he Peloton Interactive, Inc.

Peloton Interactive, Inc.is an exercise equipment and media company based in New York city. It was founded in 2012 with the initiative to bring immersive and challenging workouts into people's lives in a more accessible and efficient way. With the home users as their target customers, Peloton's main products include exercise bicycle and treadmill that allow monthly subscribers to remotely participate in classes via streaming media from the company's fitness studio. Their product portfolio also includes Mobile App, fitness classes, accessories and apparel. In 2020, the revenue reached US$1.825 billion. Their mission is "Peloton uses technology and design to connect the world through fitness, empowering people to be the best version of themselves anywhere, anytime." Millions of members use their platform to connect, bond, inspire and grow stronger together.

The fitness equipment (home exercise bike) industry and introduction of Pelton Bike+

Fitness equipment is any machine or device required for physical exercise to manage overall weight, improve physical stamina, and develop muscular strength. Fitness equipment is highly preferred for exercising, including rowing machines, treadmills, weight machines, exercise bikes and elliptical machines. The fitness equipment market size from home users has increased globally driven by rising health concerns and sedentary lifestyles of consumers. Home gyms enable end users to choose cost-effective equipment that perfectly suits individual health demands. The fitness equipment market size was valued at US$11.5 billion in 2019, and is expected to reach US$15.2 billion by 2027, registering a CAGR (Compound Annual Growth Rate) of 3.5% from 2020 to 2027. The fitness equipment market is expanding with soaring trend for exercise bikes. Home exercise bikes are stationery workout equipment used to improve and maintain cardiovascular health. The global home exercise bike market size was valued at US$1.2 billion in 2019, and is projected to reach US$2.3 billion by 2027, registering a CAGR of 8.7% from 2021 to 2027. The industry has been witnessing high growth opportunities during 2020 and is likely to continue in 2021 owing to the outbreak of the COVID-19 pandemic and subsequent shutdown of gyms and health clubs.

Peloton's first stationary bicycle, Peloton Bike, was released in 2014. The original idea was to bring the indoor-cycling experience into the home, making it convenient for time-strapped professionals and stay-at-home parents. The Peloton Bike is a high-end indoor bicycle rigged with a Wi-Fi-enabled, 21.5-inch touchscreen tablet that streams live and on-demand classes and allows the rider to compete with other participants and get a strenuous cardio workout in the process. The Peloton Bike starts at CAD$2495 plus CAD$49/month all-access membership required. The Peloton Bike is, in essence, made for doing spin classes at home. But one can tire of spinning especially if spinning is the only thing you're able to do. In September 2020, Peloton released a new version of the stationary bike, Peloton Bike+. Bike+ features a larger, 23.8" swiveling screen (can rotate 180 degrees), Auto Follow digitally controlled resistance, new front-facing speakers featuring a subwoofer, and Apple GymKit integration (syncing workouts to Apple watch). If the Peloton Bike seemed like a good way to keep fit in lockdown, the Peloton Bike+ is even better. The Bike+ aims to expand the Peloton repertoire. The Peloton Bike+ separates classes between "on bike" and "on the floor." It's the latter that's meant to bridge the gap between the bike as a fitness tool and the bike as a fitness ecosystem: a whole gym conveniently packed into the corner of your room. Now, home users can subscribe to the monthly membership program and either sit on the bike for spin or stand beside it and do high-intensity interval training, yoga, stretching, or meditation. The HD touchscreen rotates 180 degrees to the left or right so that you can watch the classes from elsewhere in the room. As shown in the above figures, the Peloton Bikes+ packages include Bike+ Basics (CAD$3,295), Bike+ Essentials (CAD$3,495), Bike+ Works (CAD$3,645) and Bike+ Family (CAD$3,845), depending on customer's choice on the accessories. The Peloton Bike+ starts at CAD$3,295 (delivery and assembly, and 12-month limited warranty included) plus CAD$49/month all-access membership required for all Bike+ packages. At the end of 2020, Peloton had more than 4.4 million total members and a 12-month retention rate of 92%. Currently, Peloton Bike and Bike+ are available only at Peloton's website for home users.

THE COMPETITION

Industry players are focusing on launching new products, which are digitally advanced and technologically innovative, to strengthen their product portfolio in the competitive market. Key companies in the home exercise bike market include Echelon Fitness LLC., Nautilus Inc. (including Bowflex and Schwinn), NordicTrack, SOLE Fitness, ProForm and others. The price of a home exercise bike has a broad range from CAD$429 to CAD$2600. The Peloton's exercise bicycle line is high-end in the industry. The competition is expected to be more intense in the future.

The following questions are related to a PRICE MIX.

a. What new product pricing strategy on Peloton Bike+ has been adopted? Under what conditions is this type of pricing recommended?

b. Identify and explain TWO strategies of "product mix pricing" being used for Peloton Bike and Bike+?