PELOTON INTERACTIVE INC.: A PUSH TO KEEP USERS PEDALLING
CASE STUDY SOLUTION
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SYNOPSIS
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The case examines Peloton Interactive Inc. (Peloton), a fitness company founded in 2012 that sells
stationary bikes and treadmills along with video workout subscriptions. Peloton saw meteoric growth
during the COVID-19 pandemic as demand for at-home fitness surged, but then suffered a 95 per cent
decline in market value due to slowing demand, supply chain issues, pricing missteps, and competition.
n
The case focuses on new Chief Executive Officer Barry McCarthy's 2022–2023 turnaround efforts,
including cost-cutting, adjusting bike and subscription pricing, expanding product lines, and shifting toward
tio
recurring subscription revenues. McCarthy must quickly identify an effective pricing strategy amid
changing consumer dynamics in a post-COVID landscape. The case examines Peloton's pricing history and
various tests of pricing models as McCarthy tries to balance revenue, profitability, and consumer demand
lu
to stabilize the business.
So
OBJECTIVES
● Understand consumer purchasing behaviour and the consumer life cycle from a behavioural lens.
● Apply key behavioural theories, including prospect theory, present bias, and projection bias, to
consumer behaviour associated with exercise.
● Assess target market, pricing, and placement strategies in the presence of behavioural biases.
● Align business model and marketing functions with consumer insights using behavioural biases and
tactics.
The Case Solution Starts From page 4
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ASSIGNMENT QUESTIONS
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1. Why is exercising a difficult task for most people?
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2. Which behavioural biases are most relevant to consumer decision-making especially as it pertains to
exercise?
3. What is Peloton’s value proposition, and how can it address the difficulties consumers face when it
lu
comes to exercise?
4. How should Peloton market its Bike across the key functions of product, price, and place with a
So
behavioural lens in mind?
5. How can behavioural mechanism design be applied more broadly to the fitness industry?
The Case Solution Starts From page 4
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ANALYSIS
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1. Why is exercising a difficult task for most people?
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Some initial guiding questions may
So
include:
● What are the major benefits of regular exercise?
● Who in the class would consider themselves extremely active (exercising once a day or more)?
● Who would like to exercise more than they do currently?
● What are major obstacles that prevent people from exercising (e.g., access, cost, and lack of guidance)?
● What mental or behavioural barriers prevent people from forming an exercise habit (e.g.,
procrastination and stigma)?
The discussion should naturally flow from the high level—such as the benefits of exercise, and the gap
between people who know the benefits of exercise and those who actually exercise—down to specific
obstacles that prevent people from exercising. This will naturally flow into the next question, which dives
into behavioural biases in detail, with a specific focus on the biases that affect exercise behaviour.
The Case Solution Starts From page 4
CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Sa
The case examines Peloton Interactive Inc. (Peloton), a fitness company founded in 2012 that sells
stationary bikes and treadmills along with video workout subscriptions. Peloton saw meteoric growth
during the COVID-19 pandemic as demand for at-home fitness surged, but then suffered a 95 per cent
decline in market value due to slowing demand, supply chain issues, pricing missteps, and competition.
n
The case focuses on new Chief Executive Officer Barry McCarthy's 2022–2023 turnaround efforts,
including cost-cutting, adjusting bike and subscription pricing, expanding product lines, and shifting toward
tio
recurring subscription revenues. McCarthy must quickly identify an effective pricing strategy amid
changing consumer dynamics in a post-COVID landscape. The case examines Peloton's pricing history and
various tests of pricing models as McCarthy tries to balance revenue, profitability, and consumer demand
lu
to stabilize the business.
So
OBJECTIVES
● Understand consumer purchasing behaviour and the consumer life cycle from a behavioural lens.
● Apply key behavioural theories, including prospect theory, present bias, and projection bias, to
consumer behaviour associated with exercise.
● Assess target market, pricing, and placement strategies in the presence of behavioural biases.
● Align business model and marketing functions with consumer insights using behavioural biases and
tactics.
The Case Solution Starts From page 4
, e
pl
m
Sa
ASSIGNMENT QUESTIONS
n
1. Why is exercising a difficult task for most people?
tio
2. Which behavioural biases are most relevant to consumer decision-making especially as it pertains to
exercise?
3. What is Peloton’s value proposition, and how can it address the difficulties consumers face when it
lu
comes to exercise?
4. How should Peloton market its Bike across the key functions of product, price, and place with a
So
behavioural lens in mind?
5. How can behavioural mechanism design be applied more broadly to the fitness industry?
The Case Solution Starts From page 4
, e
pl
m
Sa
ANALYSIS
n
tio
1. Why is exercising a difficult task for most people?
lu
Some initial guiding questions may
So
include:
● What are the major benefits of regular exercise?
● Who in the class would consider themselves extremely active (exercising once a day or more)?
● Who would like to exercise more than they do currently?
● What are major obstacles that prevent people from exercising (e.g., access, cost, and lack of guidance)?
● What mental or behavioural barriers prevent people from forming an exercise habit (e.g.,
procrastination and stigma)?
The discussion should naturally flow from the high level—such as the benefits of exercise, and the gap
between people who know the benefits of exercise and those who actually exercise—down to specific
obstacles that prevent people from exercising. This will naturally flow into the next question, which dives
into behavioural biases in detail, with a specific focus on the biases that affect exercise behaviour.
The Case Solution Starts From page 4
