338. Boost Your Brand: The Power of Behavioral Economics in Peloton's Advertising (Refreshed Episode)

Welcome to episode 338 of the Brainy Business Understanding the Psychology of why People Buy. Today's episode is all about the behavioral economics of Peloton. Ready? Let's get started.

You are listening to the Brainy Business Podcast where we dig into the psychology of why people buy and help you incorporate behavioral economics into your business, making it more brain friendly. Now, here's your host, Melina Palmer.

Hello. Hello everyone. My name is Melina Palmer and I want to welcome you to the Brainy Business Podcast. Today's episode is in one of my very favorite formats, the Behavioral Economics Analysis of series. If you aren't familiar, this is where I look at a popular company, one you've probably used before or have at least heard of, though I know this isn't always the case given our international listener base. And I break down the experience to explain the different behavioral economics concepts I see and what makes that company successful. There are a couple of reasons why I do this. First is to help you see the concepts in action and in a way that you can see and remember. I think it always helps to make it resonate more and you can see how others are applying this as well. That leads to the second point, which is to get ideas for how you might implement something like this behavioral economics in your business, along with the equally important opposite side, which is to see ways you don't. You don't want to use this in your business. Just because something works for another company doesn't mean it's going to work well for yours. It's always important to consider the context, the goals, who your customers are and what they care about, your value proposition and more. You don't just want to say, well, Costco's successful with a membership model, so we need to do that too. No, no, no. While that model has worked for Costco and is great for a lot of companies, including Peloton, it isn't a blanket strategy that will work for anyone in any situation. And while there's already a behavioral economics analysis of Costco, I'll link to it in the show notes. Today, as you know, we're talking about Peloton. It's really interesting to note that this episode came out in early February 2020, just before the pandemic where the interest in the company really took off. In the audio, potentially I talk about how it maybe is more of a niche brand that you hadn't heard about yet. So things really as this for this company, as it became something that people were hearing about a lot more since then. So many people lost access to their gyms and other fitness options. So shortly after this episode came out that Peloton was a company many turned to they had back orders and a huge influx of new customers for a while, and that's potentially one reason why this episode was so popular. As people were researching Peloton, this was a sort of non traditional resource of information about the company and its model. My husband Aaron and I got our Peloton as a gift to ourselves for Christmas in 2019 and so it arrived just after the New Year. So these insights were from my experience using the product and outlining some of the cool things I saw that the company was doing. In case you're wondering why I refreshed this one today, it's because the guest on this upcoming Friday's episode, Lucy Buisson, specifically mentioned Peloton, and while it isn't the total focus of the episode, it was a great excuse to give this one a refresh. As you listen today, take some time to consider your own company and even if your business is doing nothing like Peloton, be thoughtful to how their choices might work if you were to implement them in your work. What might that look like? How could it help you stand out from your competition? This is always a great exercise to expand your brain a bit and not do things the way they've always been done. And don't forget that there are links for everything, including related past episodes, books and articles all waiting for you in the show Notes for this episode, which are found within the app you're listening to and at the brainy business.com 338 all right, let's talk about the behavioral economics of Peloton as a brief intro for those of you who aren't really familiar with Peloton. It's a fitness company that sells workout equipment, bikes and treadmills, and they have classes that you can take in very limited cases in person. But generally it's about these streaming videos that you can either do live or you can do on demand via the app, or again attached to the equipment that you buy. According to Peloton's website, there are now more than 1.6 million members as of September 2019, so I'm sure it's gone up since then. They also say there were over 55 million workouts completed in 2019, and that in their last fiscal year, which ended In June of 2019, the company made $915 million. Wow. Another stat from their site is something that any company should boast over, and I'm actually not really surprised to see now that I'm part of the community, but they have a 94% 12 month retention rate, which is not too shabby to think that basically once people come in, they stay in. I'm going to talk more about the company when we get to the concepts, but for now I want to pause and talk about the ad. If you aren't one of the nearly 10 million people who watched the ad on YouTube or saw it blasted all over the news, at least in the US back in December, I'll tell you a little about it and it is of course linked for you in the show. Notes for ease if you want to check it out Essentially a woman is surprised on Christmas morning with a Peloton bike. It's basically a stationary bike with a big video screen on it, a gift from her husband. We then follow her journey over a year, perhaps of riding the bike, and at the end she's sharing a video of her vlog with her husband saying she didn't realize how much it would change her. Seems simple enough, heartfelt and straightforward when shared that way. So you may wonder why I called it the ad if you hadn't seen it. Essentially the Internet hated this commercial. The world said the wife looked far too scared getting on the bike. There was a huge amount of backlash, saying that the husband must have assumed she was fat and got her the bike to send her a message and that it was sexist. And people complained about how she was already a very thin person and essentially looks unchanged. From the beginning to the end of the year, it had negative coverage in all the major publications. And according to Business Insider, Peloton lost 1.5 billion billion from its market value in the three days following the release of the ad. Yikes. Really not what you want to see from your big holiday push in general. Personally, I don't think the ad is anywhere near as bad as it was made into on social media. And as I talk about in that article I referenced earlier, the real problem I see for the brand is in its mixed messaging, something that truthfully, most companies actually are victim to this wow. We're creating things for a specific group, but really, anyone can benefit. So we'll message it like it's for everyone or for this space or whatever it is mentality. When you don't really, really hone in on your niche, it can come back to bite you. Just like it did for Peloton. In their case, the ads they make are clearly directed to wealthy people. Even before this 2019 holiday promotion, Peloton was criticized for for only showing their bikes in gigantic mansions overlooking amazing views. And in general, they also only have what appear to be very fit people in their ads, even when they're pretending to be scared to get on an exercise bike for the first time like in the holiday ad. The other side of their brand is being a community opportunity for everyone to be able to have access to amazing fitness regardless of whether you want to be going into the gym. World class trainers on a phenomenal machine that's easy for anyone to use whenever their schedule allows. You can see how these messages sort of compete with each other, right? If you say you're for everyone, a community of all kinds of people coming together from all around to support each other, the ads should reflect that. If you're truly only for extremely wealthy people who are looking to maybe lose those last five pounds, or those looking to move from simply a flat tummy to six pack abs so they look great on the red carpet. Well, say that going this route doesn't mean other people can't buy their bikes or treadmills. And if they went with the healthy wealthy path, I think they would still be very successful. There is no reason that any business can't target a high income or high net worth group of individuals. But if you're going to do this, you, you need to make sure it's really clear and not sending a mixed message. No one's going to Maserati and complaining on Twitter that their advertising and marketing doesn't appeal to a low income demographic. They know who their cars are made for and don't apologize for it. Just as it should be. So as I said with Peloton, either path could work. And I think that they do want to be inclusive, especially after having my bike for about a month now. I mean, their website is1peloton.com and they share that messaging throughout all the workouts and everything they do. They really do appear to be very focused on the community that they're building and with a few small tweaks their ad would have been well aligned with this inclusivity approach. First, it needed a teeny tiny bit of backstory. So everyone knew the wife actually wanted a peloton. And it wasn't like her husband bought her a vacuum cleaner for Christmas and an apron or something, which is really the ultimate bad gift. If the commercial would have opened with her leaving a note in his day planner that said reminder by Susie's peloton with a winky face emoji, or if there was a text conversation saying Ugh, stuck at work again. Guess I can't meet you at Spin after all. Sad face. Then when she got the Peloton for Christmas, it would have been really clear that it was what she wanted and not a thinly veiled attempt by her husband to tell her she was fat. For any business, you can't assume everyone who watches your ad or sees your message is coming from the same place as you. You're too deeply ingrained in what you're doing and what you're about. Especially with something like health and fitness, where everyone has their own story and history and pain points and quick triggers, it's essentially a minefield that must be very, very carefully navigated. When you don't provide the proper context in the backstory, people will fill it in with their own story, which could be loaded with those negatives. Always take a step back and look at your messages from many perspectives and just try to find what people could disagree with or not. Like, you're not going to catch everything, but it's really important to do this, to fix the big stuff that you may not be noticing when you're too close to the content that you're making making and the stories that you're about and what you know your product can do. People who have never heard of you or that aren't really familiar aren't necessarily going to put everything together in the way that you want them to without the right context. So beyond that intro piece, I would have also recommended if Peloton was my client, making a noticeable difference in the protagonist from the beginning to the end of the story. Even though it's only 30 seconds, a lot can happen, and in that time it looks like the entire thing, honestly was filmed in one day with a lot of wardrobe changes. And I'm not going to get into the she started thin controversy because I know everyone has goals they're working toward. Losing weight is not the only goal, and bodies can change without dropping a bunch of sizes. However, if you're going to do a montage and show how much someone changed since getting their peloton, we should all see the change easily as well. It could be showing a before and after of a calf muscle and its definition, or now that you have ab lines or really anything, it doesn't matter if you want it to be a mental thing, which is fine as well because the bikes have mindset and mantras and all that sort of stuff within the app and community. We just needed that context at the beginning of the ad. Like I talked about, where you could have shown her really frazzled and now she's much calmer and feeling happier and getting up easier or whatever it is. If the change isn't visible, it doesn't exist for the viewer, even if you think it should or that we should make that connection. It just doesn't work that way. Lastly, if you're going with the inclusive message, it should have closed with a very quick line like one of the many stories of Pel Peloton which could then trim down to say, one peloton to bring people to the website. Or one of the many stories of Peloton start yours or are you next? Or yours is next. Whatever it is, you could have shown profiles then of a bunch of people and their own bikes and a bunch of squares. So she's just one of the group. There are a million little ways this could have been slightly tweaked to amp up the community and inclusivity piece, but they just weren't there. I believe focusing on their true purpose and niche would make this very easily achieved, and I truly hope that they do this in the future. I think their ads would be really, really successful if they were to do that. And again, if I were consulting to Peloton, I would recommend they get some actual people who get the bike or treadmill and follow them through their journey. Get them to agree to a setup where they're being filmed or need to take pictures or do their own vlog, and that Peloton gets the rights to share the transformations at the end of the year or maybe six months. And the person with the best video gets a Peloton treadmill which is over a $4,000 value. Or that they get their Peloton bike for free if they agree to be part of this experiment. With over 1.6 million members of the Peloton community, they absolutely have a treasure trove of fantastic stories and people that they could profile to motivate others to want to be part of the group. They have enough content for unlimited advertising if they take the time to find it or help nudge it along with, like I said, a contest or a free year of membership or something. I'm going to do a full wrap up of all the advice for your business at the end of the episode. But before we move on from the ad to the overarching experience of Peloton and those concepts, I'm going to do a quick wrap up here of the things to note for for your own advertising and branding. First, understand your market niche and who you're speaking to when this is gray, you can get into trouble. Bring people along with you in your story. You can't assume they know the right context, and it's important to share key elements to ensure the right message is being conveyed so people aren't laying their own insecurities or issues or triggers on top of something. Especially when you're trying to help people to make a change that is notoriously difficult. Lastly, don't overlook your community when you're creating ads and messages. You have a huge amount of people who love you and your brand and would be honored to be featured while singing your praises. Ask for stories and you'll probably be surprised at what you get. Now let's move beyond the ad and into the company itself and all those great concepts of behavioral economics. One thing I will say is even though it's estimated that Peloton lost those $1.5 billion in value in those days following the ad, it doesn't mean that that is going to last forever. Markets shift all the time and that is a loss in value, but it doesn't mean it's permanent. It isn't like they had, as far as I know, people demanding refunds on their bikes and boycotting the brand after that commercial came out. Customers didn't have the same issue, as far as I know. So these losses can be made up over time. And I would be willing to bet that the company will find, while it wasn't the greatest way to go viral, that it made a lot of people who had never heard of Peloton aware of the brand and the problem it was solving. Maybe a problem they didn't solve even realize they had. This is the availability bias. When you start to see something everywhere, it gets more weight in the brain. That was episode 15 of the podcast and it is linked for you in the show notes, which are again@thebrainybusiness.com 86 so seeing Peloton in the news and talked about at parties means more focus on the company. People who otherwise wouldn't have been driven to look into into Peloton are now trying to find out what they're all about and what the deal is with the ad. So I'm guessing that over time this will actually have been a good thing for awareness of the company. But again, it's not a way that really anyone would recommend getting that visibility. It's really too risky. So don't do something controversial in hopes that it might come back and be positive. It's just really difficult to quantify things like that and they definitely could just go wrong and be bad. So for most people who started looking at peloton over the holidays, maybe even bought one, they wouldn't likely say that they were introduced to the bikes or got the idea from the bad ad being blasted on social media. It doesn't really jive with how most people want to identify with their choices, and the brain will likely come up with another story that feels feels better. Like one of my friends got one and we were interested. Or I'd been looking for an alternative to going to the gym or spin class and started doing research. Those things might also be true, but the availability bias and the ad being everywhere pushed peloton through the subconscious filter and got you to consider it and look for more information. I can concretely say for us, I definitely believe the ad played a factor in our choice to get a peloton. We we started talking about it and then my husband started doing some research, his favorite thing, and we realized all the great benefits and discovered it was a fit for us. But I don't think we would have gotten to that point without the ad as a controversial awareness prompt. Definitely not, at least at the time that we ended up getting it. Do remember though, they were already a well established company before the ad with 1.6 million members and had gone public in September. One of the reasons it was easy to join Palaton was in the framing of their offer. Their equipment is admittedly expensive. A bike is over $2,000 and as I already said, the treadmill is over $4,000 to buy with that offer. It's difficult to get people to try one out because it's such a big investment. However, they have a 30 day trial with a money back guarantee. I've talked on the show about how awesomely effective money back guarantees are in getting people over the hurdle of that initial purchase. And they have a 0% financing option where you can pay for the equipment for three years. As you heard me say earlier, they have a 94% stay rate from people at the 12 month mark. So their main hurdle is really to get that bike or treadmill into your home once you have it and use it. So they're pretty confident you're going to stick with it. You may not use it as much as you intended because of optimism bias, but that isn't really the issue for the company. They want people to use the product, sure, but buying it, getting it into more homes is important. They have made it so incredibly easy to buy. They have free delivery and set up in your house and easy payments and the money back guarantee. The question becomes why wouldn't I try it? Whether you pay upfront or in payments for your equipment, or choose to buy the equipment at all, you can be part of the community by paying a monthly membership fee to access the content. Those who choose not to buy the bike or treadmill can still be a member with the app for only $12.99 per month. This gives them access to all the classes on demand and are free for one person each. So if my husband and I each wanted to join, we would each pay 1299 when you get the equipment. So when you buy the bike you can have unlimited accounts for your household and you are required to get a $39 per month membership with the piece of equipment that you get. This then tracks your stats and they honestly have really amazing technology. I'm going to share images and things on my social media accounts. You can can find me everywhere as the Brainy Biz the thing I really want you to note here is that there isn't a discount for people who bought the bigger thing from Peloton. You get additional benefits like I said, like unlimited accounts if you buy the bike or the treadmill, but for a single person who gets the bike for themselves, they're paying three times the monthly rate to have access to the same content that they would have had if they were to get it without the bike and just use outdoor running or use a bike at the gym. In episode 84 I talked about stacking and bundling offers and 77 was focused on raising prices. Those are both linked for you in the show notes, but it's important to know that you don't have to discount when you bundle things together, and Peloton is a really great example of that. People who buy the bike want to use the content and will use it more than other people. You can justify the higher price with the enhanced stats and those unlimited accounts, but these are people who will pay a reasonable price to continue to use their equipment. The people only getting the app need a much lower point of entry to get them to try the workouts and see if they might want to move up to get the equipment someday. But I'm guessing they don't have a ton of people that come in and get the bikes or the treadmills in that manner. I I think they're more like two different market segments and that getting the app on its own isn't really the first point of entry that's on your path to getting a bike or a treadmill. I don't know that for sure, but I would guess that people that go into solely using the app probably really stick with it because they don't get to really see and experience the benefits of the machines that they offer. And as I've sort of alluded to here, I'll talk about it more throughout the episode, but the bike itself is amazing. The stats on it are so great and things you can only get when you're truly using their bike that it's totally worth it. So anyway, the access to content and the free trial and zero percent financing are also all examples of reciprocity. Even though you pay each month to have access, it feels like a gift to have all these great instructors and stats and details. Everyone I have talked to agrees the caliber of the classes is just they're phenomenal. I've taken a lot of spin classes at various places in person over the years, and these ones through Peloton are head and shoulders better than what I've experienced in any of those classes I've taken at various gyms over the years. The workouts are intense but fun, and they're just really well done throughout everything that they're offering. And it's great as a user to see that all that content is there. And like I said, it feels like a gift because there's so much. But this could be something that would potentially present a really big problem for Peloton if they weren't acutely aware of and focusing on the this specific space, which is Choice architecture. And I'm specifically talking about Structuring Complex Choices, which was episode 41 of the podcast and is of course linked for you in the show Notes. With a commitment to over 20 new classes that go live every day and they're already over 10,000 on demand, there is a huge amount that could be coming into these choices for someone to make when they would jump on the bike. If it was really difficult to find a class or what you might be looking for, people would have not had great experiences and wouldn't keep those bikes past the first 30 days, let alone over 12 months. So let's look a little bit at how they structure those choices so you can learn about that for your own business. You can easily search and filter for what you're looking for, whether you're on the bike or using one of the app functions and it's based on what matters to you. You can look at type of class, length of time, instructor, music genre. When I open the Peloton app, it defaults to the classes page as the first one, because that's really what most people are going in to do. You might be looking at your stats or something, but it's an important space to start with and that's what most people want. So they have 10 main categories that you can choose from. This is that overarching first filter that everyone really knows. When you go in, this is where you want to start. So those categories are running, outdoor, running, strength, cycling, yoga, meditation, stretching, boot camp, walking and cardio. When I click on, say, cycling, it opens up with some recommended rides at the top. And I do think it's important to note that while the majority of the community is doing the same cycling, that's not the first thing on the list. So you have to look past running and strength before you get to cycling, which also helps to remind people that running and that their treadmill is something that exists for when you're ready. So you have to go through a few options to get to cycling. You don't always want to put the most prominent thing first. Sometimes it's good to have people search a little bit to get to the thing that they're looking for. And even if they don't consciously resonate that they're sifting through these other options, it is hitting the subconscious and they are reminding them every time they look at those. So when I click on cycling, it's going to open up with some recommended rides at the top. And they all have images of the instructor in case you recognize someone you have liked classes from before. And it's not just their standard headshot, it's a shot from the actual class. And so if I remember someone was wearing a green shirt or their hair was up in a certain way or whatnot, I can then know very quickly that that was the course maybe that I was looking for. Or if I don't want one I've done before, then I can know, oh, no, I've seen that shirt before, so I don't want this one. If I have liked or booked mark a ride, that is noted. And if someone in my community, which I'll get to in a minute, if they've taken a class, I can see that too. And so you can use the filters then to refine a search. If you don't want any of those top suggested ones that come up when you first click on that main theme of cycling, the filter options that are there, and it's very easy again, the filter icon comes up at the bottom of the page. You don't have to search for it. It's just there and the options there are for length. There are nine options from five minutes up to 90. They also have class type, instructor and music genre and you can choose to sort by new popular trending, top rated, easiest and hardest. So I might say that I want a 30 minute intervals class that plays pop music and there are 112 classes to choose from or if I know I only want a specific instructor. In this case I picked Ali Love who's the first purpose person on the list. She has 388 classes so I might want to then come up with some other filters. This is easy on the bike or from the app when you're out and about. For example, when I run outside or on the treadmill at the gym, gotta train for that half marathon. I use the outdoor running content. When I'm done with that it will suggest stretching or strength courses I might want to take that complement my run. And those are different than the strength training classes that are recommended. When I finish a cycling ride, it's really awesome when you dig in. It's like a personal trainer on your schedule, or rather a hundred personal trainers who don't yell at you or make you feel inadequate. So the fear of doing something wrong or being judged is completely eliminated from the experience. You get lots of benefits without the scary parts of being in a gym. It's really great and a smart system. When you think about how they've structured all of this, it's very obviously thoughtful. And one of the things personally that I hate about taking classes at the gym is having the instructor talk to you or call you out. Even if it's a positive thing, it's often just awkward and uncomfortable and it just doesn't feel good to me. I know I'm not the only one and I'm sure that some people do like that. I but knowing someone is watching me while I work out and there's another person less than an arm's length away is just kind of so this is the real magic of Peloton. They use concepts of herding and social proof to really enhance the community experience. You've heard me talk about herding before and I've decided to dig into social proof next week. But essentially you get all the goodness of being part of the community without that awkwardness. So for herding purposes, they show you how many people have taken a specific class before. And everyone can follow people and have followers. As I mentioned on the classes portion, I can see if someone from my followers or that I'm following has taken or bookmarked a class. So if a friend friend liked that particular ride, maybe I will, too. If I had more friends on Peloton and saw that 85 of my followers had taken a class, it would likely drive me to want to take that one, too. When you take the classes, everyone also rates at the end, whether you liked it or not, how difficult it was, how much you like the music, and if the stats were accurate. So that helps them to keep their content really high quality and know which things to promote, which is smart. And as you're putting in that information each time, it helps them to find out what you like or don't, what instructors they should be pushing to you or not. It's just making it this really usable, valuable experience for everyone while they're gathering data. And then I know when I go to take a class and it says the Difficulty level is 7.8 out of 10 or 8.5 out of 10, that's not on their own opinion. That's everyone else, like me who's taken a class already. And then again, with this herding piece, if there were, you know, 20,000 people that took a particular class, or 5,000 or 1,000, it doesn't really matter. But I can see where I come up in the rankings. I'm usually in the bottom third these days, but it gives me something to strive for, to work on, to move my way up in the rankings and maybe get in the top half someday. That's really my goal right now. So they do also a really great job of demystifying the spin experience. I know a lot of people are kind of scared to take a regular spin class because you don't know the terms people are going to use or how you're supposed to do something or what's important, what you should look at. And when you use a traditional spin bike, there are numbers and stats on most of those, but nothing that you really understand other than calories burned. And most of us know that those aren't really accurate for a specific person. They're just a general number. Or you can also look at distance, but that doesn't say too much either. You could do the same distance on one ride and a completely different one, and it doesn't mean you have the same output. The instructors on Peloton walk you through what numbers to focus on. In this case, they have resistance and cadence, and there's an overall output that ranks you on the leaderboard. You can focus on what you want to and ignore what you don't, but it makes it really easy to track progress and see where you're supposed to be on your leg speed. And that the resistance shows how you rank against the 20,000 other people that have taken a particular class. As I said, this is a framing benefit. They show you what matters and tell you what to focus on. And it isn't calories or distance, but by framing for you what you should be looking at and not clouding up, gunking up the mess with all these other things that you could look at. And their stats are robust. There's a lot if you want to dig in and see everything else. But in the moment, while you're taking the class, what you should focus on are these two numbers. And the instructors are telling you where you should be when you're in the range. Like if your resistance is supposed to be between 45 and 55, it. It glows orange instead of being black and white. And it just really makes it easy as you're going to know if you're where you should be and if you're moving up on where you were before. And it makes a really big difference by not putting too much in front of you. So again, framing and they know what matters and they've made it so it's really, really easy to track that. And they put them front and center for everyone who has one of these, their pieces of equipment. They obviously can't track this if you're running outside or if you're doing strength training or something else. It's only if you're using their bike or their treadmill. But again, this is the real benefit as to why you feel good about that investment, all these extra stats that you get and that you are paying for when you are part of that community. Now getting back to social proof, which like I've already said, I'm going to talk about more next week. It's kind of like hurting in that it shows lot a other people are there and liking the course. The problem with old workout videos with a dozen people in matching spandex outfits is those are just a few random people. You have no idea about everyone else who bought the video. So it feels very isolated. With Peloton, they do a fantastic job of incorporating social proof and making you feel like part of a gigantic community. In every workout, they're constantly calling out names or profiles of people who are hitting milestones live in the workout. So one quick side note, as I said earlier, there are 20 or more workouts that happen live every day. Anyone can attend the class, live virtually and an instructor may mention you. They can't see you or anything. You're just the first to take the class with the instructor as they do it. And it is possible to actually be in person in the room. They have a really limited space. And I know they have sites in London and New York where you can do those. And so any time when you're doing a class and you see people around, that is essentially someone just like me. If I was in New York or London and wanted to attend a class, theoretically I could. So if you take it live, either in person or one of the many people who could be taking it virtually streaming live, when it goes on, that's great. And they might call you out or mention something with your name during the class. But once it's done, it's archived and anyone can take it on demand and the stats update as more and more people take it when you watch those replays. But it is done really well. So regardless of when you're taking it, you feel like you're there in the moment, even really in the room. You're so close and able to see the instructor. Unless they're talking about holidays that are coming up or something, it feels like it's right now in the moment. So it's really impressive to me that those instructors can be focusing on juggling so many different things at one time. So they're focusing on the class that's live there in the room, and they do interact with them a little bit, but they're also focusing on that digital leaderboard of the people who are taking the class virtually in real time, and they're not excluding people who are watching it later so that you still feel like you're part of a class, even if it was filmed six months ago. And you know they're doing all of this while they're completing a 45 minute difficult spin class. So they shout out milestones throughout the class, starting high and working their way down. This helps with anchoring another concept that's really important with peloton. So they'll say things like, ann Smith, congrats on your 1200th ride today. And then work down to people hitting their 500th, 400th, 200, 50th, hundredth or 50th ride. They are announcing those milestones. And if you're a beginner, you can't help but think, wow, people really love and stick with this. I wonder when I'll hit a milestone. There are also badges and achievements as you hit milestones, like 10 rides or things like that, and it becomes part of Your identity to be one peloton, something the instructors mention throughout the classes. And they also focus on mindset and pushing through mental blocks. All the instructors have a different vibe and I'm confident anyone could find at least one one instructor whose style resonates with their own. So these anchors are set in tandem with that social proof by announcing them live in class for those who are hitting milestones. And you can also give out virtual high fives during the class and things like that. But one of the really amazing things they do to make this resonate, something that admittedly I might not like if it was a real in person class. But one of the things they do is when they give you a shout out, they say I see you. So instead of just saying be thoughtful, which you know is my screen name. So instead of saying be thoughtful, congrats on 10 rides today and leaving it at that, they say be thoughtful. Congrats on 10 rides today. I see you. Susie, Annie, Steve. Congrats on 50 rides. I see you. This, this is so subtle and I don't know that everyone picks up on it, but this is absolutely. It has to be intentional and it is very, very smart. Even if they aren't talking to me directly and they definitely aren't because I haven't taken a live class yet. It feels like they are and makes it all that more real. I've heard them say things like ride or die. Congrats on 100 rides today. I see you there in Maine. Didn't realize you were in Maine until just now. See you in class all the time. You're killing it today. Let's do this. Little tidbits that make it all feel like a big family. And this I see you phrasing is very important for that social proof. It goes to show you how one small smart phrase can have a huge impact. Another way they use anchoring is in tandem with commitments and pre commitments which help form good habits. There are goals to hit a certain number of rides in the year or month and challenges that keep you moving in the community. Trackers showing your streak of weeks that you've completed a class. All sorts of things that really keep you motivated, as well as regular emails that you might get for daily or weekly to let you know what classes are coming up or what you did over the last month and how that was better than the month before. They also have a challenge called the Annual with a minimum goal to hit 2000 minutes, which can be combined across anything from meditation to cardio. 2000 is just the first tier. And it works up to 5000 minutes in the year to get the gold badge. And I know that now. So far I've done 359 minutes within the Peloton app and all various things from stretching to running and riding on the bike. And I can also see that there are 360,000, 216 other people who have accepted the annual challenge. I don't know that I would have shot for 2,000 or 5,000 minutes, but I'm motivated to hit them now. And there's also a challenge to run 10 miles in February, which is the minimum and gold status if you run 40 miles. And that one has nearly 35,000 thousand participants, plus they have a general activity to work out at least five days a month with gold status at 15 days. These anchors help boost the amount you might have worked out otherwise and are combined again with herding to make you see other people have these goals. Other people are succeeding in this. I want to be like everybody else who's part of Peloton and doing these amazing things and they're very fit. And if I want to be fit like them, I need to change my habits and reach the goal by setting these big anchors. I'm going to do more. I've talked about this a bit on the show before in episode 67 on getting and staying motivated. So I'm not going to dig into it too much here. But commitments and pre commitments to challenges like this are absolutely known to work in behavioral change. At the end of the day, Peloton wants and needs people to change their behavior to use the app and equipment consistently. So they continue to find value and pay the monthly subscription. And if you feel like part of the community, you want to shout out, you're part of the group, the herd becomes part of your identity. So they also have workout gear you can buy with the Peloton name and logo on it. Hats, clothes, water bottles. We actually got a free hat and water bottle when we bought our bike, which triggers reciprocity. Tiny little items that cost them, you know, pennies compared to what we're spending on the bike and things like that. And this also then becomes a form of self hurting, something I've talked about on the show before. It makes me feel like I am the type of person who wears Peloton gear or shares it on a water bottle. So it's easier to buy more things with the logo on them later on. If I didn't have anything with a Peloton Peloton logo, I might feel a little awkward about it, but let's say I got my hat and I was wearing it out or I was using my water bottle and people are commenting, hey, I'm part of Peloton too. It might make me feel good and like I want to get more items with the Peloton logo, something I wouldn't experience if they didn't gift me those free items. And you also get to see the outfits on a lot of the instructors who wear them while teaching the classes. So for 30 or 45 minutes while you're watching somebody during a R, I might be thinking hey, that's cute. Or I like that over and over again. And then I want to take a look at those when they pop up in an email I get or if I'm looking in the app. All these little nudges make a big difference to help diversify the income streams for the company and just making it reinforce this community vibe. And it helps to show why Peloton is is so smart and that they're making mostly good choices. I do hope that they will show off more of the benefits in their future ad campaigns and really play on that One Peloton line just how amazing their technology really is after buying ours. It's been amazing to learn how many people I know who already have one or got one at the new year like we did. And everyone I have talked to absolutely, absolutely loves their Peloton and can't stop talking about how great it is. They've built a great company that their members love to be part of and that's worth showing in their advertising to encourage more people to join the One Peloton movement. If you have a Peloton and want to connect there, please follow me. As I said, my name is Bethoughtful all as one word, so it shouldn't be too hard to find me. I look forward to seeing you there. And before closing out the episode as promised, I want to do a recap of the key items for you to learn from Peloton to use in your own business. First is what I talked about in the notorious ad Know who you're speaking to and make sure your branding is aligned with that target market. Narrowing your focus is good and will help you better align with your right people. Also, know that context is important in any story you're trying to tell. You can't assume people know the story or have the same background as you have when you came up with a particular story. Take the time to understand which details are important and show them in the right order to support your brand's message, especially if you're in a space where people have really quick triggers and hot buttons like weight loss and health. Next is to use the stories from your community, the people who already know and love you. They'll feel honored to be included and can help others want to join you as well. Real stories are almost always more compelling for bringing on new customers than making something up. It is okay to have complex offerings with a lot of choices, but you need to make sure the structure of those is really, really easy. For people who are going to use your product or service, think about the user experience. What's the most important first category? What is someone thinking they want to do that they want to sort out initially? Like am I running or cycling or doing yoga? And then how do you present the information and options? And is there a way to have defaults or remembered settings? If it gets too difficult, people will bail out very quickly, especially if they're trying to change habits and start working out when maybe they haven't done this before. So if you're trying to impart change and make that easy, the way you structure those choices is really, really important and it needs to be as easy as possible. Next, Anchoring is always important. You've heard me talk about it all the time and you want to start with big numbers to help others see what is possible, or to just move people beyond what they were thinking for themselves, which ties in with social proof. Saying things like I see you and showing that there's a bigger community present is critical for an online space. If you want people to feel connected, like on a Facebook Live, calling somebody out and saying hi Susie, I'm so glad that you're here. I don't know why I always say Susie but or hi Ann, I'm glad that you joined in today and oh great question. But when you connect, mention people by name. They like it and it helps everyone else to feel like they're connected and really interacting more in that live experience. It doesn't have to be long or drawn out, but those smart interjections really help. This is also a reason I do shout outs on the show from time to time and I always take people on social media when sharing the podcast. It helps make it all seem real and expansive for that person and everyone else as well. Next, giving things away can trigger reciprocity and actually make people want to get more from you. And lastly, it's okay to not have discounts for people who are buying other stuff from you. Understand who's buying and their mindset and what matters for them. When you set your pricing, it doesn't always have to be about a discount. If you do have one person or one offer that's more expensive than the other, don't apologize for it. If there's a good reason, you can always defend it if somebody asks, but it's your company and you can price it. However makes sense. If people don't like it, they aren't your people and that's okay. Not every business is for every person and you know, this really brings it full circle. But in everything from pricing to ads, know your people and see speak to them. When you're focused, it makes it easier for your tribe to connect with you and refer others to join that group as well. So what got your brain buzzing as you learned about the behavioral economics of Peloton today? For me, I've always been amazed and fascinated by how Peloton was able to make a virtual massive group experience feel incredibly personalized. The simple ability to shout out usernames when someone's reached a milestone, or just acknowledging that they're working hard so that someone feels included is so important to the Peloton experience. Being able to say the brainy biz I see you is so simple and you don't have to acknowledge everyone every time. The surprise and delight factor is a big part of this working Will they say my name too? Will they notice me? It's not a negative if you aren't mentioned, but it's really cool when you are. And that anticipation builds up over time for sure. Those dopamine brain chemicals. It's funny because in an in person class I don't really like it when the instructors try to learn my name and acknowledge me during the class. It feels super impersonal and like they have to and I don't actually want everyone to look at me. It's like when someone was told they should learn people's names to be good at sales and you can tell they say your name a little too often and obviously where it feels like a shtick and not like they actually care for whatever reason. It feels completely different to me when it's part of that virtual Peloton experience. So I think they end up having a lot more opportunities for engagement and your business might too. During the pandemic I started using their running training as well and I really liked having someone in my ear nudging me to up the speed a bit to have it feel like an 8 or a 6 or whatever the focus was of the segment and then be telling me stories and just chatting to me when I didn't have to respond. As a side note, I've always thought it's funny when people say you should be running at a pace right now that you could be at all day where you can carry on a conversation and not be out of breath. And I'm like, like, okay, so you mean walking. Maybe it's just me. Let me know what you thought about this one on social media if you want. You'll find me as the brainy biz pretty much everywhere anyway, having someone talk so it feels like I'm having a conversation but I don't have to talk back. And there's this mix of music because personally I need that to exercise. Shout out to all the listeners out there who tell me they load up episodes. Episodes of the Brainy Business podcast for the gym or when you're going to run a marathon. I'm so delighted that works for you. But anyway, having that mix of music and talking is a really great balance that helps me to achieve this experience that I'm never going to get on my own because I don't run well with other people. But I've found that I like the social nature of having someone in my ear like that, and this is something that they can only find out and see that people like by trying it, by looking at implementing that for people. And that should make you think about your own business. How often have people said something like we have to be in person or the only way people can interact with us is in a physical location or service is better when you're in front of someone. This just doesn't have to be true, and Peloton is a great example of that. What might this look like for your company? How could your business be even better if it were virtual with a subscription or membership model? How might the Network Effect work to your advantage? There are lots of episodes linked for you in the show, notes on those concepts I was just talking about and others that you can use to learn more about all of this if it feels like a good fit for you or something you're interested in learning more about. Many of those episodes came out after this one, which first aired way back in February of 2020 episodes on the Network Effect. Surprise and Delight, the difference between subscriptions and membership models and how to determine if either is a fit for you, as well as my interview with Gina Bianchini, CEO and founder of Mighty Networks and author of the book Purpose. All those episodes are waiting for you, along with many others in the show notes where you're going to find related books, articles, a timestamp summary of this episode, and more. It's all waiting for you inside the app you're listening to and at the brainy business.com 338 and just like that, episode 338 on the behavioral economics of Peloton is done. Join me Friday for a brand new episode with Lucy Buissant of Content Square. It's going to be a lot of fun. You don't want to miss it. Until then, thanks again for listening and learning with me, and remember to be thoughtful.

Thank you for listening to the Brainy Business podcast. Molina offers virtual strategy sessions, workshops and other services to help businesses be more brain friendly. For more free resources, visit thebrainybusiness. Com.