Feb 7, 2020
Last year on the show, there
were behavioral economics analyses of Apple Card, Costco and
Starbucks and this is the first time in 2020 we will be digging
into a specific company. I’ll talk about the infamous Peloton ad
that made the company’s market value drop $1.5 billion in three
days: what happened in the ad and why it went wrong. Then I’ll
explain what could have been done better and the behavioral
economics concepts that back it up.
I also talk about my own
personal experience with Peloton. I recently got one and I’m loving
it. You’ll learn about the behavioral economics of financing
options, the 30 day money back guarantee, as well as how they use
the concepts of social proof, herding, reciprocity, and more in
very smart ways. If you don’t have a Peloton, you’ll learn a little
more about equipment, subscription, and app options. I also talk
about some of the really cool things they are doing that align well
with behavioral economics – including sharing a bunch of concepts I
see in their set up, and we will wrap up with tips for your
business based on successes from Peloton.
As a note, I don’t do any work
with Peloton and don’t know if they are working with anyone in
behavioral economics or if they are familiar with any of these
concepts or doing any of this intentionally. The stuff I talk about
in this episode are my own thoughts and observations, not from any
conversations I have had with anyone at Peloton.
If you work there or know
someone who does that would like to Connect, please email
- [03:28] Peloton is a fitness
company that sells equipment and features live streaming videos on
a screen attached to the equipment.
- [03:52] According to Peloton’s
website, there now have more than 1.6 million members. They state
over 55 million workouts completed in 2019, and in their last
fiscal year (which ended in June 2019) the company made $915
- [04:21] They also have a 94%
12-month retention rate.
- [04:48] Over the Christmas
holidays, they featured an ad about a woman who receives a Peloton
from her husband as a gift. We then get to watch her video blog of
her entire year riding the bike and she says she didn't realize how
much it would change her.
- [05:38] The internet hated this
commercial. There was all kinds of backlash about the husband
giving her an exercise bike and how it was sexist. It had negative
coverage in all the publications.
- [06:10] According to Business
Insider, Peloton lost 1.5 billion dollars in three days after the
release of the ad.
- [06:33] In my opinion, the ad
wasn't as bad as it was made out to be on social media. The real
problem is mixed messaging (something many companies struggle
- [07:03] The ads that Peloton
makes are clearly directed towards wealthy people. They also only
have very fit people in their ads (which is fine if this is a
clearly defined niche).
- [07:34] 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 have
access (or time to go) to a gym.
- [07:49] If you say you are for
everyone – a community of all kinds of people coming together to
support each other…the ads should reflect that.
- [08:03] If you are truly only
for wealthy people, you should say that.
- [08:27] There is no reason that
any business can’t target a high income or high net worth group of
individuals. Just make sure that the messaging is
- [09:15] I think they do want to
be inclusive – especially after having the bike for a month now.
Their website is “One Peloton” and they share that messaging
throughout all the workouts and interactions. They are very focused
on their community.
- [09:24] my recommendations:
First the ad needed a teeny tiny back story where everyone knew
that the wife actually wanted a Peloton.
- [10:04] You cannot assume
everyone who watches your ad or sees your message is coming from
the same place as you.
- [10:32] 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 negatives (especially
when you’re talking about health, diet and fitness).
- [10:45] Take a step back and
look at your message from many perspectives and look for what
people would disagree with.
- [11:17] A noticeable difference
in the protagonist from the beginning to the end would have made a
- [12:42] If you are going with
the inclusive message, it should have closed with a very quick line
like “One of the many stories of Peloton” which could then trim
down to say “One Peloton”.
- [14:22] Peloton has enough
content for a ton of advertising if they take the time to find it
within their community.
- [14:46] Understand your market
niche and who you are speaking to. When this is grey you can get
- [14:54] Bring people along with
you in your story, you can’t assume they know the right context. It
is important to share key elements to ensure the right message is
- [15:19] Don’t overlook your
community when 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.
- [15:45] Even though Peloton
went down 1.5 billion in value it doesn't mean that will last
- [16:18] Even though it wasn't
the greatest way to go viral more people probably know about
- [16:34] Availability bias is
when you start to see something everywhere and then it gets more
weight in the brain.
- [18:06] The availability bias
and the ad being everywhere pushed Peloton through the subconscious
filter and got you to consider it.
- [18:50] One of the reasons it
was easy to join Peloton was in the framing of the offer. Their
equipment is expensive, but they have a 30 day trial with a money
back guarantee and a 0% financing option where you can pay for the
equipment over three years.
- [19:37] They have a 94% stay
rate from people after 12 months, so their main hurdle is to get
that bike or treadmill into your home.
- [20:22] You can be part of the
community by paying a monthly membership fee to access the
- [21:14] There isn't a discount
for people who bought the bigger thing (equipment) from Peloton -
they actually pay more each month.
- [21:39] It's important to note
that you don't have to discount when you bundle things together or
have repeat customers.
- [23:11] The access to content,
free trial and 0% financing are all examples of reciprocity. You
pay each month to have access, but there is so much value it feels
like a gift to have these great instructors, stats and
- [24:11] Choice architecture
(specifically structuring complex choices) is in play with over 20
new classes going live daily and more than 10,000 already on
- [25:02] You can easily search
and filter for what you're looking for based on what matters to use
such as type of class or instructor.
- [26:26] Sometimes it's good
that people have to search a little to get to what they're looking
for (the subconscious is always scanning).
- [29:56] Peloton uses concepts
of herding and social proof to really enhance the community
experience. You get all the goodness of being a part of a community
without any of the awkwardness.
- [32:40] The instructors walk
you through what numbers to focus on (in their case “resistance and
cadence”) and there is an overall output that ranks you on the
leaderboard. Limiting the areas of focus is a framing
- [34:37] Social proof is kind of
like herding, in that it shows other people are there and liking
the course. With Peloton, they do a FANTASTIC job of incorporating
social proof and making you feel like part of a gigantic
- [37:20] They shout out
milestones throughout the class, starting high and working their
way down. This helps with anchoring, another important concept for
- [38:25] Anchors are set in
tandem with the social proof by announcing those in the live class
who hit milestones. When they shout you out, they say, “I see
- [40:07] Another way they use
anchoring is in tandem with commitments and precommitments – which
help form good habits.
- [41:34] These anchors help
boost the amount you might have worked out otherwise, and
committing in advance makes you much more likely to form a habit
and reach a goal.
- [42:16] 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
- [43:58] These little nudges
make a big difference and help to show why Peloton is a smart
company making (mostly) good choices.
- [45:07] 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.
- [45:30] SUMMARY OF TIPS: Know
who you are 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.
- [45:34] Context is important in
any story you are trying to tell. You can’t assume people know the
story or have the same background as you have when you came up with
the story. Take the time to understand which details are important
and show them in the right order.
- [46:00] Use the stories from
- [46:17] It’s ok to have complex
offerings with a lot of choices, but you need to make the structure
of those really easy for people who are using your product or
- [47:11] Anchoring is always
important. Start with big numbers to help others see what is
possible and set your anchors.
- [47:29] Social proof – saying
things like “I see you” and helping people feel there is a
bigger community present is critical for an online space if you
want people to feel connected.
- [48:18] Giving things away can
trigger reciprocity and make people want to get more from
- [48:30] It's ok to not have
discounts for people who are buying other stuff from your
BE Thoughtful Revolution membership
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Use the code LAUNCH to lock in your rate and save 60%
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