tesla leading the way with an NPS score of 96 according to Retently. All things considered, 60 is an amazing performance given the challenges I’ve outlined around customer services, product quality and delivery times.

Churn remains low despite the short-term headwinds

Real churn is key measure and at just 0.64% customers just aren’t cancelling their memberships and Peloton is growing rapidly. I wanted to get a sense of the likelihood to churn for the members and use this to cross check the validity of my sample. It was encouraging to hear that 93% of members are unlikely to cancel memberships in the next six months.

Peloton members love the instructors

It’s something you hear about time and time again on Peloton members forums: “I love XYZ instructor”. Peloton has invested in a wide range of instructors to suit the majority of tastes and preferences. Instructors are Peloton’s secret sauce versus traditional gyms. Peloton has made significant investments in its instructors and it’s a real highlight with its members. When you look at a rival offering like Apple Fitness + it too has invested in a variety of instructors. If Apple wanted to disrupt Peloton and attract its members to Fitness + it would be wise to throw some serious money at Peloton’s most popular instructors. If you’re Peloton and you’re reading this, protect your best instructors with some heavyweight long-term incentives.

A distant second to instructors are fitness classes. We’ve seen from the earlier charts on usage that the variety offered to Peloton members is another major highlight.

Thirdly, Peloton’s user interface is slick and easy to use. The large and vibrant touchscreens provide a user experience that customers enjoy.

At the opposite end of the scale comes delivery times. I’ve mentioned that the acquisition of Precor will benefit Peloton, but in the short-term the majority of customers want Peloton to do so much better. Peloton just can’t make equipment fast enough but that will change and it’s something they can fix.

Community and how Peloton members feel part of something is mentioned often as a key component to success. However, for all the positive stories of being in the Peloton ‘cult’ there’s equally negative experiences.

“Get rid of that Facebook group. It's toxic!”

Peloton’s members are extremely active on social forums like Facebook and Reddit and this does lead to conflict. Peloton themselves run a forum but members are reporting bad experiences.

Will Peloton members buy the new cheaper Tread and other new product lines?

The majority say they will, but let’s be specific this could also be apparel and accessories. Peloton definitely has an opportunity to cross-sell to its existing base. Given the high incomes and large houses I’d think there’s plenty of room both within the home and for Peloton to increase its product line and sales from existing customers.

Summary

• Peloton’s customers are highly satisfied with an NPS of 60; comparable to Netflix and Amazon

• Peloton’s instructors and variety of class types provide a strong package for its members

• There’s work to be done to lower delivery times, improve product quality and bolster customers services

• Peloton has room to grow within its existing customer base

• Peloton is not a zero sum game

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