Peloton, the popular fitness company known for its stationary bicycles and digital app, has made a significant change to its membership options. The company has discontinued its unlimited free-membership tier on its fitness app due to its inability to attract paid subscribers. This move comes less than a year after the free tier was introduced as part of a rebranding strategy.
The unlimited free-membership option was initially seen as a key part of Peloton’s growth strategy. The company hoped that offering a free tier would entice users to try out the app and eventually convert them into paying subscribers. However, this bet did not pay off as expected. Peloton’s CEO, Barry McCarthy, admitted that the relaunch had been less successful at engaging and retaining free users and converting them to paying memberships.
As a result, Peloton decided to remove the unlimited free option for new users. Those who had already signed up for the free membership before it was removed will continue to have access to it. New users now have two paid tiers to choose from, priced at $12.99 a month or $24 a month, with the option of a seven-day free trial.
The decision to discontinue the unlimited free tier reflects Peloton’s shift in focus from hardware sales to its digital app. With declining sales, the company aimed to capture new customers who may not be willing to invest in expensive equipment but are interested in the brand. McCarthy, a former executive at Netflix and Spotify, believed that offering a free tier would allow users to experience Peloton’s content and eventually upgrade to a paid membership.
However, it became apparent that the free tier was not driving the desired conversion rate. Peloton’s finance chief, Liz Coddington, revealed that the free tier was actually cannibalizing efforts to convert free-trial members into paid subscribers. This realization led the company to shift its strategy towards a free-trial model.
Despite the setback, Peloton remains committed to its app strategy. Coddington emphasized that the app is still a work in progress and that there are opportunities for improvement. The company aims to better engage users during the trial period, increase conversion rates, and improve retention. By doing so, Peloton expects to see improved marketing efficiency.
The discontinuation of the unlimited free membership tier has had a negative impact on Peloton’s stock performance. Shares of the company have fallen over 45% this year, and its market cap has significantly decreased. However, Peloton believes that its app strategy is still an important part of its business and remains confident in its future prospects.
In conclusion, Peloton’s decision to discontinue its unlimited free-membership tier on its fitness app reflects its struggle to convert users into paid subscribers. Despite the setback, the company remains committed to its app strategy and is focused on improving user engagement and conversion rates. While Peloton’s stock has experienced a decline, it believes in the long-term potential of its digital app.
