Peloton Case

Task summary:Dear freelancer, please write a 1200 words essay for the attached Peloton case, following the prompts inside the attachment. Do not use any other source beside the case and the slides that are inside the pdf.

Task example:Provide a complete situation analysis for Peloton, the competitor landscape, and the customer (three Cs). In addition, make sure to address the following questions: • What key characteristics of Peloton’s current business model have facilitated its initial profitability and competitive resilience? Explain your reasoning. • Do an onion analysis. Which competitor (however specifically or broadly defined) represents the biggest threat, and why?

1. Review the Marketing Case Guidelines (below)
2. Watch Why Peloton Spun Out: https://www.youtube.com/watch?v=9R6rgrWJCRI
3. Review Company Overview Slide Deck (below)
All information you need to complete this assignment is either described in this prompt or accessible via
the documents referenced below. You are also welcome to use other material from class, such as previous
cases or assigned readings. Importantly, in order make sure all students have access to the same set of
facts: Do not do any outside research in support of your analysis. Use only the information provided
alongside this prompt: (1) “Why Peloton Spun Out” and (2) “Company Overview Slide Deck.” If there
are data that you wish you had (but are not available in the provided materials), simply make a
(reasonable) assumption and state it clearly in the write-up. If you are relying on something that you
believe to be common knowledge, but are worried about whether or not it is common knowledge, simply
state it clearly in your write-up and proceed with your analysis.
Formatting
•
•
•
•
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Length: maximum two (2) pages, single-spaced
Font: minimum 11-point font
Margins: minimum one-inch margins
Appendix: You may include a one-page statistical appendix, if necessary (although most good
writeups do not need an appendix). Also feel free to include tables in the text to enhance
readability. Any tables included in the text must also adhere to formatting requirements (e.g.,
font, margins, spacing, etc.)
Background
Peloton, the embattled exercise equipment and media company, has seen its stock price fall roughly 98%
since the all-time highs set during the pandemic. This year, the company announced that CEO Barry
McCarthy would be stepping down, and that it planned to lay off 15% of its workforce. The job cuts mark
the fifth time Peloton has reduced its headcount since 2021.
Over the last few years, Peloton has also had to make many other tough decisions, including store
closures, hiking subscription costs, heavily discounting equipment, and turning to third-party sellers such
as Dick’s Sporting Goods and Amazon. The company has also seen an unexpected decline in connected
fitness subscriptions, which showed an annual churn rate of 1.5% (higher than expected by analysts for
this period). The company today faces a harsh reality: Many of the customers Peloton gained during the
pandemic have opted to return to in-person gyms (e.g., 24 Hour Fitness and Equinox), while fitness
junkies have jumped ship for a slew of alternative products including everything from rowing machines to
connected mirrors.
Watch the attached video (“Why Peloton Spun Out”). Please assume all presented information regarding
the recent past remains accurate today. Specifically, any details about the customer, company, or
competition are still relevant in 2024, and any recent trends have continued into present day.
But Peloton does not plan to go down without a fight. The company recently secured a five-year, $1
billion loan, along with a revolving credit line of $500 million, to help finance a turnaround. It remains to
be seen whether these and other recent changes are indeed the first steps on the road to recovery, but it is
clear that the company is at a crossroads, and needs new sources of revenue.
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Your assignment is to decide—and, more importantly, justify—why you believe Peloton will be more
successful in the long run as either (1) an exercise equipment company, a (2) media-technology company,
or (3) B2B vendor focused on hotel and gym partnerships. In other words: Should Peloton continue to
develop high-end hardware, double down on software (e.g., app-based subscriptions), or pivot to
corporate partnerships (e.g., selling inventory to gyms and hotels)?
Review the attached company overview slide deck. Please assume all presented information regarding the
recent past remains accurate today. Specifically, any details about the customer, company, or competition
are still relevant in 2024, and any recent trends have continued into present day.
To that end, you will chart a strategic path forward for Peloton. This will require you to not only
recommend adding another product to its product mix or pursue new strategic partnerships in commercial
fitness, but also develop a complete and comprehensive marketing strategy for your recommended course
of action. You will choose one of the following three options:
1. PeloTone: A complete full-body strength station that will serve as a comprehensive home gym.
Features include a full-length LED screen to stream live and on-demand classes, with built-in
bands capable of delivering up to 200 pounds of resistance, connected to a retractable bench.
2. PeloVerse. An immersive virtual reality (VR) app compatible with all major VR headset
platforms (e.g., Meta, HTC, Sony, etc.). Features include live and on-demand classes in
customizable 360-degree virtual gyms and arenas, with access to content developed specifically
for the metaverse by its most popular instructors.
3. PeloPartnerships. A strategic partnership to extend Peloton’s reach by offering excess bike and
treadmill inventory to hotels and/or gyms. This strategic option will harness the existing product
line by providing fitness solutions to commercial establishments eager to elevate their amenities
with Peloton-branded assets.
Remember, no matter which option you choose, your goal on this assignment is to demonstrate your
facility with and understanding of the marketing framework (i.e., three Cs, STP, and four Ps).
Instructions
Situation Analysis—Three Cs (30%)
Provide a complete situation analysis for Peloton, the competitor landscape, and the customer (three Cs).
In addition, make sure to address the following questions:
•
•
What key characteristics of Peloton’s current business model have facilitated its initial
profitability and competitive resilience? Explain your reasoning.
Do an onion analysis. Which competitor (however specifically or broadly defined) represents the
biggest threat, and why?
Strategy—Segmentation, Targeting, and Positioning (25%)
Given your recommendation, perform a segmentation analysis of the potential customer base. Which
specific segment do you recommend targeting initially, and why? Additionally:
•
How valuable will it be to Peloton, on average, to acquire a customer in the targeted segment for
the new product or partnership you are proposing? You may draw from data included in the video
or company overview slide deck to calculate the customer lifetime value (CLV) and justify the
expected profit margin and marketing cost, or you may simply state any assumed expenditures.
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•
How will you position your strategic path for this segment? Why is this the most effective
framing relative to other alternatives?
Marketing Mix—Four Ps (40%)
Assume that Peloton has adopted your proposed targeting and positioning, and plans to go-to-market with
your recommendation. All marketing mix decisions, therefore, should reflect the strategy you proposed in
the previous section. Describe the optimal marketing mix (four Ps), making sure that each of these tactical
decisions align with your target segment and subsequent positioning. In addition, be sure to answer the
following questions:
•
•
•
Considering the possible barriers to this adoption by your target segment. Offer some guidance
for how quickly your new product or partnership will be adopted using either an ACCORD or
Bass model.
Discuss the goals behind the promotional strategies you propose.
Calculate the EVC for this new product or partnership (no need to calculate the breakeven cost).
Justify your analysis.
Overall Structure and Clarity (5%)
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GUIDELINES FOR CASE PREPARATION AND ANALYSIS
When you begin to prepare a case, start by making a quick run-through of the text. This reading sets
the tone by giving you an idea of what the case is about. Once you have done this, re-read the case in
detail (pay special attention to the exhibits this time). Stop at the parts that seem important to you,
make notes and internalize the vocabulary of the case.
The third reading of the case is the most important one. When you read the case this time, use the
case guidelines to list the major problems/issues. Proceed to the detailed analyses (both qualitative
and quantitative) and formulate your recommendations. Finally, check the sensitivity of your
recommendations to your assumptions and develop the specific action plan.
As in real life, the case may not provide you enough data. However, you need to develop a logical, selfconsistent plan on the basis of the available data and information. Resist the temptation to obtain outside
information and ‘work backwards’ to your recommendations. No credit will be given for analyses based on
outside information. Also, do not use papers or notes from previous or concurrent marketing classes to aid
you in your analysis. You will be doing your fellow classmates a great disservice.
GENERAL GUIDELINES FOR WRITEUPS
Overall organization: Clearly show the flow of your presentation (e.g., use clear sub-headings). Try
and see the reader as somebody who needs to be “walked” through the report. The following
structure is the most effective:
1) Briefly introduce the problem and your solution right upfront
2) Follow the 3C->STP->4P framework, use sub-headings to indicate each part of the framework
3) There is no need for a summary repeating the recommendations (remember, there are strict page
limits). Instead, be as concrete as possible about your 4Ps, explain WHY you are suggesting them.
Parts of the Analysis:
• Company analysis: try to use the resource-based view. Be as concrete as possible, give evidence
from the case. For example, “Company A has good reputation” is too generic to be useful. Reputation
for what? Why do you think so? Why is the reputation important to your argument?
• Competition analysis: A list of competitors is not an analysis. An analysis highlights which
competitor is important, explains why, and considers both strengths and weaknesses of competitors
that are relevant to your overall argument.
• Customer analysis: A list of what customers care about is not an analysis. Always try to delve deeper
into the benefits/needs that drive behavior. Be concrete, explain how customers differ in the benefits
they seek (do not fall into the trap of mass marketing) Are there trends, seasonality or other patterns?
• Segmentation: A list of segments is not a segmentation. Justify why your chosen classification of
customers into groups is the most useful given your 3C analysis.
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• Targeting: make sure you explain how ALL THREE C’s contribute to your recommendation. A good
match between company strengths and the segment’s need is not enough (it misses competitive
considerations).
• Positioning: a complete positioning statement must include credible/persuasive support. Review
your class notes on this.
• Price, Product, Place, and Promotion: Try to use relevant frameworks and models from class. Be as
concrete as possible in your recommendations; explain how all the tactics work together to
implement your strategy. There is no need to discuss all 4Ps at length, focus on the most important
ones in the case.
Common pitfalls to avoid
• Report leaves reader guessing at used terminology, especially in appendices (e.g., basis for
calculations, labels on graph axes). Use labels, definitions, cross-references, footnotes etc. to ensure
that the reader is “with you”. In the end, the team member least familiar with the computations
should be able to follow your calculations easily without the need to ask any further clarifying
questions.
• Make assumptions, but do not engage in wishful thinking. What’s the difference? Assumptions
help you solve the problem, wishful thinking makes the problem disappear.
• Whenever the case gives you a choice between two courses of action A and B, give an argument
for A is better than B. A list of good things about A or B is not an argument. Do not use the analysis to
push a specific course of action (e.g., by not noting the sensitivity of your recommendation to certain
assumptions). Provide a balanced analysis and persuade the reader that your recommendation
makes logical sense.
• Report is an exercise in restating case facts. Use case facts only to support your analysis and
decisions in a convincing manner. It is fair to assume that your audience has read the case and is
familiar with all the historical facts about the company.
• Problem/issue is not clearly defined. This report usually presents case facts and then jumps straight
to analyses without outlining the critical issue. Problem diagnosis is probably the most important
part of the process.
• Recommendation does not follow from analysis (the most common shortcoming). This may
happen when the recommendation is made but there is no indication of the specific business issue it
deals with. For example, “After much deliberation, we decided to target the affluent segment” is a
decision but not an argument. It prescribes a course of action but doesn’t tell you why it should be
followed.
• Recommendation is generic and does not specify action plan. Contrast the generic “we recommend
that the firm analyze it’s competitive position and develop new products that are not easily captured
by competitors” with the specific “we recommend that the firm target the higher education market,
focusing exclusively on texts written by leading professors at top-ranked universities with whom the
firm has long-term contracts and on-going relationships”.
• Analysis dwells on minor case issues. Let the case guide you in the selection of issues (e.g., if there
is very little information/data on an issue in the case, it isn’t worthwhile spending effort on it). Do
not get lost in the numbers (review the reading from week 1).
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• Report brings in information and/or data from the outside world i.e., beyond what is present in the
case and beyond what is common knowledge (e.g. it is common knowledge that light bulbs use
electricity. It is not common knowledge that the overall luminous intensity of a 40W tungsten
incandescent light bulb is 1.9 percent). The case method is designed to provide you a situation that
you analyze only on the basis on the provided facts. Therefore, avoid the temptation to bring in extracase knowledge and stay with the case facts (especially if you are an expert in the domain the case is
set in, e.g., in light bulbs).
INVESTOR PRESENTATION
May 2024
Disclaimer
The information contained in this presentation is being provided to you for informational purposes only and does not constitute legal, tax, investment, accounting or other advice by Peloton Interactive, Inc. (“Peloton”,
“we”, “us” or the “Company”) or any other party and may not be relied upon as such. This presentation does not constitute an offer to sell or a solicitation of an offer to make an investment in the Company, including
the purchase of any securities of the Company. Neither the Company nor any other party is making a recommendation or advising you to invest in the Company. You are encouraged to do your own analysis and form
your own judgment about the desirability of investing in the Company. In addition, you should consider whether the information contained in this presentation is suitable for your particular circumstances and should
consult with your professional advisors. The statements in this presentation are made as of the date on the front cover of this presentation, unless otherwise indicated, and shall not be deemed an indication that there
has been no change in the business affairs or any of the assets or businesses described herein since such date. The Company does not intend to update or otherwise revise this presentation (or any of the information
included therein) following the date of this presentation and you should not expect the Company to do so.
SAFE HARBOR STATEMENT
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor
provisions for forward- looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this
presentation other than statements of historical fact, including, without limitation, statements regarding the execution and timing of the transactions contemplated hereby, the execution of and timing of and the
expected benefits from our restructuring initiatives and cost-saving measures, the cost savings and other efficiencies of expanding relationships with our third-party partners, details regarding and the timing of the
launch of new products and services, our new initiatives with retailer partners and our efforts to optimize our retail store footprint, the prices of our products and services in the future, our future operating results and
financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,”
“anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements use these words or
expressions.
We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy,
short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions and other important factors that
could cause actual results to differ materially from those stated, including, but not limited to: our ability to achieve and maintain future profitability; our ability to attract and maintain Subscribers; our ability to accurately
forecast consumer demand for our products and services and adequately maintain our inventory; our ability to execute and achieve the expected benefits of our restructuring initiatives and other cost -saving
measures and whether our efforts will result in further actions or additional asset impairment charges that adversely affect our business; our ability to effectively manage our growth and costs; our ability to anticipate
consumer preferences and successfully develop and offer new products and services in a timely manner, or effectively manage the introduction of new or enhanced products and services; demand for our products
and services and growth of the connected fitness products market; our ability to maintain the value and reputation of the Peloton brand; our reliance on a limited number of suppliers, contract manufacturers, and
logistics partners for our Connected Fitness Products; our lack of control over suppliers, contract manufacturers and logistics partners for our Connected Fitness Products; our ability to predict our long-term
performance and declines in our revenue growth as our business matures; the effects of increased competition in our markets and our ability to compete effectively; any declines in sales of our Bike and Bike+; our
dependence on third-party licenses for use of music in our content; actual or perceived defects in, or safety of, our products, including any impact of product recalls or legal or regulatory claims, proceedings or
investigations involving our products; increases in component costs, long lead times, supply shortages or other supply chain disruptions; accidents, safety incidents or workforce disruptions; seasonality or other
fluctuations in our quarterly results; our ability to generate class content; risks related to acquisitions or dispositions, including the acquisition of Precor; risks related to disruptions or failures of information technology
systems, or websites; risks related to payment processing, cybersecurity, or data privacy; our ability to effectively price and market our Connected Fitness Products and subscriptions and our limited operating history
with which to predict the profitability of our subscription model; any inaccuracies in, or failure to achieve, operational and business metrics or forecasts of market growth;
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Disclaimer (cont’d)
SAFE HARBOR STATEMENT (cont’d)
our ability to maintain effective internal control over financial and management systems and remediate material weaknesses; impacts from warranty claims or product returns; our reliance on third parties for
computing, storage, processing and similar services; delivery and installation of our products; our ability to attract and retain highly skilled personnel and maintain our culture; risks related to our common stock and
indebtedness; risks related to expansion into international markets; risks related to the Peloton App and its ability to work with a range of mobile and streaming technologies, systems, networks, and standards; our
ability to maintain, protect, and enhance our intellectual property; our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and
internationally; and those risks and uncertainties described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 in our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2024 and the sections titled “Risk Factors” in Part I, Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7
in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, as such factors may be updated in our filings with the Securities and Exchange Commission (the “SEC”), which are available on the Investor
Relations page of our website at https://investor.onepeloton.com/investor-relations and on the SEC website at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment. New risks
emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this
presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that
the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Our forward-looking statements speak only as of the date of this
presentation, and we undertake no obligation to update any of these forward-looking statements for any reason after the date of this presentation or to conform these statements to actual results or revised
expectations, except as required by law.
NON-GAAP FINANCIAL MEASURES
This presentation includes references to non-GAAP financial measures, including Adjusted EBITDA, Subscription Contribution, Subscription Contribution Margin, and Free Cash Flow. These non-GAAP financial
measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be
different from non-GAAP financial measures used by other companies. In addition, this non-GAAP financial measure should be read in conjunction with the Company’s financial statements prepared in accordance
with GAAP. The reconciliations of each non-GAAP financial measure to the corresponding GAAP measure should be carefully evaluated. See the Appendix for reconciliations of historical non-GAAP financial measures
included in this presentation to the nearest GAAP financial measure.
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Company Overview
© Peloton 2012–2024, Peloton Interactive, Inc. All rights reserved.
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Our Vision
We power people around the world to be the best version of themselves
through personalized fitness and wellness experiences. Peloton couples
gorgeously designed hardware with innovative software that seamlessly
integrates best-in-class content, including classes from the world’s
leading fitness instructors, immersive scenic rides and runs, and
motivating gaming experiences. We serve a passionate community of
active and engaged members, wherever they are in their fitness journey,
so they can reach their goals anytime, anywhere.
© Peloton 2012–2024, Peloton Interactive, Inc. All rights reserved.
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Key Figures
3.7 million
48.6 million
Global Subscriptions1
Total Monthly Workouts1
66% Paid CF2
Subscriptions
Who joined in 2021 are still
members today
© Peloton 2012–2024, Peloton Interactive, Inc. All rights reserved.
45%
FY2018-FY2023 Revenue CAGR
Source: company provided information
Note: Data as of 3FQ24
1.
Includes both paid connected fitness subscriptions and paid app subscriptions
2.
“CF” stands for Connected Fitness
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Our Evolution
Offering
Overview
2014
20241
CF products
Bike
Bike, Bike+, Tread, Tread+, Row, Guide
Subscription types
All-Access Membership
All-Access Membership, Guide Membership,
App+, App One
Content languages
English
English, German, Spanish
Disciplines
2 modalities
(Cycling, Limited stretching)
16 modalities, plus Lanebreak, scenic workouts,
and gym plans
Instructors
6 (US)
57 (Global)
Total # of classes
2,100 Studio Classes
> 42,000
Monthly classes