Let’s get R.E.A.L. lessons from Peloton
Let’s get REAL is a series where ChangeMakers provides quick and actionable insights for protecting your reputation in a rapidly-evolving risk landscape.
We’ll begin by evaluating a reputational RISK for businesses, exemplified through a news EVENT. Then we will provide an ANALYSIS of the reputational impact, citing findings from ChangeMakers Data Intelligence team and close with LESSONS (together, R.E.A.L.) that leaders and organizations should consider.
The pandemic caused a boom in at-home services – from streaming to food delivery to exercise equipment. Peloton, the machine and the company, may be the best exemplification of this phenomenon. It’s meteoric rise and fall has captivated our team which continually looks to it as a case study in self-inflicted wounds and reputational harm.
RISK
It should go without saying that consumer and public safety must be the top priority for companies, especially when safety is threatened. When the unimaginable happens, companies need to react and do so quickly, expressing genuine sympathy and regret, and putting safety above all else.
Companies who fail to apologize, who refuse to own it and fix it as an integral part of their strategies risk losing trust, reputation and in the end, market share.
Let’s look at how Peloton’s failure to do just that has impacted their ability to fully recover years after the recall of their treadmill.
Event
After a pandemic boom when many of us hopped online to order exercise equipment, including a few of our team members, reports were emerging of injuries related to the Peloton treadmill. This culminated in March 2021, with the tragic death of a young child.
On April 17, the Consumer Protection Safety Commission (CPSC), issued a safety warning and advised consumers to stop using the treadmill, sharing a disturbing video of a child being trapped under the belt. Peloton’s reaction was swift and aggressive, calling the warning ‘inaccurate and misleading’. There was no humility, self-reflection or nuance.
So, unsurprisingly, the outrage and the pressure continued. Finally, on May 5, Peloton announced the recall of 125,000 treadmills along with an apology from CEO John Foley, admitting not only the risk of the product, but also their “mistake in our initial response to the Consumer Protection Safety Commission’s request that we recall the Tread+”.
This continued Peloton’s painful 2021 which included a June security breach involving user information and the death of beloved TV character Big on HBO’s Sex in the City reboot.
Analysis
In the span of a few weeks, Peloton’s decisions completely altered the course of their brand’s reputation for years. From March to May, the volume of media coverage increased. Following their recall announcement, they saw an average of 1.3k daily mainstream hits, 85% higher than the 700 daily hit average they had in the first three months of the year. Needless to say, the coverage was overwhelmingly negative.
In the 18 months after the initial recall notice, mainstream and social media continued to trend high, souring the digital environment for this cult-like brand. Conversation has been consistently negative, and the brand has struggled to get back to their values and ethos of combining health+ wellness with community.
The impact has had a huge financial impact, with Peloton shares plummeting and never recovering.
Lessons
- Own it up front and put safety first. Peloton came out swinging, but ultimately looked extremely defensive. They then had to do a public about-face with an apology from the CEO and a recall – and let almost two months elapse in between. By failing to address some of the key concerns of consumers and aspects of the recall in the earliest days, the company prolonged its problems and caused potentially irreparable reputational damage.
- Don’t lash out at the regulators. Peloton came out looking heartless in response to the death of a child and the CPSC’s warnings. They were subsequently fined $19 Million for failing to report the hazard, reinforcing the impression that the CPSC was the body taking care of consumers and Peloton was the bad guy.
- Stay true to your brand values. The response was a complete contradiction against Peloton’s brand – community focused and wellness-oriented. The contrast between the company’s values and how the recall was handled compounded reputational damage.
- Turning the tide gets harder over time. Peloton is now faced with a digital environment, largely driven by direct consumers, that has been mostly negative for a prolonged period of time. Even years later, righting that ship to reactive brand champions and advocates is still difficult.
- The pile-on-factor can hurt your brand. Peloton was not ready for the next wave of negative events, putting itself in a deficit position for the other incidents it faced including the data breach and SITC, both of which would have been manageable issues if it were not for their response to the treadmill recall.
- Stay Humble Peloton was on such a meteoric rise due to their market-leading product that they fell into the trap of thinking they were the only game in town. Peloton faced these issues as newer, cheaper competitors were coming online, giving consumers choice yet they were still acting like they were the only option for interactive, live streamed fitness programs. Just as we’re seeing Netflix struggle with the same attitude, brands who feel impervious to losing equity will soon come face-to-face with the hard truth.
