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Can Peloton Bounce Back From its Latest Crisis?

Posted on January 23, 2022 by Michael Grimm
, Reputation Partners

Portions of the following article were featured in Forbes‘, Peloton Faces Challenges Before it Can Recover from their Latest Crisis.

On Jan. 20, Peloton news leaked that the company was halting production of its Bike and Tread products as a result of significant failing demand. As a result, the company’s stock price cratered by 24% in one day, and there are reports of mass layoffs at the company. The company’s future is in peril. 

So, how can the company bounce back from this latest crisis which seems to pose the greatest existential threat to its future? Our own Michael Grimm shared the following thoughts and tips for Peloton.

For Peloton to Bounce Back—Must Evolve Product & Market Positioning 

Peloton badly misjudged its ability to sell its Bike and Tread products throughout the latter stages of the pandemic in 2021 and into 2022. Competitors became more aggressive for Peloton’s market share, consumers broke away from quarantine and returned to gyms or non-at home workout routines, and Peloton found itself in a unique position during the pandemic when most brands struggled with maintaining supply chains: they are buried with product supply with little demand. 

It is clear Peloton must adapt or die to maintain its market position and financial solvency in a post-pandemic society. They need to evolve their products, and they plan to do so in April of this year with their “Peloton Guide” strength training product. But, this product is $495. Will consumers find that palatable? Based on the recent crisis, there is reason to be skeptical. 

Peloton should consider a product rebrand to show innovation with their star instructors—incorporate more interactive and customizable elements to each specific user vs. just one product for all, and find ways to have smart partnerships with national gym chains that could incorporate their products on-premise. 

Crisis Communications Lessons from Peloton’s Fall 

  1. Adapt to changing market conditions, or risk setbacks: Peloton’s crisis is largely due to a precipitous drop in demand while the company incorrectly created a massive supply to meet demand that never emerged. The company placed its bets on the pandemic continuing a strong demand for its products while folks were still in quarantine or at home. However, as lockdown restrictions lifted and more people became vaccinated, the Peloton products seemed like less of a necessity for physical and mental health than they were during the heart of the pandemic where folks were more likely to adhere to strict lockdowns or quarantines. This failed bet cost Peloton dearly, and because they were unable to adapt to changing market conditions, they find themselves in significant peril. Market conditions are not favorable to Peloton’s high cost structures, and the company is still ignoring this with the expensive strength training product coming out in April
  1. Missing Leadership Adds Speculation and Doubts: While the stock cratered 24% in one day on Jan. 20, where was CEO John Foley? A quick look at his Twitter account shows zero tweets related to the company, and just the other day, on Jan. 21, he posted a positive tweet saying “Proud of my Peloton teammates for all they do day in, day out to help more and more people lead healthier and happier lives.” While this message is fine in normal non-crisis periods, it ignores the fact that the company is in an existential financial and market crisis. Plus, such a positive message from the CEO following the news that the company’s plan for course correction will include significant layoffs is nothing short of tone deaf. Leaders should understand that the best way to overcome a crisis is to confront it, lay out a vision for evolving, and give next steps for when consumers, investors and other stakeholders can expect a turnaround. Lots of eyes will be on the Feb. 8 financial earnings call, but it’d be best if Foley can provide more information much sooner
  1. Always have a Plan B: In late 2021, Peloton went all-in with sales, advertising, and marketing to capture on a hopeful holiday demand, and offered $300 – $500 discounts for their Bike and Tread products. This strategy failed, and the company did not have a Plan B ready to adapt to the market conditions. They’ve since hired McKinsey consultants to review cost structure, and essentially help the company manage this tailspin. The McKinsey news was a sign of desperation and lack of leadership adaptability and vision, and only added to the tumultuous week for the company. Peloton’s stock plummeted just two days after the McKinsey news leaked. Peloton should’ve never been in the position to hire outside consultants, and if they did, should ideally have had them on board far before the company’s 2021 marketing strategy was rolled out in-market.
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