Customer Segmentation – Soulcycle and Peloton

For a long time I have been a fitness fan. I ride everyday my trusted $270 Schwinn stationary bike that I bought more than four years ago.  Recently I was exposed to the branded cycling classes that people swear by.  My initial reaction was disbelief – Why do I need an instructor for stationary bike?  But I started trying out the classes at local Y (which is free with membership) and find it surprisingly interesting to do it at least once a week.

I am mostly a utilitarian buyer so my opinions on product recommendations don’t count. There are scores of others who are not satisfied with a stationary bike at home or the free classes. They are willing to pay $35 per class. Case in point is Soulcycle which offers these classes and made $112 million in annual revenue.  Soulcycle has cycling studios  that have well maintained quality bikes that you can reserve ahead of time.  Clearly a far better product than the rickety old bikes at Y that you fight for with 30 others.

A premium product that offers some utilitarian reasons. But the social aspect of being in the class serve as hedonistic and conspicuous reasons that gets customers to pay a hefty premium. If you are a big fan you will point out how the Soulcycle class is far more advanced that Y and the instructors are far better trained and way cooler than Y instructors. I will have to dismiss them as your post purchase rationalizations since we have not done a controlled test on results.

A variation of Soulcycle model is Peloton cycles. Instead of going to a class you buy their bike for your home and subscribe to instructor led programs that you can stream on-demand. It offers convenience (being able to do when you want it), choice of your instructor (pick any program you want from the menu) and multiple users (all the people in your house can do it). Only thing you don’t get is to be in the class and be seen – no conspicuous consumption. These benefits come for a premium price. You pay $2000 for their bike, $250 for delivery and setup and a monthly subscription fee of $39.  Peloton reported $50 million in revenue with 10,000 cycles in the market.

So you saw here four different products

1. Simple stationary bike at home, price sub $300
2. Group cycling class that is free with membership at Y
3. Premium “Spinning” class at Soulcycle for $35 per class. Offers  Social aspects,  Pay-as-you-go with no commitments, trained instructors and well crafted programs.
4. Premium at home cycle and on-demand class for $2250 upfront cost and $39 a month subscription cost. Offers convenience, on-demand well crafted programs, and multiple users.

The first two are not that interesting. Between the two premium products can we tell who is the customer, and how they differ in the job they are hiring the product for?

I hypothesize this (hypotheses and not claims, so add most likely to each statement):

Soul cycle customers are unmarried, live by themselves, have lower disposable income to splurge (can’t afford $2250) but have small amounts of discretionary fun budget. They also live in cities vs. suburbia with limited space. They hire the product for more social benefits than utilitarian.

Peloton customers are married or live with a partner, have much higher disposable income so they can afford the upfront cost, live in cities or suburbia but have spacious living quarters. Significant portion of them are also parents who value the convenience. They hire the product for more utilitarian benefits than social benefits.

I cannot afford to do an extensive marketing research to these these hypotheses. So I did the easiest thing that will serve as proxy – looking at their twitter followers. The obvious caveats are – the customer base and twitter followers are likely not the same and we cannot measure income status from twitter. Caveats be damned and let us make some bold conclusions.

Soul cycle clearly has a lead in its follower count, 45,000 to 4000 for Peloton with about 670 common followers.

Here are the word clouds of the respective followers’ twitter bios from Followerwonk.

Soulcycle Followers Bio

Peloton followers Bio

Looking at the frequency of phrases I believe at least two of the hypotheses above are validated.

1. See the prominence of Fitness (mostly a utilitarian reason) for Peloton vs love for Soulcycle.
2. See words Fashion, Music and Food are prominent in Soulcycle and barely present in Peloton (hedonistic buyers). This should be concern for Soulcycle as these are its competition and not Y, Peloton or other spinning classes.
3. See that the word Girl is absent in Peloton
4. See  that Husband and Father are more prominent for Peloton with no presence in Soulcycle.

I am declaring here my customer segmentation hypotheses are validated.

If twitter is looking for revenue source to its customers – brands with Ad spend – this is a big avenue without turning away the users.