21st January

Pelton. The making of a Superbrand

If you don’t already own a Peloton, or haven’t seen their TV ads, the chances are that you first heard of the company for the ‘wrong reason’ on social or mass media. By ‘wrong reason’, I mean the many times Peloton has trended for courting bad press. First, in 2019, a Christmas ad by the fitness company generated enough public backlash to wipe off $1.5 billion of its market valuation. The ad was considered ‘sexist and dystopian’ by the great American public, and it may well have been, perhaps unwittingly so. Then, in 2021, Mr Big (Chris Noth’s character) died of a heart attack shortly after completing a cycling session in an episode of ‘And Just Like That’. Fans were horrified and the publicity was, once more, sufficiently hostile for Peloton to contrive an immediate damage control. It filmed and released an emergency ad starring Mr Big and the Peloton instructor, Jess King, toasting to ‘new beginnings’ and doubling down on the message that ‘cardiovascular exercise is good for you’. However, by then, its share price had fallen by 18%. Between these events, the Conservative Party Chairman, Oliver Dowden, didn’t do the company any favours when he remarked that ‘people need to get off their Pelotons and back to their desks’, as the UK government tries to persuade civil servant back to office work. Naturally, civil servants responded by tweeting about politicians being out-of-touch to think they could afford exercise equipment retailing for up to £2,295 plus £39 monthly subscription. There have been other infractions, and their cumulative effect somewhat reflects in Peloton’s current share price plummeting to $34.49 from a high of $162.72 in December 2020. A 130% loss in value.

As an international business and entrepreneurship researcher, I am more interested in the fundamentals of the business and take the share price yo-yo in stride. These fundamentals include how compelling the firm’s proposition is, does it solve a difficult customer problem beyond what competitors sell? Does it offer joy and ease of use? Does it have an aesthetic appeal? And, most important of all, what is the ingenuity and character of the firm’s leaders? These questions are what concern long-term investors and, on these measures, Peloton shares would seem a must-have asset. However, these are not the interests of speculators seeking to profit from short-term market fluctuation.

Pondering on solving a difficult customer problem, Peloton has addressed the perennial Achilles heel of the fitness industry – willpower! At last, on the market is a fitness machine that serves a purpose beyond collecting household dust. By offering interactive fitness equipment with themed classes, storytelling instructors, a live leaderboard, and guilt tripping daily and weekly streak reminders, the company has built a community of active users that will be potent for the long term. This global community is already 2.5 million strong, and boasts Joe Biden, Michelle Obama, Usain Bolt, Richard Branson and Hugh Jackman as members. The fusion of motivation, high energy, competitiveness and entertainment is what makes business analysts describe Peloton as the ‘Netflix of wellness’. For aesthetic appeal, there is an apple-esque attention to detail in Peloton’s hardware and software. As a result, its equipment are easy on the eye and a joy to use by having human intuition engineered into the proposition. Equally important to note is John Foley at Peloton’s helm, whose spells as CEO/President at Evite, Pronto.com and Barns & Noble makes for an impressive CV by any investor standard.

There is never a shortage of high growth companies on the block, but many flatter to deceive and often fail in spectacular fashion, like Theranos. Beyond market valuation, the ultimate index of corporate success is, to my mind, attaining superbrand status. Superbrands are firms that ‘offer consumers significant emotional and/or physical advantages over competitors which (consciously or subconsciously) consumers want, recognise, and are willing to pay a premium for’. This is where Peloton is headed, save for future bad press more damaging than what it has already navigated. Indeed, like many a superbrand, Peloton sees itself not as a fitness company, but as a technology and content company ‘changing the lives of millions of people around the world’. Precisely, superbrands excel by satisfying people’s wellness, wisdom and wealth (WWW) needs. This is why 2.5 million, about the population of Namibia, have deemed Peloton’s high-ticket products to be more of a financial commitment than a hazard. Afterall, wellness is priceless.

Recognising the Streisand effect, it is possible that negative publicity may have enhanced Peloton’s reputation and even assuaged its share price to some degree. But, this is too much of an empirical question for a blog post to tackle. What I do know is that many of today’s superbrands have achieved the coveted status with less compelling and less exciting propositions. Only aspiring to be the ‘Netflix of wellness’, catchy as it sounds, would be setting the bar too low for Peloton. The ‘Rolls Royce of wellness’ might be a good start. Wherever Peloton goes from here, it is truly ‘new beginnings’, and far from ‘just like that’, they would have earned it.

By Adah-Kole Onjewu, senior lecturer in International Business, University of Wolverhampton Business School

@enterpriseadah