Peloton’s Predicament: What To Do When Demand Outstrips Supply

Peloton is facing a serious customer experience challenge. Will they stumble across the finish line, or cross it to cheers?


 

Many Peloton customers are exhausted – not by their workouts on the company’s exercise bikes, but by the seemingly endless wait for the fitness equipment they’ve purchased.

Peloton’s pricey bikes and treadmills have been in high demand since the pandemic closed down gyms and fitness centers, leaving consumers to look for home-based exercise alternatives.  The company’s stock is up over 400% since lockdowns began in the United States.

For many businesses navigating the pandemic, the mantra has been that “with every crisis comes opportunity.”  In Peloton’s case, it’s the opportunity that has created the crisis.  With Covid-19 lockdowns substantially increasing demand for its products, Peloton has struggled to keep up with orders (something that CEO John Foley acknowledged in his Thanksgiving message to customers).

According to The New York Times, Peloton customers are being given delivery timeframes up to ten weeks out from their purchase dates.  And, as delivery day approaches (or even arrives), some customers get messages from Peloton indicating that their equipment won’t arrive when promised.  Even worse, some of them are already paying for the exercise equipment they don’t have (a consequence of the terms set by Peloton’s financing partner, which requires that payments begin immediately upon purchase, and continue even if product delivery is delayed).

Peloton’s predicament might seem a lot more appealing than the converse problem – having a lot of product supply but no customer demand.  In truth, however, an inability to reliably deliver on customer orders creates serious reputational risk for a business.  It’s a risk with which Peloton has become all too familiar, as customers take to social media to express their dissatisfaction and, in some cases, even cancel their orders and defect to competitors.

There are a whole host of proactive ways that companies can protect themselves from a situation like this – better demand forecasting capabilities and supply chain management/diversification, among them.  But when you do find yourself backed into a corner due to a supply/demand mismatch, here are a few ways to mitigate the impact and preserve some semblance of an acceptable customer experience:

  • Set clear expectations.  Ambiguity is the enemy.  If there’s one thing customers hate more than an excessive wait for a product, it’s an excessive wait of unknown or variable duration.  Be specific, but conservative, in articulating delivery time estimates – because the moment you miss a promised date, customers are going to become a lot less forgiving.
  • Keep the customer informed.  Even with the benefit of clear expectation-setting, there’s still an opportunity for unpleasant ambiguity to creep into the customer’s head (particularly if they’ve heard about ongoing delivery issues, as was the case with many Peloton customers).  If you’ve got high confidence that everything is on track for a promised delivery, use interim updates to provide reassurance to the waiting customer.  And if a delivery date is going to be missed, get out in front of it by communicating as early as possible (no last-minute surprises).
  • Be mindful of the money.  Customer inconvenience caused by a delayed product delivery is bad enough.  The situation gets much worse, however, when the impact is financial.  That creates a perception of unfairness from which it is difficult to recover (as was the case with Peloton customers who financed their purchase and are paying monthly for equipment they don’t even possess).  Be sensitive to the financial ramifications of delivery delays and adjust procedures accordingly (e.g., delayed payment terms).
  • Overcorrect on the recovery.  If product delays are severe enough, consider ways to soften the blow by delivering an unexpected surprise to the aggrieved customer.  In Peloton’s case, for example, the company could offer affected customers a complimentary Peloton membership, giving them free access (for a period of time) to live and on-demand exercise classes.  Sure, there’s a cost to that.  However, if it helps shift the consumer narrative in the market from “I can’t believe how badly Peloton screwed up my delivery” to “Wow, it was nice of Peloton to gift me a membership in light of the product delay” – then it’s probably money well spent.
  • Dial back business development efforts.  Even as delivery delays grew over the summer, Peloton continued to advertise its products and accept additional orders.  The company got wiser around Thanksgiving time, electing to not offer its usual product promotions on Black Friday and Cyber Monday.  When order backlogs get bad enough, it’s worth considering how business development efforts could be paused or scaled back in order to avoid exacerbating an already ugly situation.  No company likes to ignore consumer demand and forgo potential sales, but in challenging circumstances, that may be the best decision for the long-term health of the business.

When your business has the (seemingly) enviable problem of not being able to keep up with consumer demand, don’t resign yourself to creating dissatisfied customers.  The fact is, how you respond to those tough circumstances – how you engineer the experience for customers affected by delays – can make a world of difference in how your brand weathers the storm.

[A version of this article originally appeared on Forbes.com.]

 

Jon Picoult is the founder of customer experience advisory firm Watermark Consulting.  As a consultant and a speaker, he’s worked with the CEOs and executive teams of some of the world’s top brands.  Follow Jon on Twitter or Subscribe to his monthly eNewsletter.

 

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