Key Marketing Strategy Issue #1: Competition due to lack of product differentiation
Summary
Peloton faces stiff competition from other brands selling similar products and services to the target market. According to Dopson (2020), the Peloton bike needs more product differentiation making other brands develop similar exercise bikes but more functional and affordable. Peloton faces competition from other brands like Echelon, ICON Fitness, Flywheel, SoulCycle, Equinox, and Precor. Moreover, Peloton CEO Foley claimed technology giants like Apple have entered the market and offer stiff competition to Peloton (Winchester, Pleggenkuhle-Miles & Bass, 2021).
Evaluation
Competition is a market force affecting how brands operate and achieve their strategic objectives and goals in an industry. Peloton faces competition in the exercising bike industry because they sell one product line and have yet to invest much in product differentiation. According to Corporate Finance Institute Team (2022), product differentiation is a marketing strategy allowing a firm to achieve a competitive advantage over other brands selling similar products and services to the same target market. The stiff competition faced by Peloton is caused by the emerging lifestyle trends leading to many people opting for exercise to maintain physical fitness. Researchers from Expert Market Research (2022) found that consumers have become health-conscious, propelling the demand for exercise bikes. To deal with the growing demand, brands have developed innovative products offering consumers better experiences, creating a very competitive market. The ever-increasing competition affects Peloton’s market presence since rival companies have introduced similar brands with additional features and lower prices. The over-reliance on one product line makes Peloton prone to threats of new entrants and competitive rivalry that affects its competitive edge and profit margins.
Proposed Solution
Solution #1: Introducing new products in line with existing exercise bikes.
Peloton has built the brand name as the number one exercising bike globally, making it easier for the brand to introduce a new product in line with the operating industry. Winchester, Pleggenkuhle-Miles & Bass (2021) claimed Peloton differentiates its brands by introducing new concepts in fitness through technology and design. Diversifying to other products and services while maintaining their unique design gives Peloton an added advantage in the market.
Solution #2: Changing their product features and designs
Peloton management can improve its product offering by developing new design features that meet customers’ needs and stay in line with emerging trends. Peloton, a start-up company, can react faster to changing market dynamics than competitors (Winchester, Pleggenkuhle-Miles & Bass, 2021). As such, the brand can aggressively penetrate the market through new product design and win the market competition.
Recommendations
Recommendation #1: Product differentiation
Peloton could try a product differentiation strategy by introducing new products or services. One best approach towards achieving product differentiation is the introduction of medical services for clients in addition to exercising bikes. The fitness industry remains very health conscious, especially after the Covid-19 pandemic, because of the increasing number of people worried about their health (CB Insights, 2020). Peloton could boost customers’ health by integrating health management systems in their product line that can check, diagnose, and recommend best practices for clients. The services could be offered as a mobile app that consumers could download without additional subscription fees.
Recommendation #2: Promotion Strategy
Peloton needs to invest more in product advertising and promotion to create awareness of its brands. Promotion strategy allows the brand to influence customers’ decision-making by making their products and services more admirable than competitors’ brands. Peloton management could consider promotional ideas such as offering discounts, free subscriptions for first-time buyers, and random giveaways.
Key Marketing Strategy Issue #2: Relying on one market segment
Summary
The main target market segment for Peloton bikes is United States (U.S.) customers. The business only markets its products to local customers locking away potential customers from other places with good taste for their brands. Peloton’s bike distribution is restricted to one market segment despite the growing demand for health and fitness products in other parts of the world. Also, the marketing team has invested more in increasing local stores and the production of bikes locally despite the growing global demand (Winchester, Pleggenkuhle-Miles & Bass, 2021).
Evaluation
The place element of the marketing mix is a crucial factor to consider when marketing brands today. Peloton has successfully marketed its exercising bikes in the U.S. market but is experiencing problems entering new markets with massive growth potential. c (2021) claimed Peloton recorded slowing growth towards the start of 2020, an issue associated with the overdependence of one market where competition was stiff. Peloton could face a severe marketing problem should they focus only on the U.S. market considering many competitors have international distribution channels.
Proposed Solution
Solution#1: International Market Entry
Adopting the international market entry strategy is one of the best-preferred solutions to the place issue at Peloton. Peloton’s operation in the U.S. and its environment limits the business’s opportunity for international growth and global recognition. According to Research and Markets (2022a), the market for exercising bikes is growing steadily globally because of the rising number of consumers having health and lifestyle issues. Moreover, Peloton’s vertical integration strategy offers an opportunity to increase subscriptions in other locations worldwide because the brand enjoys high popularity. Implementing an international business strategy allows an organization to become globally oriented to survive global competition (Francis, 2020). As such, international market entry remains one of the best solutions for Peloton to stay competitive and relevant.
Solution #2: Collaborate with similar brands in other countries
Peloton can consider selling its brands to international markets by collaborating with suppliers in their other locations. The company can maintain its manufacturing location in the U.S. but create distribution channels across all other target markets worldwide. Peloton pledged $1 million during the Covid-19, which made it acquire global recognition. Therefore, many partners will be willing to work with the brand to market and supply their products.
Recommendations
Recommendation #1: Open up a new manufacturing firm in other parts of the world
Peloton needs to enter the Chinese market by opening a manufacturing centre. China is one of the fastest-growing economies in the world, attracting many foreign direct investments. Also, the demand for exercise bikes in the country keeps increasing, with a projected annual growth rate of 8% (Research and Markets, 2022b). Entering the Chinese market is a more incredible opportunity for Peloton to overcome the issue of place. Also, China offers lesser production costs than other potential destinations leading to a reduction in cost and increased margins.
Recommendation #2: Implement a Joint Venture
Organizations use different models to enter international markets. The joint venture would be the best strategy for Peloton to reach its global markets. Peloton has a known brand name, and its products have unique technology and innovative features (Winchester, Pleggenkuhle-Miles & Bass, 2021). A collaboration between the brand and other firms selling similar products would increase its global presence. Also, the joint venture reduces the cost of international entry because the company does not have to start a manufacturing unit in the target market.
References
CB Insights. (2020d, October 15). Fitness In The Post-Covid World: How Technology Is Changing How We Work Out. CB Insights Research. https://www.cbinsights.com/research/report/fitness-post-covid/
Corporate Finance Institute Team. (2022, December 12). Product Differentiation. https://corporatefinanceinstitute.com/resources/management/product-differentiation/
Expert Market Research. (2022). Global Exercise Bike Market Report and Forecast 2023-2028. https://www.expertmarketresearch.com/reports/exercise-bike-market
Francis, C. (2020). International business, Sixth Edition. (2020). (n.p.): PHI Learning Pvt. Ltd.
Research and Markets. (2022a, October 13). Exercise Bike Market Growing to Unveil a Remarkable CAGR of 13.80% By 2029, Key Drivers, Size, Share, Demand and Opportunity Analysis. GlobeNewswire News Room. https://www.globenewswire.com/en/news-release/2022/10/13/2534038/0/en/Exercise-Bike-Market-Growing-to-Unveil-a-Remarkable-CAGR-of-13-80-By-2029-Key-Drivers-Size-Share-Demand-and-Opportunity-Analysis.html
Research and Markets. (2022b, October 13). Exercise Bike Market Growing to Unveil a Remarkable CAGR of 13.80% By 2029, Key Drivers, Size, Share, Demand and Opportunity Analysis. GlobeNewswire News Room. https://www.globenewswire.com/en/news-release/2022/10/13/2534038/0/en/Exercise-Bike-Market-Growing-to-Unveil-a-Remarkable-CAGR-of-13-80-By-2029-Key-Drivers-Size-Share-Demand-and-Opportunity-Analysis.html
Winchester, C. C., Pleggenkuhle-Miles, E. & Bass, E. (2021). Peloton’s ride to growth. The Case Journal, 17(6), 754-783.
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