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Peloton Uses Bundling Strategy to Increase Retention and Reduce Churn

  • Jackson Reynosa - SUBTA
  • Apr 1, 2021
  • 3 minute read

Peloton is partnering with Verzuz to combine at-home exercise with music entertainment. Through this deal, the fitness subscription company will create new workouts using playlists from the popular webcast series.

This bundling strategy could help rebuild support for the Peloton brand after a treadmill fatality and supply chain woes tainted its stock price in the last two months. It also aims to improve users’ experience and enhance Peloton’s music library. 

Increasing Customer Retention Through New Partnership with Verzuz

Created by producers Timbaland and Swizz Beatz in March 2020, Verzuz has gained viral buzz while displaying Hip-Hop and R&B artists competing to see who has the best music catalog. The company already aired 29 episodes, attracting more than nine million viewers for one of them. The show’s quick rise as a pop-culture phenomenon could benefit Peloton in terms of customer retention and acquisition.

Verzuz’s music could enhance the fitness company’s workout arsenal and appeal to subscribers’ music demands. Close to 70% of Americans report that music increases their exercise performance, and most prefer to listen to Hip-Hop while working out. A bundling partnership supports Peloton’s creation of an ideal exercise environment while also keeping subscribers engaged through a more diverse music library.

Peloton has had issues with its platform’s music in the past. In 2019, the company was sued for $300 million after playing mainstream songs in workouts without the artists’ — Taylor Swift and Rihanna — permission. The lack of choice and popular songs offered by Peloton sparked complaints from its subscribers for almost a year. The company eventually found its star replacement in November 2020 when it acquired the streaming rights to Beyonce’s music, the most requested artist by subscribers.

“We couldn’t help but recognize the parallels between our two brands,” Peloton officials stated in a newsletter, “and wonder about the potential to come together to celebrate fitness, music and fandom in a new Peloton class experience.”

Creating a Virtual Community to Succeed in 2021

Peloton and Verzuz could co-create a vibrant workout environment that mimics the energy of a live show. As many miss live concerts amid the pandemic, this could be a large selling point for the exercise company. 

“I feel that the parallel lines with Verzuz and Peloton are the same,” states Verzuz founder, Swizz Beatz. “You’re in the zone. Your energy is there. Everybody’s in the VIP, the same seats, at the show.”

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Peloton has made an effort to add community features to its platform in the past. A bundling strategy could bolster its community principles by blending the two userbases together.

“Both Peloton and Verzuz are rooted in engaged communities who show up for each other and celebrate together,” says Gwen Bethel Riley, Peloton’s Head of Music.

“I think the community is important in Verzuz, the community is important in Peloton, because that’s the motivation. The motivation is the community,” adds Beatz.

In Q1 2021, Peloton members surpassed 3.6 million, connected fitness subscription workouts grew by more than 300%, and the company had a 92% retention rate. Despite setbacks, the exercise giant is still dominating the fitness industry. It looks to gain even more momentum in Q2 thanks to its newfound partnership with Verzuz. 

“Taking the musical phenomena that is Verzuz and eventizing it, in a way that is unique to Peloton, will provide our members with a way to access incredible artists and their legendary catalogs across multiple disciplines,” states Riley.

Key Takeaways: 

  • After a treadmill fatality and supply chain woes tainted its stock price, Peloton looks to make up for lost revenue through a new partnership with Verzuz.
  • Peloton will create workouts based on Verzuz, a webcast series where Hip-Hop and R&B artists face-off to see who has the best music discography.
  • 68% of Americans report that music increases their exercise performance, and most prefer to listen to Hip-Hop while working out.
  • This partnership could improve users’ exercise experience and add more music culture to the platform.

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