Peloton vs Lego: A lesson in how to make smart marketing decisions

Or: what to do and not to do when making promises to your customers

I’ve written about tech-connected fitness brand Peloton and my concerns about the impact of their decisions on their reputaiton. Yet, for the luckless stationary cycle manufacturer, the disastrous news stories just seem to keep coming.

How is it that some brands seem to make all the right marketing decisions, while others seem to make questionable ones? 

A weak sales cycle

Earlier in May, Peloton reported a first quarter in which losses spiralled. New CEO Barry McCarthy (who took on the role after the previous incumbent, John Foley, was asked to step down) warned that “turnarounds are hard.” 

Pretty uninspiring stuff, isn’t it?  

The confidence that investors and customers must feel may only be compounded by McCarthy’s further comments relating to forthcoming price rises: would customers begin to cancel subscriptions? 

“We won’t know until we know,” he says. 

Hardly the words of a man with his finger on the pulse of customer mood, one might say. 

Built on strong foundations

Let’s set that against the golden-child of marketing, a brand with universal appeal that lives by its values: the ever-popular Lego.

I bloody love Lego.

The strength of Lego’s positioning, enduring innovation and self-set high standards have meant that although the brand’s core patents have long expired, the much-loved toy manufacturer seems never to miss a beat. Even with competitors now able to copy Lego’s central clutch mechanism, the brand continues to perform extremely strongly, experiencing huge growth in 2021.

Of course, Peloton also went through a phase of massive growth in recent years. The rise of home exercise during lockdown presaged an explosion in sales, bringing an increase in revenue of 172%. The enormous ramping-up in Peloton’s manufacture of bikes indicates that bosses expected the trend to continue – no matter what the outcome of the pandemic. 

It’s a decision that has left them with a vast overstock of hardware. McCarthy says it will sell “eventually” – which doesn’t sound particularly confident to me. 

Triumph, not disaster

Lego, on the other hand, take a totally different stance on their success. 

When operating profits rocketed by 32% YOY in 2021, the brand was able to read the market and analyse the reasons for their success.

According to LEGO Group CEO, Niels B. Christiansen these include “the benefits of strategic investments… to innovate our portfolio, expand and evolve our retail experiences and increase capacity within our global supply chain network” 

But for 2022, Lego is taking a more circumspect view. It predicts “growth rates to normalise” towards long-term single-digit growth.  We can expect that strategy will reflect this. 

Lego’s prudent approach, coupled with strategic investments, is far more likely to yield long-term benefits than the boom and bust model apparently favoured by Peloton, who, despite a large stockholding of unsold bikes, now aims to focus effort on its digital app as it aims to become a “global connected fitness platform.”

With equipment sales falling and prices about to rise for digital memberships, it is not unimaginable that Peloton may, before long, be bought by a well-known tech giant and rebranded into oblivion.

Onwards and upwards

Lego, meanwhile, is in a strong position to reinvest in its brand and its values.

The most recent product innovation comes in the form of a licensed deal with the Transformers franchise. The announcement has fans of both brands celebrating an affordable toy that will “actually transform” without a rebuild (or so says online tech mag The Verge). 

Collaborations like these can be developed further to boost Lego’s pulling power even higher.

In contrast, it is highly unlikely that a reputable brand will align with Peloton for an audience-boosting collaboration, as things stand today. 

Business integrity

Of course, innovation and collaboration are only a part of a good marketing strategy. The world is increasingly filled with conscious consumers who weigh up the CSR (Corporate Social Responsibility) and ESG (Environment, Sustainability and Governance) of the companies vying for their cash. 

Brands need not just to share their values but also actually deliver on the promises they make about the way they do business.

For Lego, this has meant leading the way among toy manufacturers by unveiling a prototype brick made from recycled plastics – with the aim of retailing these bricks by summer 2023. 5% of existing Lego bricks are already manufactured from a sugar-cane derived polymer.

Lego is already powered by 100% renewable energy. It delivered on that goal three years ahead of schedule.   It is not only in tune with the current generation of parent purchasers, but with the views of future customers – Gen-Z and Gen-A. These are the users who have recently loved Lego, or are stil, enjoying playing with Lego. In future, they will need to enjoy the purchase of Lego too.. 

In other words, if Lego continues to get things right, this audience will grow up to choose Lego for their own children in the coming decades. 

Now that’s a long-term nurture strategy.

Knowledge is power

If a brand has undertaken adequate research into its market – and for both Lego and Peloton, that includes existing customers – decisions can be made with some level of certainty. If not, brands are simply in the dark.

Failure to pay close attention to what your customers want means a brand that is unable to face the future with a clear strategy. And without a strategic approach, whether to success or a crisis, your business is like a ship without a hand on the tiller – it’s adrift and heading for disaster.

To sharpen your messaging, gain a clear direction in your strategy, and protect your reputation against the unexpected, get in touch. We’ll help you make smarter marketing decisions.