Peloton’s Brand Mismanagement: From Status Symbol to Cost Restructuring

Throughout the coronavirus pandemic, the advertising world explored few bigger stories than the continual tale of Peloton’s brand mismanagement. When the COVID-19 pandemic first started, many states throughout the country imposed lockdowns to mitigate the virus’ spread.

However, this didn’t stall Americans’ shared need to stay in shape. Home gyms, as opposed to typical memberships, became more of the staple throughout the pandemic. In particular, exercise bikes and other cardio equipment soared in popularity. As a matter of fact, 25% of Americans purchased an exercise bike and 21% purchased a treadmill or elliptical throughout the lockdowns.

Out of the white-hot home exercise equipment industry, Peloton rose to fame. While the company has been around since 2012, the brand didn’t have anywhere near the level of household recognition that it obtained throughout the COVID-19 pandemic. Throughout the pandemic, Peloton reported more than two million members at the end of 2020 with its revenue expanding by 77% to $466.3 million. At its height, Peloton’s stock price climbed from an IPO of $25.24 to $162.72.

Now, all of that seems to a lifetime ago. After achieving notoriety as a status symbol, Peloton came face-to-face with numerous public relations and branding struggles. Today, we look at the origin of three of them in specific: its supply chain delays, numerous equipment accidents, injuries (and even a death), and the return of an iconic HBO show.

Peloton’s Brand Mismanagement with Supply Chain Delays

While Peloton’s brand mismanagement regarding supply chain delays should not fall solely on the home equipment company. Their reaction could have been handled much more efficiently.

A report from McKinsey & Company detailed the plummeting usage of gym locations during the COVID-19 pandemic, falling from 74% to 65% post-lockdown. Additionally, it highlighted the rise in usage for connected equipment, skyrocketing from 14% to 31%. And Peloton won out big in the early days. 32% of Peloton consumers attribute the novel coronavirus pandemic to the event that propelled them to purchase a Peloton exercise bike. More so, 18% bought one solely because of the pandemic.

For many businesses, this is a wonderful problem to have. However, Peloton ultimately failed to keep up with the rapidly increasing demand for its products. Because of its strenuous influx of orders, “Peloton reported that it had $230 million in backlogged orders for its products in June 2020”.

While the order influx alone would have been an issue, to make matters worse, the world experienced massive increases in shipping traffic. This completely wrecked the global supply; many of these issues persist to present day. Ignoring the coronavirus pandemic, experts forecasted global maritime traffic to increase by 240–1,209% by 2050.

Admittedly, many of these problems are out of Peloton’s hands? So, how did they mismanage their branding in the face of ongoing supply chain issues?

In short, the company lied to customers. Customers flooded social media channels with stories of Peloton exercise bike deliveries facing delays. Some deliveries faced several rescheduled shipping dates. The problem grew so incessant that Peloton customers created social media groups to vent and share information about their ongoing delivery woes.

While the company eventually planned a $100 million investment into its supply chain operations, the damage was mostly done. #PelotonLies began trending a Twitter. And Peloton’s delivery date increased from a four-week goal to ten weeks.

Peloton’s Brand Mismanagement After Equipment Accidents

Delayed gratification is one thing. But after numerous injuries and a fatality, Peloton’s brand mismanagement continued to plague the home gym equipment company. From 2019 to 2020, at-home exercise injuries resulting in emergency room visits increased by more than 48%.

As it specifically relates to Peloton, the United States Consumer Product Safety Commission officially declared the Peloton Tread+ to be unsafe on April 17th, 2021. This press release came out less than one month after Peloton revealed that the Tread+ killed a child. Essentially, the Consumer Product Safety Commission highlighted that several children and a pet were pulled under the exercise treadmill.

Peloton’s Founder and CEO John Foley considered the death to be a “tragic accident”, representing only a “small handful” of incidents related to the Tread+. At the time the Consumer Product Safety Commission knew about 39 incidents. However, that number nearly doubled in short order.

 After Peloton received 72 reports entailing adults, pets, and objects being sucked under its treadmill, the brand decided to recall the Tread+. In total, Peloton recalled 125,000 Tread+ Treadmills. Also, Peloton recall 1,050 Tread Treadmills, citing an issue with a touchscreen that could potentially fall and cause injury.

While the recalls were the right moral course of action, they came far too late. In the aftermath of John Foley’s negligence, the Securities and Exchange Commission announced an investigation into Peloton. In addition, the Department of Justice and the Department of Homeland Security subpoenaed Peloton documentation.

Now, Peloton has been named in several lawsuits regarding its treadmill recalls. While John Foley since apologized and the brand stated it would cooperate with the investigations, the company already experienced great reputational damage.

Peloton’s Brand Mismanagement in Response to And Just Like That

In December 2021, HBO successfully launched the ten-episode sequel series, And Just Like That. The series takes place following the events of HBO’s hit show, Sex and the City. In the pilot episode, viewers had front-row seats to the latest example of Peloton’s brand mismanagement.

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Spoilers Below

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Towards the end of the first episode, John Preston (known commonly as “Mr. Big”) dies after having a heart attack while conducting an evening Peloton exercise bike workout. For the unacquainted, Mr. Big was quite pivotal to the plot of the original Sex and the City show as he became the main character’s primary love interest since season 1. To have him die on a Peloton bike created a flood of internet articles (including this one), showing another negative incident reflecting the brand, albeit a fictional one.

But the involvement of Peloton was not the company’s fault. In the world trademark law, nominative fair use allows production companies to use a trademark as long as the product is shown being used in a way consistent with the original trademark. However, there are two reasons why this incident probably wouldn’t qualify as nominative fair use:

1.       Peloton didn’t know how the bike or its instructor Jess King would be featured in the show.

2.       The incident disparaged the brand instead of creating a mutually beneficial product placement relationship.

In all fairness, Peloton did not directly create this problem for itself. That being said, an argument could be made that its prior public relations and branding struggles (see the above two points) made Peloton an easy punchline for a joke that people in the HBO writer’s room thought was funny. Peloton’s Senior Vice President of Global Communications Jessica Kleiman stated, “This was a casting opportunity for one of our instructors for an acting role — not an official brand integration or product placement.

However, the story doesn’t end here. In what could have been an actually savvy strategic move, Peloton executives sprung into action and filmed an ad featuring Mr. Big’s actor, Chris Noth, less than 48 hours removed from the pilot’s airing. The ad showed Chris Noth as Mr. Big claiming that he was alive after all. Ultimately, this could have been a clinic in how to spin a negative into a positive.

But then, in a shocking twist, two women came forward and accused Chris Noth of sexual assault. Shortly after, Peloton pulled the ad and deleted its tweet featuring the actor.

Summary

Currently, Peloton stock plummeted to $24.22 per share, lower than its starting price of $25.24. Confronted with a tailspinning stock price, Peloton hired McKinsey & Company to review its cost structure, potentially leading to numerous store closures over the coming months. Finally, Peloton announced that it will temporarily halt production of its exercise bikes and treadmill equipment.

It’s impossible to predict everything in life. Things happen. Based on Peloton’s account, they felt blindsided by HBO’s negative product place of its exercise bike. Of course, this was shortly before they were blindsided again by the Christ Noth allegations.

But they knew about their supply chain. And customers claim that Peloton overpromised on delivery dates. Similarly, Peloton knew about the injuries and death related to its Tread+. Instead of taking appropriate immediate action, the company’s CEO played off the matters as trivial.

And in life, if you hear the same joke over and over again. It eventually ceases to be a joke. And becomes reality, instead. While Peloton’s brand mismanagement doesn’t fall solely on the exercise bike manufacturer, it did little to help itself once the punches started rolling in.

To build your brand in an ethical manner, contact the digital marketing specialists at Rizzo Young Marketing.