Peloton recently made a significant move by removing its unlimited free-membership tier from its fitness app less than a year after its launch. This decision was made due to the failure of converting free users into paid subscribers, according to the company. The free option for new users, which was once a crucial part of Peloton’s growth strategy, was eliminated in the past few weeks. With this change, new users now only have access to two paid tiers priced at $12.99 per month or $24 per month, along with a seven-day free trial option.
Last May, Peloton underwent a rebranding effort positioning itself as a fitness company for all, with an emphasis on its digital app. CEO Barry McCarthy aimed to shift the company’s focus from its hardware to its app, in hopes of attracting new customers who might not be willing to invest in the equipment. The rebrand introduced a tiered app strategy including the unlimited free-membership tier as well as two other paid levels with different content offerings. McCarthy, a former Netflix and Spotify executive, had long advocated for a free tier on the app, believing that it would lead to higher conversion rates to paid memberships.
Despite McCarthy’s optimism about the free tier, Peloton’s experiment did not yield the desired results. The company fell short in engaging and retaining free users and converting them into paying subscribers. In a statement to investors, McCarthy acknowledged that the relaunch was not as successful as anticipated. Consequently, the unlimited free tier was discontinued shortly after. During a conference in March, Peloton’s finance chief Liz Coddington mentioned that the free tier was actually hindering efforts to convert free-trial members into paid subscribers. This realization prompted Peloton to transition to a free-trial model to increase conversion rates.
Coddington emphasized that Peloton’s app is a continuous work in progress and there are ample opportunities for improvement. The company aims to enhance user engagement during the trial period, increase conversion rates to paid subscriptions, and improve long-term user retention. By achieving these objectives, Peloton anticipates an enhancement in marketing efficiency through better retention and conversion rates. The ultimate goal is to ensure a higher rate of retention and conversion among app subscribers to drive business growth.
As Peloton navigates through these strategic shifts, it faces challenges in maintaining its subscriber base and driving revenue growth. The company must learn from its past mistakes and adapt its approach to better meet the needs and expectations of its user base. By focusing on enhancing the user experience, improving retention rates, and strengthening its app offerings, Peloton can position itself for success in the competitive fitness industry. Only time will tell if Peloton can overcome the setback of discontinuing its unlimited free-membership tier and emerge stronger and more resilient in the market.