Peloton held their Q2 2024 earnings call last week, and CEO Barry McCarthy specifically mentioned the phrase “product innovation” several times.
This was typically in the context of hardware devices, implying that Peloton is once again ideating and planning for new product releases & new Peloton devices & hardware.
McCarthy explained that in the past two years, Peloton’s focus has been primarily business model innovation rather than product development. Reintroducing the Tread+ and launching the Row were the major product-related initiatives during this period, catering mostly to existing subscribers. However, McCarthy expressed excitement about the upcoming two years, predicting a significant surge in product innovation that could alter the growth trajectory of the business.
McCarthy went on to stress the importance of delivering value to customers – by investing in the product and user experience – and highlighted successes at his past companies of Spotify and Netflix. Peloton aims to replicate this success by leaning into the performance aspect of the market with premium-priced products.
McCarthy cited the Tread+ as an example of consumer appetite for premium offerings, given the right user experience. To achieve this, Peloton is actively investing in product innovation and talent acquisition, expecting meaningful contributions from recent hires. According to McCarthy:
“I think there’s a tremendous opportunity for us going forward to lean into the performance aspect of the market with premium priced products in order to drive new growth for us, meaningful growth. And I think an existence proof that there’s an appetite amongst consumers for that kind of positioning is the Tread+ by a way of example. So if you give people something they want, they’d be delighted to pay for it, but it has to be a uniquely compelling user experience. And which is why we’re leaning heavily into investing in product innovation. And now we have to have the right talent in the building to pursue that. We had some pretty interesting talent walk into the building last quarter. And I’m pretty optimistic based on what’s being discussed in the building today.”
McCarthy left no room for doubt about the connection between product innovation and growth. He discussed the underexplored potential in areas like gamification – i.e. Lanebreak – and corporate wellness, where Peloton sees opportunities for expansion. He argued that the recent introduction of Row and Tread+ serve as proof that innovation drives growth, and with the company now on better financial footing, Peloton is ready to intensify its focus on product development. McCarthy stated:
“It’s pretty clear from the introduction of Row and the introduction of Tread+ innovation drives growth. And we’ve been busy saving ourselves for the last two years. And now we’re positioned to invest in innovation. Again, it’s innovation that put us on the map in the first place.”
Finally, McCarthy emphasized the untapped potential not only in the United States but also in international markets. While Peloton has a substantial market share in the U.S., unaided brand awareness is comparatively lower in the United Kingdom, Germany, and likely Latin America. This highlights the room for growth through geographic expansion. According to McCarthy:
“The unaided brand awareness for the product in the US is 55%. Okay, anybody now by a way of comparison what the unaided brand awareness is for Starbucks or Coke. They’re north of 90. So there’s still a lot of untapped potential even in the US and by a way of comparison, the unaided brand awareness in the UK is 37%. And in Germany, it’s in the 20s. And so — and I don’t know what it is for LatAm, but it’s got to be significantly lower. And we’ve got a lot of strength in the Latinx community from a content perspective. So product innovation, geographic growth and product relevance in commercial and corporate wellness should all be vectors for — to drive an acceleration in sales in the next couple of years.”
McCarthy’s statements throughout the call indicate the Peloton views product innovation as a central theme in its strategy for growth. We have previously reported on potential new hardware products, like a platform strength device. However, these never came to fruition and there have not been any new developments on them as of late.
For any other news you may have missed from Peloton’s latest earnings call, check out our overview article for all the details. You can read Peloton’s full Q2 2024 earnings letter via the investor website.
What potential new products would you be interested to see from Peloton in the future?
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