3 Secrets to Peloton's Astonishing Success

When Tom Cortese and his four co-founders started Peloton in 2012, they were faced with an industry that hadn't seen change in "40-plus years." They set out to shift the fitness landscape—not just where fitness happens, but how people think about it, said Cortese in a keynote today at Brandweek: Challenger Brands. Their main goal was moving fitness from a destination activity to something that can happen in the comfort of your own home. They aimed to merge media, community, technology and fitness into one cohesive experience. Safe to say they accomplished their mission. Here are three takeaways from Cortese's keynote: 1. A community-based approach pays off Peloton takes pride in being responsive to its members. The company does this by using data to understand the costumer and using social media to learn and understand what works and what doesn't. "Community was part of the grounding principles of creating the business," Cortese explained. In building a community, "we allowed folks to come together around shared experiences," whether via virtual classes, the brand's online community or IRL meetups in its stores. "Consumers were going to these boutique classes because they wanted to feel the presence of others, they wanted a teacher motiving them," Cortese said. So Peloton decided to bring that group-class experience into people's homes, thereby creating a virtual community. 2. Creating 5 businesses in one is difficult, but worth it Cortese said he and his co-founders took a "vertically integrated approach" when creating the brand. "You don't wake up and say, 'Man, I really want to start an incredibly complicated company,'" Cortese said. "If I could have woken up in a dorm room somewhere and written six lines of code and made a great company, I would have much preferred that to happen." He explained that the co-founders realized they had to create five businesses in one: hardware, software, content and streaming media, ecommerce, and retail and logistics. "We're on target to stream about 40 hours of original programming every single day," Cortese said. "To say that we are not a media company would be insane." In terms of logistics, the company had to become a "full-blown in-home concierge service" when it comes to shipping and installing the bike. "Peloton had to become a logistics company. This has been our path. I don't recommend it," Cortese said with a laugh, "but it's created amazing emotional loyalty to our product that we're all incredibly proud of." 3. Cater to consumers where they're comfortable Peloton "recognizes the absolute value in the convenience of home," Cortese said. He recalled going to arcades decades ago to access the best gaming consoles and to be around a community. That was the only real place that that could happen. Today, the arcade is gone, and Xbox and PlayStation have taken over. "Suddenly, from the convenience of home, you have access to a mobile community and the best gaming machines in the world," he said. That same revolution is now happening for fitness. Consumers nowadays are used to being catered to in the comfort of their own home. Think of Alexa, Cortese said, or even Netflix. "Subscriptions are on the rise and movie theater attendance is on the decline, and we believe this is happening in fitness," Cortese explained. 'The gym of yesterday will be gone. Peloton transforms your home into the absolute best place on earth to work out."