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Part 2: How to Compete With Peloton — and Win

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Peloton Digital Bike

If you haven’t read Part 1 of this series yet, check out the article here. 

Whether you are on the side of Peloton or cheer for the Soul Cycle’s of the world, there are four things you need to beat Peloton and grab your share of the sports and fitness market in a reshaped landscape.

The 4 Components You Need to Compete with Peloton — and Win

  1. Production: The entertainment, fitness content (e.g. class type). The motivation that makes us all want to workout except curated with a production first mindset. Think the Sundance Film festival.
  2. Distribution: The means to access consumers via the segments themselves that act as marketing channels. The segments are in-person studios (e.g. storefronts) and/or digital fitness (e.g. virtual, app, remote, video).
  3. Talent: The instructor, the trainer, the coach…the single greatest asset and driver of motivation in the entire industry.
  4. Technology: The ability to pull it all together, that delivers on the high expected value promise made to the consumer by bringing the in-person and digital channels into one experience.

1. Production 

It is easy to forget that Peloton operates several in-person studios in NYC, in addition to the digital experience that brings fitness to your home. For years (and still to this day) every live class is produced from an in-person live studio class (the COVID-19 shutdown not included).

So Peloton not only knows how to run an exceptional studio cycling or tread class, they have been producing a digital version of each class for years. This learning curve alone has positioned Peloton in a place well ahead of others.

Now on the other side of the coin, while an in-person fitness studio does not have the production expertise to drive the same digital growth as Peloton, for decades they have been producing high quality classes at countless studios around the world. And this is evident in consumer behavior research. Here’s one of an infinite number of consumer comments on Reddit:

I loved Pure Barre, but it was hard for me to justify spending top dollar…Peloton has filled the void cause I actually feel like I’m riding live in a studio in my living room. -Hannahkat90

With the sudden crisis created by COVID-19, the digital fitness trend went from a 3 to 5 year transformation to an overnight one. So where Peloton has enjoyed watching the market stubbornness and ignorance let them dominate, in a short 90 day period every in-person fitness business was forced to ramp their learning curve of digital production. Through this industry phenomena it also revealed not all digital content is created equal. Rather it’s rare and far more likely to experience something akin to being stuck to the cycling equivalent of Catwoman.

Takeaway: Both sides of the market will be required to continue focusing on value creation that produces engaging content. That includes Peloton. For the in-person side of the market, you must avoid the trap of thinking digital exists in a vacuum. Remember Peloton built digital because they understood the inherent value of the in-person class, not the other way around.

Convert a corporate studio or gym into a production location, where you will build out and evolve your own content. Run live in-person classes during production. Let your members be a part of the discovery process, like Peloton does so masterfully. And remember, just because you record a live class, that does not mean it has to be streamed live out of the gates. If there is no value in streaming live, (e.g. no leaderboard, no recognizing digital members in the class, etc) focus on editing the class after it’s recorded to deliver higher quality content.

Most importantly, eliminate the idea that you can fake reality. It feels like acting and consumers don’t believe it for a minute.

Peloton Studio NYC
A Peloton studio in NYC

2. Distribution

Access to clients comes in two channels in this fight: geographical area around physical locations and digital apps (e.g. SWEAT, Peloton, etc). Peloton surprised the market by developing a way to leverage both channels in an unconventional way. Peloton made the bike (e.g. equipment, hardware) a physical location at home while building a vast delivery network. Now with every software update, Peloton can distribute new content immediately. When they produce a new type of class, within one download they can compete with a new genre of sports and fitness. Look at the recent Dance classes they launched earlier this year.

Same goes for the argument around gamification. When I hear someone say “Well not everyone wants to workout to an instructor. So there’s definitely a place for gamification style digital classes.” I agree with the value of gamification, but what happens to that business model when Peloton’s next update includes games? And don’t think for a second they are not thinking that. In some ways the data they collect daily furthers their advance on the market.

What Peloton does not have at the ready are thousands of studios around the World to bring an in-person experience to all markets outside of New York City and London. Now one could consider the new Peloton retail stores as a physical presence, but not quite the same as a gym, boutique studio, etc.

For these studios, they are rich in physical locations. Yet they lack the software enabled hardware that is needed to deliver the digital experience. Therefore they are weak on digital distribution. And in some cases may be hurting themselves by creating a terrible quick digital app that will damage the brand so much that it will cost twice as much to get consumers to try a future app under the same brand again.

Takeaway: If you own a physical fitness business, you need to move fast and think quicker. As General McCarthy once said you need to “pick up your rate of movement”. Bring Peloton into your business so you can begin understanding the consumer behavior that drives this obsession. You can download Peloton conversion guides and put at bike stations and even buy Peloton hardware and put in your facility for people to use. Through this effort you will be able to leverage new knowledge that will lead to a more viable long-term strategy. Helping you create a digital and in-person distribution model that wins for your brand. So embrace the locations you have and prepare to use them for massive distribution when it’s time to rollout and scale your new digital class experience.

Peloton Store Somerset
Peloton storefront in Michigan

3. Talent

This one always amazes me. What is the one thing that creates true, full loyalty in sports and fitness? In this industry it is the only thing as guaranteed as death and taxes: the quality of the trainer, instructor. The coach. It will always be about the relationship between player and coach (more on this in a future post). In consumer psychology, this is known as an indirect intimate relationship. If you’ve ever loved someone, then you know the loyalty, desire and determination it creates in you for that person.

This is not a new phenomena yet Peloton seems to be one of the only companies that realizes the importance of a quality instructor and the psychology of an indirect intimate relationship with a consumer. Just take the rise of Robin Arzon as an example. Then look at what people are saying about the importance of the instructor connection:

I used to love cyclebar. I used to drive 30 minutes to get a studio. I stopped going because my favorite instructor left and I started using the Peloton app on the bikes at the gym. I also bought my own shoes. Just like any other type of class, the instructor makes a difference. -Hananah_bananana

Now, Peloton is not the only place to find great instructors. And do not be fooled by attraction alone. These are people who know how to coach, teach and motivate people to go faster, work harder. A class, in-person or live, with an attractive instructor who can’t teach will be the last class you take with that brand. When your heart rate is 170 bpm it’s funny how your mind clings to survival. In survival mode you don’t want a model statue. You need a coach that motivates.

Spend fifteen minutes on Instagram and you will find the fitness equivalent of the NFL Combine. People like Caro Mareike, Kira Stokes, Massy Arias, Natalie Uhling and more.

Takeaway: Peloton has world-class instructors and acquired them by picking them off in places where people raved about the in-person class, like Barry’s Bootcamp. This is the holy grail of the sports and fitness industry. Just ask someone who takes an Olivia Amato, Alex Toussaint or Ben Alldis class.

For Xponential, OrangeTheory, and Planet Fitness brands of the world, their greatest strength is their massive network of instructors. Yes, Peloton is beating you today with a dozen or so instructors. But for them to beat you long term they would have to tap into a much larger network of trainers.

You already have that network. Tap into it.

Overnight the biggest brands in the industry could bring 10X as many world-class instructors to the fold and start truly competing for the motivation of fitness consumers. And where there is motivation, there is conversion.

Peloton Coaches Cycling
A group of Peloton cycling coaches smiling for a photo

4. Technology

Easily the most ambiguous of the four areas. Technology often is so broadly defined that it can be very difficult to understand what you need for your specific business to win in both digital and physical sports and fitness. And yet this is one of the most important areas to successfully manage production, content distribution, and instructor talent. Of course technology introduces additional complexity when solving for the local gym or boutique studio experience (e.g. selling memberships, managing member services, etc) as they must manage this and a new digital experience.

The biggest threat to the fitness studio owner is the capital waste created from pursuing what may appear to be a fruitful digital strategy in the short-term, that is only doomed to end up very costly. As an example, leveraging Zoom as a live class delivery platform has been widely popular and by most standards very successful for everyone in the industry during the COVID-19 shutdown. In a majority of cases there were zero alternatives for you. Yet to truly compete in the digital segment it will take far more than Zoom to deliver the high expected value consumers demand.

Takeaway: Decide if you want to be a sports and fitness business or a technology and software business. If the latter, make sure you have the financial means to invest heavily in the rapid growth of digital while maintaining the same expected technological growth required to compete on the consumer experience side. If you are looking to move quickly and be a business that focuses on creating the best content versus how to deliver that content, then partner with technology companies who are thought leaders in the industry; companies that have a reputation of “shipping code” early and often.

And be wary of a CIO that looks to pull one solution in after the next to create your “own proprietary software”. The risk exposure from this “middleware” approach is far greater than the guaranteed fallout from the bad experience it will deliver to members.

Peloton app for Amazon Fire TV
Peloton app for Amazon Fire TV

In Summary

With a new wedge on the talent front, production development in place and a technology partner, you have the critical pieces in place to maximize distribution. Start with in-person celebrity instructor classes that give consumers access to winning content. And with time, opportunities for software enabled equipment for in-home training like Peloton will emerge.

Imagine the endless possibilities to deliver the expected value for clients that exists for the entire fitness market…especially where you have that physical presence in place.

I mean the quickest way to get me off the Peloton and out of the basement is to bring Olivia Amato and the instructors people love training with to their neighborhood studio. I’d be in line before sunrise to get my seat.

And to think most of you are just a punch list away from rising up and competing again.

Footnote

Never forget that competition is a good thing. I want Peloton to be as successful as I want Xponential or Planet Fitness to be. The more people exposed to fitness, the greater the opportunity for all.

I am the founder and chief executive officer of Upper Hand, a technology company in the sports and fitness industry.

If you are interested in taking a deeper dive contact me and we can outline a plan for you.

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