MBA1889 How Peloton Became a 4 Billion Dollar Company

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Hey, welcome to the $100 MBA Show. Because your business is not going to.

Grow by itself, it needs you at your best. That's why we deliver daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014.

And in today's lesson you will learn how Peloton became a $4 billion company. Founded in 2014, Peloton decided to bring that spin class experience to the home. But bike exercise videos have been around forever.

Stationary bikes have been around forever.

Why did Peloton explode and become a huge, huge, huge business? Well, that's what we break down in today's lesson. So you can extract those strategies and apply them to your own business. So, so let's get into it.

Let's get down to business.

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Peloton has grown so quickly in the last few years. The only way to really describe it.

Is that they've created a movement. Really?

But how? Like I mentioned at the top of the episode, the stationary bike has been around forever.

Home workouts have been around forever.

But Peloton did a few things really well that allowed their business to explode. We're going to break those things down.

Today so you can do the same in your business.

But first, let's break down what is Peloton. Officially, it's called Peloton Interactive, Inc. And it's a company that was started by John Folly who is a former barnes and noble executive. One day in 2012, he pitched to his coworker, hey, imagine we can bring the experience of a spin class to someone at home. This would be great for people who are super busy and can't go to the gym to attend a class. He was speaking about himself because he had a very busy lifestyle as an executive. He wanted to stay fit, but he wanted to stay fit around his own schedule. So he got to work, and a year later, he launched the first peloton bike on kickstarter. That kickstarter was successful and resulted in getting a lot of awareness and some investment.

People funded peloton with a few rounds.

Of funding, and they were off to the races. Now, one of the things that peloton wanted to do that's different from everything else that's out there is to incorporate live interaction. Why? Because they noticed that people don't get.

The same workout if they do it on their own. If they watch some sort of video on YouTube or back in the day, you know, popping in a VHS tape.

And just rely on their own willpower. People get a much better workout when.

They'Re in a live setting with somebody.

Watching them, somebody seeing what they're doing or actually seeing how hard they're working. When people are amongst other people, we tend to show our best self. John knew this and wanted to really emphasize this point.

This is why people get better workouts.

In live classes, in person. So he wanted to bring that to the home. So the first thing he realized is.

That there is a difference between on demand and live.

Live has a total different atmosphere and causes people to act differently and get a better result. This is something that we all know from our own experiences from school. When we're in the classroom, we're definitely working harder when the teacher's in front of us versus doing our homework at home. So John, really what he did is he used human nature to his advantage. He says, hey, what are we inclined to doing?

What will get people the best results with exercise equipment?

He knows the track record of exercise equipment is horrible. People buy exercise equipment off, you know, infomercials on tv, and it just becomes something they hang their clothes on, right? He wanted to make sure that the peloton bike didn't become another thing that people regret buying. So he said, let me leverage human nature, and in this case, live interaction. And, boy, did he score. Not only did peloton not become another.

Piece of equipment that people didn't use.

They have one of the highest retention rates of any product on the market. 96% of people continue to use a.

Peloton bike after the first year.

That's an absolutely bonkers statistic.

Okay, Incredible retention.

The second strategy that peloton used, and this is probably their most killer strategy, is that they didn't create a product.

They created a movement.

If you know anybody who has a.

Peloton bike or takes peloton classes or a part of the peloton community, they rave about it like they're part of a cult, right?

Like they're part of a community, a religion, a club, a group, a team. And I'm saying this to praise peloton because peloton realized if we're going to be a big business, a big brand, it's gotta be more than just the product. We have to create a movement. And through this movement, people love being a part of a community, love being part of the peloton family. People do peloton meetups, people do peloton happy hours. And part of the peloton class is that you can interact with your classmates. There's a webcam, so you can do video calls and have a buddy system. The point here is that John understood you don't build something alone and you can't get people to love your product alone in isolation. And if you want want people to do something like get in shape, you're going to need the power of momentum and the group. And therefore he leveraged the power of community and says, I'm going to build a whole community around peloton. So people love coming back to the classes. Not just because of the classes and the exercise and the workout they get out of, but because the community aspects, because they're going to see their friends, hey, I'm part of an intramural, over.

35 years old basketball league.

And half the reason why I show.

Up to this league to play basketball is to see my friends, to talk.

To catch up, to grab a dinner afterwards. We have a WhatsApp channel. It's more than just basketball. And this is why I enjoy it, right? And peloton understood that we gotta build.

A community, we gotta build a movement around our brand if we're going to succeed.

Not only succeed now, but in the future. Why? Because you're going to get copycats, you're going to get competition. And the reason why people buy a.

Peloton bike and be part of the.

Peloton community is because of the community, not because anything else.

Because of that community and movement.

They built third strategy. And this really kind of puts it all together. Peloton understands their customer. They understand this is for somebody who's busy, who's willing to invest in their.

Health if it's going to be convenient and all they have to do is show up.

So if you go on Peloton's website, you will see that it's not cheap.

It'S an expensive piece of equipment. Plus you have the monthly membership for the classes.

And they can probably price it at a lower price point, but they purposely.

Make it expensive because they want to.

Attract people that are willing to invest in their health. Because the thing is, is that if you put your money where your mouth is, you're more likely to use that thing just to prove your to your.

That, hey, I didn't waste my money.

Secondly, they know that people are busy. These are executives. These are people that are juggling a lot of things in their life. They don't want to have to do any research. They just want it figured out. So actually, Peloton will give you everything you need, including shipping and assembly. They'll assemble it right there in your home so you don't have to do anything. They'll get you all set up. They'll even include the hand weights that you need and even the shoes that.

You lock into the pedals with, even.

A mat so you can do some.

Of the floor exercises.

The point here is that Peloton understands that you don't want to do the thinking.

Okay? Their ideal customer doesn't want to do.

Any of the thinking. Just tell me what I need and I'll buy it.

And they package their products in that way.

This comes from really understanding who your.

Market is, understanding who your ideal customer is. Who are you actually serving?

Listen, too many of us as entrepreneurs, we try to cater to everybody. Peloton did an excellent job by saying, no, we're not catering to everybody. We're catering to the busy professional that.

Is willing to invest to maintain their health or improve their health.

They could have sold more units by making it cheaper or selling it in retail or to wholesalers or at Walmart. But they said, no, we are not that.

We're going to become the apple of exercise equipment. And we know our customers and we're going after them. We don't worry about everybody else that we don't serve.

Guys, I got more on today's topic.

But before that, let me give love to today's sponsor.

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Today's lesson on how Peloton became a $4 billion company of course we got to talk about the Pandemic. Peloton exploded in the last couple years because of COVID 19. Because a lot of people were stuck at home. Gyms were closed all around the world and wanted to get a good workout in.

Now some people might say, oh, they.

Got lucky because of the pandemic and that's why they grew so fast.

That's simply not true. I did a bit of research and found out that Peloton did most of.

Its growth actually before the actual pandemic.

But they moved up another level when.

They hit the pandemic. And it's not because the pandemic they were successful.

They were successful even before it. And the right product will always shine.

In the right opportunity.

Opportunities will present themselves for every business at some point. Being around long enough to be there.

When those opportunities are there is really.

Important and it's key here. Now, a lot of places around the.

World, gyms have opened back up and.

Yet Peloton usership has not changed. People continue to use it and the retention rate is still solid. This means Peloton is a game changing competitor to traditional gyms and classes and they're not slowing down. I hope the research that I shared with you today on the three things.

That Peloton did to grow their business.

To a $4 billion business helped you. Yes, they're a big company, but the strategies are the same. You can use these strategies in your own business and leverage human nature. Understand who your actual target market is. Create a movement. These things will last the test of time. Thanks so much for listening to the $100 NBA show. If you love what you hear, leave us a review on your favorite podcast app. We'd love to hear what you think of the show.

And it also helps us get more exposure to get more listeners so we can keep on bringing new lessons to you every single day.

Before I go, I want to leave you with this. Every business starts from zero. It's easy to look at these big businesses, these billion dollar businesses and say.

Oh, easy for them. They're this big business.

But they started from zero. They started with an idea. John had an idea working over at Barnes and Noble, put us Kickstarter together and made it happen.

We are all capable of great success. Thanks so much for listening and I'll check you in tomorrow's episode Q and A Wednesday. I'll see you then.

Take.

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