Peloton Interactive (NASDAQ:PTON) impressed the market yesterday by crushing analyst expectations on earnings, and the connected fitness guru's new "better, best" product strategy aims to keep the momentum going.

Although its naming convention for its products could be initially confusing for consumers, hitting the mid-tier (better) and high-end (best) price points ought to be a viable growth strategy.

Man on stationary bike looking at fitness instructor on screen

Image source: Peloton Interactive.

The Goldilocks plan

The COVID-19 pandemic created a well of demand for at-home fitness equipment, but only so many consumers can pay $2,500 for a stationary bike and $4,300 for a treadmill. Peloton is now going slightly down-market to broaden its customer base.

The equipment Peloton rode to fame is its connected fitness Bike, but it has lowered the cost of it by $350 to widen its appeal, while introducing a new higher cost model called the Bike+. At the same time, it developed a cheaper treadmill called the Tread, while the original model was rebranded the Tread+.

It means all of Peloton's high-end equipment will have a plus sign and the more affordable models will carry the basic name.

Peloton estimates that there are 35 million treadmills in the U.S. today. But CEO John Foley told analysts the Tread lineup of products "represents an enormous growth opportunity for Peloton over the coming years, multiples of our Bike opportunity," some two to three times larger.

Peloton still needs to get through the supply chain disruption the pandemic created, which caused wait times on delivery to expand considerably and forced the company to issue substantial numbers of refunds to consumers -- so much so that it impacted guidance. Peloton says it doesn't foresee supply and demand reaching equilibrium again until at least the end of its fiscal second quarter.

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