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Who Is Peloton For?

Peloton sells connected bikes and treadmills that let members access live and taped workouts. It's a communal exercise program that you can do from your home. The company charges over $2,200 for a bike (and more than $4,000 for a treadmill) and sells $39-per-month memberships to access its classes. So far, its audience has been a wealthier customer. To grow, the company will need to expand its brand reach.

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This video was recorded on July 16, 2019.

Dylan Lewis: We're being candid here and giving a good feel for our perspectives on the fitness world. Maybe we should talk a little bit about where we're coming from here, Dan. I truly love putting a bunch of cookie dough and ice cream in my mouth.

Dan Kline: We've talked about this before -- Dylan is much younger than me, and in dramatically better shape. He's getting, like, fan mail from screaming teenagers. I am not.

Lewis: [laughs] That's all too flattering, Dan! I'm not the Beatles!

Kline: [laughs] I know. But Dylan's a fit, good-looking younger guy. I am 45, and last year, decided I was going to get back into running, and super messed up my knees. Six months of physical therapy, a lot of sedentary-by-force behavior. And then, about three months ago, I went back to the gym, and I realized I work well with appointments. That's good for me at work. It's good for me in fitness. So, I pay a trainer to come to my home gym. I live in a building that has a nice gym. And three times a week, we do a very hard -- didn't start hard, but it's hard now -- hour workout. And then he holds me accountable. We text back and forth on days we're not working out. And it's been very good to make me go to the gym when I'm not with him, and also, when I'm on vacation -- I was on a cruise ship last week, and instead of at midnight having a pizza, I had a piece of grilled chicken. [laughs]

Lewis: There you go, Dan! That's true strength right there!

Kline: I'm putting an effort in to get back to palatable. I was joking to one of our colleagues today that I'm trying to look more Hulk and less Endgame Thor. That's a bit of a spoiler if you haven't seen that, but Thor has let himself go a bit out of depression in that movie. I'm working very hard. But my habits are more regimented and expensive than the way you're doing it.

Lewis: Yeah. For the summer, I've been biking about 20 miles each day to work to make up for the fact that the Metro is closed. And I usually play soccer about once a week in a D.C. rec league. I'm biking a good amount, I play some sports. I'll occasionally get down to the gym, but I'm not someone who's spending a ton of money on fitness products.

I think there are elements of both of our fitness tendencies that play into what someone at Peloton would be targeting, but neither of us are necessarily the ideal target market for this product.

Kline: No. If my building had a Peloton, I would probably use it twice a month to shake things up. But when you go to a class and you're not physically there, there's no real accountability for it. If I have an appointment with my trainer and I cancel, it costs me money. If he shows up and I don't put in a full effort, I've wasted time and money. Whereas if I'm doing it remotely, there's only so much encouragement -- again, there's people in my family, my aunt is super fit, and she was always the one that had the old NordicTrack ski machine and she'd use it all winter when you can't go outside. Peloton would be perfect for her because she goes to classes but she's time constrained. For someone like me, for someone like you, I'm not entirely sure at the price point it's a very logical product.

Lewis: Yeah. There are definitely some internet memes about the stereotypical Peloton customer, and the place that it sits, maybe, in the home or in the home gym or something like that. There was this tweet thread that went viral a little while ago and it was from a Twitter handle @ClueHeywood, and Clue said, "Love putting my Peloton bike in the most striking area of my ultra-modern $3 million house."

Kline: Right. That's a brand lifestyle piece of this. When you market exercise, you can do one of two things. You can be like -- and I mean this jokingly -- "Hey, fat, lazy slob! We're just like you! Try it, it's easy! You'll get in! Here are the amazing results you can have!" And I'm teasing a little bit, because that certainly could be how you market toward me at various points. Then there's the person who looks like they don't need to work out because they just spent 19 hours at the gym, and they go to an all-you-can-eat buffet and eat water. [laughs] That's the Peloton lifestyle. Everyone is super good-looking, they're models. It's aspirational. You're supposed to believe that if you buy a Peloton, three months from now, you're going to be a supermodel living in a mansion. Rationally, I think you understand that's probably not going to happen, but that's where they're going. It's how a lot of the high-end gyms market themselves. This is a gym you're going to come to that costs $200 a month where you put makeup on before you go.

Lewis: Yeah, this positioning is not limited to Peloton. You look at a lot of the boutique gyms out there. I'm thinking about Orangetheory, I'm thinking about some of the other big ones, SoulCycle for example, a lot of those are scenes into themselves, and they are a place to be seen and it's a cultural community in addition to being a place where you work out. I think Peloton plays on that a little bit, except it is in the comfort of your home.

Kline: Yeah, and I think that is a little intimidating. But I will point out that Peloton does have entry-level classes. If you have never been on a bike before -- I went to a Peloton at the mall, I think I sent you a picture of me doing that. And I asked them questions about, can my middle-60s mom, who's never been on an exercise bike, or at least hasn't since the 80s, do this? And there's absolutely classes for all levels. So they're not actually as exclusionary as their marketing would be. But they definitely want the marketing to be upscale. I do think -- we'll talk about this in the second half of the show -- that leaves them vulnerable at a certain level.

Lewis: Actually, there are some tools that the company makes available that almost play into this "visualize your future self" mode. If you're on their site, and you're on mobile, at least on iPhone, and you're checking out one of their products, you can use AR to place it in your home. You can literally have the Peloton sitting in front of you in your corner or out in front of your windows as they are in these advertisements. There is this element to the way that they are trying to market to people of, "Hey, picture this and picture your future self," a little bit.

Kline: Jason Moser and I talked about augmented reality a few weeks ago. One of the things we talked about is how valuable would it be for trying on outfits. "Gee, I wonder what I would look like in that hat or that pair of glasses." Now, you sent me an augmented reality picture of a Peloton in our office. I'm familiar with that spot in the office. And I had to look at it and go, "Wow, did you get one of these to test out? Is this just a coincidence that we're doing a show and they dropped one off?" It was 100% believable.

That said, I don't need augmented reality to picture how an exercise bike might look like in my house. It's not something that requires a fit, like a pair of glasses, where you might like it, and it might not look good. I know what an exercise bike looks like. I know what my house looks like. I have the level of imagination it takes to figure this out. This isn't Pokemon Go, where they're blowing your mind. But it was a cool piece of technology.

Lewis: [laughs] Dan, I guess I will just cut out one that I've printed and send it to you in the mail so you can hold it up, and then immediately be able to place it within your house.

Kline: [laughs] Yes, I'll give you my fax number later.

Daniel B. Kline has no position in any of the stocks mentioned. Dylan Lewis has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool has a disclosure policy.


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