Peloton's Bumpy Ride is a Reminder that Employee Satisfaction can be a Canary in the Coal Mine for Company Performance

With a share price that has fallen 72% in the past six months, public markets have spoken and Peloton’s reckoning was swift and brutal. And recently over the past few weeks, the company laid off 20% of its workforce, appointed a new CEO, and temporarily paused production of its flagship product in an effort to cull ballooning costs. Now rumors of a buyout are swirling around Wall Street while Zwift and other competitors take aim at the company’s market share. It’s a surprising reversal of fortune for a brand that was heralded as the future of fitness only a year ago. For investors, customers, and other connected fitness brands, the story of Peloton raises an important and challenging question: Was the company’s fate inevitable?

To get to the bottom of this mystery, we’ll have to turn back the clock and take a hard look at the data.

Happy Customers and Downtrodden Employees Don’t Mix

At this time last year, BlueOcean’s brand sentiment algorithms found that the morale of Peloton employees was near an all-time high. Over the past three months, however, we witnessed a? precipitous decline falling substantially below its competitors and driving its BlueOcean score for Employee Support Trend falling 28 points in the last 2 quarters. Given the large-scale layoffs and relentless negative press coverage, this decline in Peloton’s esprit de corps is not particularly surprising. Yet against this backdrop of low spirits inside the company, Peloton’s customer support actually increased. This disconnect between a broken company culture and satisfied customers isn’t sustainable — internal tensions eventually take their toll on a company’s performance.

A recent study by Glassdoor illustrates the correlation between customer and employee satisfaction across various sectors. Specifically, the data shows a strong, positive link between the two in high customer-contact industries such as retail, tourism and restaurants. In low customer-contact industries, such as tech or manufacturing, customer and employee satisfaction are not as closely linked. Although Peloton is a technology company, the brand built its appeal around content — which is expertly tied to its workers and, therefore, their contentment.

The lesson in this is that waning employee support can become an early indicator of longer-term issues, and so it’s one trend that every marketer should keep an eye on as part of its brand strategy.?

What We Talk About When We Talk About Sluggish Growth

Declining employee morale may account for some of Peloton’s struggle to juice its growth over the past year. We can clearly see this playing out in Peloton’s modest growth metrics compared to other connected fitness offerings. While Peloton may have dominated headlines throughout the pandemic, BlueOcean’s revenue data reveals that by March 2021, the company was already third to last in terms of its growth rate among comparable connected fitness companies like Tempo, FightCamp, and Echelon.

The Future of Peloton

To Peloton’s credit, it did attempt to address some of these issues but only those that impacted the customer, not its employees; it zigged when it should have zagged. Peloton’s best bet was a comprehensive internal brand-building strategy. Instead, the company devoted its energy and resources to appeasing shareholders and in doing so, lost sight of its biggest champions - its own employee base.?

Do these mistakes spell the end of Peloton? It’s doubtful. If the rapid growth in the connected fitness space is a secular trend rather than a pandemic bubble, Peloton is well-positioned to thrive in the coming years. It’s not hard to imagine a scenario where Peloton forms a strategic partnership with — or is acquired by — companies like Nike, which has long established itself as a brand that knows how to make luxury items accessible to everyone. Or perhaps Peloton will decide to go it alone.

The bigger lesson for Peloton and any company is the importance of using data to thoroughly understand your brand, employees, and customers — and how deeply interwoven they are. By prioritizing brand as a commercial strategy both inside and outside of an organization, companies can potentially avoid many of Peloton’s miscalculations and set themselves up for a bright future.