Peloton hits brakes on marketing as at-home fitness sells itself

UPDATE: May 7, 2020: This story has been updated to include details of the departure of Carolyn Tisch Blodgett, Peloton’s head of global marketing, which were first reported by Business Insider.

Dive Brief:

  • Exercise equipment maker Peloton paused cancellable advertising in most of its major markets starting in mid-March, CFO Jill Woodworth said on a call discussing fiscal Q3 results with analysts Wednesday. Revenue soared 66% year-on-year to $524.6 million during the period, as the coronavirus pandemic drove up demand for at-home fitness programming.
  • Continued growth and engagement despite a pullback in media spend signals that Peloton’s years of brand-building and word-of-mouth referrals are paying off, Woodworth said. The executive forecast that viral word-of-mouth will become “increasingly more important” for Peloton moving forward, a belief affirmed by “increased sales despite having zero marketing media dollars deployed,” according to a call transcript provided by Seeking Alpha. At the same time, Carolyn Tisch Blodgett, Peloton’s head of global marketing, announced via LinkedIn that she is leaving the company after four years, Business Insider reported.
  • Moving into Q4, Woodworth said she expects the majority of Peloton’s media spending to remain turned off in key markets, namely the U.S. and U.K. Those markets represent “roughly” half of the brand’s cost structure in sales and marketing, according to Woodworth. However, Peloton will continue to advertise and support brand-building efforts in more nascent markets, including Germany.

Dive Insight:

Marketers, many of whom are strapped for resources and budgets, have received mixed signals on how to respond to the coronavirus pandemic, with some research suggesting that investing more in brand-building during a downturn can pay off in the long run. Peloton’s latest results show that a pullback can also have its benefits, particularly in categories that are naturally experiencing a boom as consumers adjust to life stuck at home.

However, executives emphasized the importance of the groundwork Peloton laid in establishing its reputation as a virtual fitness provider prior to a rocky period. The brand has previously proven it has strong customer loyalty. A widely-mocked holiday ad last year, which drew accusations of sexism and giving off a dystopian vibe, didn’t affect Peloton’s bottom line in Q2. ​Still, the departure of head of brand marketing Blodgett makes clear that larger shifts could be happening inside Peloton as it tries to sustain momentum.

CFO Woodworth’s comments indicate that continued growth in Q3 despite an advertising freeze could lead to larger adjustments to Peloton’s strategy, with a bigger focus on organic channels like word-of-mouth marketing. Peloton’s sales and marketing expenses were still up 53% year-on-year over the period thanks to higher acquisition costs and marketing around new product offerings like a $4,300 treadmill.

Peloton is in many ways a brand primed to thrive at the moment. The company, which went public last September, focuses on livestreamed workout sessions that customers participate in from stationary bikes or other exercise equipment at home. Many brands in the fitness category have had to quickly adjust to the sometimes awkward virtual setting, but Peloton has established infrastructure in the space that is driving engagement and attracting masses of people who can no longer go to the gym.

The marketer last month recorded its largest livestreamed class ever, which drew more than 23,000 participants, according to CNBC. Total membership was up 30% quarter-on-quarter in Q3 to 2.6 million.

Peloton has had to make some adjustments due to disruptions brought on by the coronavirus. It has shuttered production studios, leading fitness instructors to stream sessions from their homes. The company also closed all of its 97 retail stores in March.

But despite the quiet period, Peloton plans to return to marketing in a big way as it looks to raise awareness for new product innovations and service offerings further down the line.

“We will come back on with marketing,” William Lynch, president of Peloton, said on the call with investors. “We don’t think we’ll be off forever and we’re going to invest, find new products and new GEOs to continue to lead the connected fitness.”

Source Article