Peloton Is Slashing Marketing. Can It Survive Without Clearer Branding?

After a year of financial struggles, and deeper recessionary fears looming, Peloton is seeking to get its bottom line in shape with a familiar tactic for tough times: It's issuing massive budget cuts—starting with the marketing department. According to CEO Barry McCarthy, Peloton is laying off 500 staffers after suffering six consecutive quarterly losses, according to CNBC and The Wall Street Journal. The job cuts are being felt companywide, which now stands at 3,800 employees. The bulk, however, will come from the marketing department. McCarthy didn't specify the potential impact on its branding efforts. Peloton's marketing team already took a huge hit last week. That's when Dara Treseder, Peloton's global head of marketing, communications and memberships, announced she was leaving after three years to join software design platform Autodesk as CMO. Once a Pandemic Superstar, Peloton Rode Straight Into a Wall. Now What? The workforce reduction comes as other brands have felt increasing economic anxiety for months. In the short term, McCarthy's announcement appeared to provide some relief to the brand's stock price, which gained 4% by late Wednesday afternoon even as most major market indices suffered another down day. Still, investors are unlikely to ignore incremental moves in light of the company's $1.2 billion net loss in Q2. In highlighting the marketing cuts, McCarthy said achieving greater operating efficiencies was required to put the company on more solid footing within six months. But by having the marketing team take the brunt of the hit, Peloton's struggles to redefine itself with consumers is likely to get tougher, said Allen Adamson, co-founder and managing partner of marketing agency Metaforce. The timing is particularly rough following the departure of a widely respected marketing leader like Treseder. "What marketing star is going to want to go to a company that effectively says, 'Marketing doesn't matter as much right now?'" Adamson said. Hard choices McCarthy was previously CFO at brands such as Spotify and Netflix. He took the CEO reins at Peloton from co-founder John Foley back in February. At the time, the once massively hyped exercise equipment and interactive fitness brand saw its stock plunging after global supply chain issues resulted in orders taking months to fulfill. By that point, other entrants had started getting into the at-home fitness game. Then, away-from-home gyms began reopening as vaccinations offered consumers a return to near-normalcy. In between all that was Peloton's unlucky media appearances. In December 2021, Peloton was prominently featured in the heart attack death of the Mr. Big character on the first episode of HBO’s Sex and the City reboot, And Just Like That. Ryan Reynolds’ ad agency Maximum Effort gave the brand a jolt of life when the agency produced a much-talked about video ad featuring the actor who played Mr. Big, Chris Noth, alongside the character’s adored instructor. The TV and video commercial was produced and distributed in an uncommonly swift 48 hours. But just a few days after that positive spin, Noth was accused by several women of sexual misconduct. Even as he denied the charges, the Peloton ad was dropped and the brand's brief win turned back into a social media loss. (Insult to injury was added in January, when a character on Showtime drama Billions was also struck by a heart attack while using a Peloton bike, though he ultimately pulled through.) Peloton has since struggled to finding its footing. Marketing takes the fall Last May, Treseder told Adweek that Peloton was working to update its image as an "experiential brand," not one that sells rowers and stationary bikes. “It’s about the content. It’s about the software. It’s about the experience,” she said at the time. “We’ve always been about connected fitness. We started out with our bike, but now we have a suite of products.” Peloton's main point of differentiation was its 54 interactive instructors, who helped inspire and maintain the brand's nearly 6 million monthly subscribers. The balance between sales and marketing teams is often fraught. And when economic times get tighter, marketing, not sales, tends to be first on the chopping block. "It's easier to cut marketing because the negative effects aren't immediate," Adamson said. "Peloton needs to tell its story. They have to sell a concept, especially given the recent pivot to 'experiences' versus selling equipment. To do that well, it needs a focused marketing team. "Consumers are tightening their own budgets," he added. "They need a reason to spend. And that's what marketing provides: the reason and the inspiration." Despite Steady Consumer Spending, Inflation Will Change the Media Landscape