OUR TEAM

Filippo Lanzarotta

Veronica D’Agostino

Irene Barbera

Miriam Di Marco

Q.M.

PELOTON �BUSINESS MODEL CANVAS

Università degli studi di Palermo

Business Game class

A.Y. 2019/2020

AGENDA

• The company
• Documents
• History
• Peloton Business Model Canvas
• Patterns
• 7 C’s Framework
• Funds

DOCUMENTS

Peloton, Q1 2020 shareholder letter, https://investor.onepeloton.com/

Peloton website, https://www.onepeloton.com/

U.S. Securities And Exchange Commission, Form S-1 Registration statement, IPO of shares of class A common stock of Peloton Interactive, Inc.

The Best Home Workout & Fitness Machine: Peloton Review

https://www.forbes.com/sites/larryolmsted/2016/11/02/the-best-home-workout-fitness-machine-peloton-review/#191797715a0d

Peloton Is Your Best Home Fitness Substitute For Going To The Gym,https://www.forbes.com/sites/larryolmsted/2020/03/18/peloton-is-your-best-home-fitness-substitute-for-going-to-the-gym/#1ee93baa42a5

No Good Agency, https://nogood.io/2019/10/16/peloton-growth-marketing-strategy/

TM

Peloton prices IPO on high end of expectations,

https://www.cnbc.com/2019/09/25/peloton-prices-ipo-at-29-per-share.html

Kickstarter Campaign

https://www.kickstarter.com/projects/568069889/the-peloton-bike-bring-home-the-studio-cycling-exp

Peloton funding rounds, valuation and investors

https://craft.co/peloton-interactive/funding-rounds

THE COMPANY

Global interactive fitness platform that brings the energy and benefits of studio-style workouts to the comfort and convenience of home.

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CEO: John Foley

President: William J. Lynch Jr.

Headquarter: New York City, US

Founded: February 2012

Global Subscribers: 1.4 million

Revenue FY 2019: $915 million

Company valuation: $8.1 billion (Sept. 2019)

Peloton Bike

$2245

Peloton Tread

$4295

Peloton Digital

All access membership – Connected Fitness $39.99

Digital Membership $12.99

HISTORY

Barnes & Noble John Foley built up a team.

$3.5 million A Series + the initial $400.000

2012

2015

2013

2014

2016

2017

2018

2019

First Bike Peloton prototype

$307.000 on Kickstarter

$10.5 million in a B series to refine the design. Launch in the market

$30 million funding for stronger sales & production

$75 million to expand the software engineers team

Peloton Digital born

Unlimited number of live lessons and on demand for a monthly fee

IPO - $1.16 billion

Company valuation at $4 billion

Peloton Tread born

$325 million of E Series funding to strengthen the community

Total global Subscribers

100k

Connected Fitness Subscribers

250k

Connected Fitness Subscribers

511k

Connected Fitness Subscribers

BUSINESS MODEL CANVAS

Fitness at home already existed. Peloton was the first technology company that meshed the physical and digital worlds to create a completely new, immersive, and connected fitness experience.

It creates engaging-to-the-point-of-addictive original programming with the best instructors in the world, supported by an interactive software that motivates its Members to achieve their goals.  

Peloton also develops beautiful and intuitive equipment that anticipates the needs of the Members and enables its community to support one another.

VALUE PROPOSITION

BRAND-NAME REPUTATION

Peloton is a cult. Its users consider the bikes and the original streaming workouts a way of life, making it much more than a company that sells exercise equipment, thought it does that too

PRODUCT/PROCESS INNOVATION

Peloton integrated a cyclette with a web connect screen, creating a new product.

It changed the fitness industry by developing a one-of-a-kind subscription platform. The most important feature is that Members can choose which training to follow, at the time and with the coach they prefer, this is a new process.

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NETWORK SIZE AND TIMING

Peloton has a first-mover advantage since it was the first to offer consumers what they want, where and when they want it. This created strong network effects, making the rapidly growing and scaled member base a highly strategic resource

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PRODUCT MIX

Peloton has increased the value for the customer by linking the Connected Fitness Products together with the online lessons service

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DIFFERENTIATION STRATEGY

VALUE PROPOSITION

MARKET SIZE

• 600 billion in global fitness spending
• 183 million people with gym membership globally
• In the markets of Peloton: 5 million treadmills and 3 million stationary cycling bikes were purchased for home use

AFFORDABILITY

The digital subscription for a fitness app vary from $10 to $30 a month, while a lesson in a boutique fitness studio costs from $20 to $40 per lesson

MARKET DYNAMICS

• Revenues from the health club industry in USA have grown at an annual growth rate of 5.4% over the past decade
• 40% of health and fitness club members belonged to a boutique fitness studio
• From 2013 to 2017, joining boutique studios grew by approximately 121%

ATTRACTIVENESS

The main competitive factors in the sector must consider include:

• total cost
• production efficiency
• original content
• product innovation
• technological advances
• brand awareness and reputation

Considering therefore the numerous dimensions on which the competition extends we can say that the market is quite competitive

MARKET CHARACTERISTICS

PELOTON ALL-ACCESS MEMBERSHIP

Connected Fitness Products +

Peloton Digital

PELOTON DIGITAL MEMBERSHIP

CUSTOMER SEGMENT

SEGMENTED MARKET

Delivery Partners or

Peloton delivery team

Device installation

One year warranty for some parts and five years for the frame

30 days to return

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Physical products:

physical stores or website

Peloton App:

90 days free trial

DELIVERY

EVALUATION

AFTER SALES

PURCHASE

Word of mouth

Traditional advertising

Social media platform

Commercial

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AWARENESS

Stores or website

App Stores

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CHANNELS PHASES

WEBSITE

(OWN AND DIRECT)

STORES

(OWN AND INDIRECT)

Large showrooms

Microstores

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CHANNELS TYPES

APP

(OWN AND DIRECT)

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LOYALTY

SWICTHING

COST

USER

INFORMATION

PERSONAL ASSISTANCE

COMMUNITIES

CUSTOMER RELATIONSHIP

PERSONAL ASSISTANCE

COMMUNITIES

Coach motivates and helps members

Personalized tips to improve your training

Personal assistance during the purchase and assembly of the tools

Communities and blogs

CUSTOMER RELATIONSHIP

LOYALTY

SWICTHING

COST

USER

INFORMATION

• 95% Peloton retention index
• The loyalty team helps:
• customers to re-engage
• members complete challenges
• assigns digital badges and gadgets for the objectives achieved
• Peloton organizes fitness events such as “Peloton Homecoming”

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• Sense of community
• The user's progress is stored on the device
• Sense of competition linked to the rankings
• Ability to send "high five"
• The ability to choose
• Targeted recommendations to guide the user to try further lessons

• Understand the preferences of the segment that only uses the app and from this extract information to try to convert them to Connected Member.
• The same for those who use the app's free trial days

CUSTOMER RELATIONSHIP

REVENUE STREAM

REVENUE MODELS

Asset sales: Connected fitness products, other (apparel)

Subscription fee: Peloton All-Access Membership ($ 39.99); Peloton Digital Membership

($ 12.99)

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SOURCE OF REVENUE

Direct product and service sales

KEY RESOURCES

ENGINEERS & DESIGNERS

Software & Prototypes

PLATFORM

The platform is a intangible resource with more than 55 million workouts.

Data collection of users physical characteristics, preferences and performance are useful to customize and to give suggestions adapted to the tastes and athletic preparation of the users (switching costs)

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PATENTS

Intangible resources

3 physical parts

4 code strings

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COMMUNITY

Network externalities

Customer retention

PERSONAL TRAINERS &

STUDIOS

Appealing and strong workouts

Brand ambassadors

Instructors record their lessons in 3 studios in NYC and 1 in London. They create engaging lessons becoming popular on the web and in the home fitness world for their effective workouts. They make the Peloton brand unique

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COMMUNITY

VALUE

RARE

INIMITABLE

NON SUBSTITUTABLE

• Valuable: It creates value for consumers who feel increasingly involved and motivated to perform workout activities. In addition, the community is a space where you can ask and clarify your doubts, as well as a source of sociability.
• Rare: The community is rare because Peloton was the first mover in fitness at home and it is one of the few that built a large and solid consumers base.
• Not Imitable: All efforts are aimed at expanding and strengthening the community and its brand, so that competitors can try to offer an engaging community but it would be difficult to replicate the entire network built by Peloton.
• Not substitutable: The community is a resource that is difficult to replace because over time a user-user and class-instructor relationship has been built so strong that there are no other resources that allow to be this close to the consumer.

KEY ACTIVITIES

CONTENTS RECORDS

Streaming on-demand and live

MARKETING AND SALES

Online store in their web site, microstores and showrooms in strategic points for testing products before buying, PT cult,

word-of-mouth referrals from loyal Members

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DESIGN, DEVELOPMENT AND MAINTENANCE

New function and new design for Connected Fitness Products and for digital platform

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MANUFACTURING

The products manufacturing is outsourced to Asian companies, but most of the supply chain is managed and controlled by Peloton, starting from the design to the procurement of raw materials

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KEY PARTNERS

MANUFACTURING

Manufacturers are the main partners for production because in this way Peloton exploits learning economies, reducing production costs and optimizing the use of resources

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SUPPLIERS

Suppliers of products and raw materials are directly identified and approved by Peloton.

Flexible contracts also provide protection against possible risks and uncertainties resulting from production-related problems

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CLOUD PROVIDERS

Streaming and video storage are provided by third-party cloud. Peloton purchase experienced resources externally to deliver a service without interruption

LOGISTICS

The logistic partners take care of home delivery of the products to the customers, while the management is given to the Peloton team

COSTS

INDUSTRY DRIVERS

Partnership with supplier, manufacturer and delivery companies

Payment transactions

Import fee

Value driven

RESOURCES DRIVERS

Personnel (trainers, engineers and designers)

Platform

Studios

Royalties

Community

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ACTIVITY DRIVERS

Contents record

R&D Consulting, software platform, own research and development center

Marketing (advertising, promotion, microstore and showroom …)

POSITION DRIVERS

Platform development

Community expansion

PELOTON BM CANVAS

PATTERNS

PATTERN

UNBUNDLING

CRM

Product innovation

According to the Peloton's value proposition, based on the differentiation of the offer, Peloton orients its business model towards building a strong and solid relationship with its customers. Focusing on retention and expansion of the consumers installed base and leveraging the partners' economies of learning, scale and scope and its first mover advantage, for increasing investments in other key activities.

SERVITIZATION

Product&Service

PSS service oriented

Leveraging the installed screen or other devices you can have access to the service offered by the App, such as streaming or on demand workouts, where the personal trainer improves the user experience.

ECONOMICS

CRM

In order to enlarge the consumers installed base, over the years, the application has been used to add new sports and more personalized training (in time, intensity, music and various scenarios and with different coaches) on the base of the collected consumer preference data. Moreover, the retention rate is very high due to the fact that the user can follow the schedules of the most motivating coach. Furthermore, in the virtual class there is not only interaction with the coach, but also challenges are created between users in the same class. There are also switching costs created by the Treads and Bikes purchase and the collection of all the user's data and progresses, that makes not convenient for a Peloton subscriber to switch to other applications that do not know his preferences and athletic performances.

CRM

The competition is based on economies of scope. Indeed, initially Peloton was born with a connected bike associated with an application for training, but over the years the app has been associated with different training programs for different sports and it was added the possibility to buy only the subscription, without owning equipment. 

In addition, the studios are used at the same time for training recordings and to accommodate subscribers in the studio. In this way, each training recording becomes a real exclusive event in which you can physically participate.

COMPETITION

CULTURE

The mindset is the Member-first, where the subscriber and his needs are the engine of every proposal, search and activity undertaken by Peloton employees. The community allows not only to increase the retention rate of subscribers, but it is also a tool that Peloton uses to keep under control the evolution of consumer demands, needs and preferences. Combining this with the training performance data automatically collected through the platform, Pelton built a complex database useful to quickly respond to changing customer needs.

CRM

CRM

PRODUCT INNOVATION

ECONOMICS

In the IPO launch document, Peloton defines itself as first mover in the technological and connected Fitness market with immersive live and streaming and Fitness Boutique instructors, available anywhere and anytime. Moreover, looking at Peloton's current major competitors in the interactive fitness at home market, it can be observed that Peloton competitors launched a connected bike several years. At the same time, Peloton has been able to enjoy premium prices due to its first mover advantage and has used its advantage to invest in the expansion of the interactive and connected fitness product offering.

PRODUCT INNOVATION

COMPETITION

In the innovation market, Peloton employees play an important role, including Personal Trainers, who, are not only requested to be creative and innovative instructors, but they become real web stars. In this way Peloton tries to involve its users as much as possible, reaching an increasingly large consumer base and creating barriers to entry. As the platform is based on technology and software, they need engineers to continue innovating.

Some examples are John Paul Foley (founder and CEO of Peloton), Thomas Cortese (co-founder and creator of Peloton's Bike), Jason Poure (director of industrial design for 2013 who contributed to the creation of Tread), Benoit Dion (Principal Engineer at Peloton involved in the creation of Tread and previously Android Tech Lead and Engineering Manager for Cisco System).

PRODUCT INNOVATION

CULTURE

The innovation that characterizes Peloton is the result of a creative and stimulating working environment. In fact, Peloton offers its employees flexible working hours, in the headquarters there is a canteen that serves only healthy meals and snacks, organizes numerous company parties, finances the studies of its employees, high quality health insurance, as well as an excellent maternity and paternity program, competitive salaries personalized for each figure, it also offers unlimited lessons and discounts for all Peloton programs and products. In addition, the company is constantly searching for new talents and it rewards employees when they introduce their friends as potential candidates.

PRODUCT INNOVATION

Product & Service

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Peloton combines Tread and Bike with Fitness at home services.

Peloton is a service-oriented PSS because lessons are offered through physical products. The access is through the installed screen or other devices to the service offered by the App, such as live and streaming on demand workouts.

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Pure Product

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Pure Service

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SERVITIZATION

SERVITIZATION

7 C’s FRAMEWORK

PELOTON DIGITAL MEMBERSHIP

COMPETITIVE POSITION: It analyses the source of firm’s profitability or competitive advantage.

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• The differentiation is evident in the fact that Peloton has taken advantage of the first mover advantage for home fitness services by offering this kind of services with one of the largest fitness communities in the world and with quality products that are well suited to different tastes and athletic preparation;

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• It has well identified its market segments and for each of the two segments it makes a value proposition that comes closest to what customers demand. By identifying the two segments ($13 and $40) Peloton proposes offers closely related to the two segments.

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• Source of revenue comes mainly from the sale of the bike, the tread and subscriptions to subscriptions. Additional revenue comes from the sale of accessories and clothing.

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• Peloton adopts a price discrimination.

7 C’s FRAMEWORK

CONNECTED ACTIVITIES: It analyses the ability of the firm of delivering the right value to the right market segments.

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• Contributing to the position of differentiation is the creation of content, development and improvement of physical products and applications in order to offer a varied and personalized home fitness experience;

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• Peloton periodically organizes events, such as Peloton Homecoming, in order to strengthen connections that until then have only been virtual.

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• The consistency with customer segments is addressed for HWTP consumers, with the design and development of physical products and app functionality. For LWTP users, the focus is on improving the app, its interactivity and variety, as LWTP users do not purchase the physical product.

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• Peloton has utilized the industry drivers by capturing those who had not time to go to the gym and also those who had not the economic availability to afford a boutique fitness lesson, be they LWTP or HWTP users.

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• Peloton, by exploiting the interaction between the physical equipment and a connected fitness class, has created the community resource that can hardly be replicated by competitors.

7 C’s FRAMEWORK

COMPETITIVE AND MICRO-EVIRONMENT FORCES: It analyses the competitive and cooperative arena and how connected activities can impact on them.

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• Industry attractiveness: the global fitness industry is estimated at 4.2 trillion with 183 million gym subscribers, and is growing steadily.

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• Barriers to entry include: production efficiency, improve products and services, original content, quality and safety of products and data collection, competitive pricing policies, market vision and product innovation, sales and marketing strategies, brand awareness and reputation. Peloton competes with a business model that is difficult to replicate.

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• Peloton relies on a limited number of suppliers, manufacturers and logistics partners for related fitness products. Losing one of these partners could negatively affect the business because they must have satisfactory responsiveness and service, financial stability, labor and other ethical practices.

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• There could be some threats: new products or services that are not required or not perceived to be of high quality, brand and reputation damage, incorrect pricing, substitution with more competitive products and services, could lead to a decline in subscriber levels.

7 C’s FRAMEWORK

7 C’s FRAMEWORK

CRITICAL INDUSTRY DRIVER: This block analyses the factors representing a significant percentage of cost or have high potential for creating differentiation.

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• The primary influence of the cost is the creation of content and all costs associated with it (studios, salaries of personal trainers, staff for registration), maintenance of the platform.

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• The primary influence of the differentiation is R&D, useful for continually improving the technology behind the product/service, the discovery and retention of talents (as they are able to drag as many users as possible), the personalization of content based on customer preferences (determined through data analysis) and community care.

7 C’s FRAMEWORK

CAPABILITIES AND RESOURCES: It analyses what kind of resources can provide the highest competitive advantage. Peloton identifies its VRIN resource in the community of users.

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• Valuable: It creates value for consumers who feel increasingly involved and motivated to perform workout activities. In addition, the community is a space where you can ask and clarify your doubts, as well as a source of sociability.
• Rare: The community is rare because Peloton was the first mover in fitness at home and it is one of the few that built a large and solid consumers base.
• Not Imitable: All efforts are aimed at expanding and strengthening the community and its brand, so that competitors can try to offer an engaging community but it would be difficult to replicate the entire network built by Peloton.
• Not substitutable: The community is a resource that is difficult to replace because over time a user-user and class-instructor relationship has been built so strong that there are no other resources that allow to be this close to the consumer.

7 C’s FRAMEWORK

CHANGES AND SUSTAINABILITY: It analyses the extent to which the firm’s competitive advantage can be replicated over time.

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• The solid and close relationship built with customers allows the creation of switching costs and a means to consolidate the installed consumer base.

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• The community and the data collected by each user also allows to monitor any requests and changes in consumer needs quickly, allowing Peloton to adapt to market changes.

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• Changes in customer needs can become an opportunity for Peloton as the company is careful to monitor which activities create value for the customer. By taking advantage of the app, the existing studios and the know-how gained in the home fitness field, Peloton is able to respond quickly to changes in customer tastes.

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• A factor that is currently a handicap for competitors, but could become a threat to the company is the network of personal trainers. In fact, they strongly contribute to the creation of value for users. However, if they decide to terminate relations with Peloton, they could benefit competitors. This shows how important are the efforts made to retain talent.

7 C’s FRAMEWORK

COST OF PERFORMING ACTIVITIES: This block analyses the cost needed to perform the business model of the firm.

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• Peloton has live classes in which an unlimited number of users can participate. in this way, the unit cost of human and technological resources to stream each lesson is reduced. In this way, not only is there a reduction of possible waste of resources, but the productivity and the utilization coefficient of studios and trainers is also increased.

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• Furthermore, by exploiting partnerships with suppliers, producers and logistic partners, their economies of scale, purpose and learning are used to reduce costs in order to be able to invest more in R&D, care and expansion of the community and marketing activities.

FUNDS

FUNDS

$3.5 million A Series

They invested for the first Bike Peloton prototype

$307.000 on Kickstarter

Reward crowdfunding

$10.5 million in a B series to refine the design. Launch in the market

$75 million

D series to expand the software engineers team

Peloton Digital born

$550 million in a F Series

Peloton Tread born

Company valuation at $4 billion

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$325 million of E Series funding to strengthen the community

Funds

Mln $

Feb 2012

Dec 2012

Jul 2013

Apr 2014

Apr 2015

Dec 2015

May 2017

Aug 2018

Seed Funding $400.000

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$30 million funding for stronger sales & production with a C Series

In 2019 Peloton Interactive filed an IPO proposal through which it raised $1.16 billion for a market valuation of $8.1 billion with a share price of $29.

In June 2020, a share of Peloton is priced at $47 and continues to grow.

THANKS FOR YOUR ATTENTION