I’m a big believer that the surest way to damage a brand is by choosing profits over public safety — or at least making it seem that way. Earlier this month Peloton recalled the company’s popular Tread and Tread+ treadmills in a stunning reversal of public position. Peloton had appeared prepared for a long fight against the Consumer Product Safety Commission’s request for a voluntary recall after the Tread+ was tied to accidents where children and adults were pulled under the machine’s rotating track. One child died, and many others were injured.
While you likely have not sold a Peloton Tread+ as a promotional item, there is still an important takeaway in this story for you and your clients. Over the years, we’ve talked about the fact that a product failure is not a matter of if — it’s a matter of when it will happen to you. As suppliers and distributors, when protecting against a product failure instance, the real key is to have documented processes in place to identify the time and place of manufacture, the customers the failed product was shipped to, and a communication plan to both make them aware of the problem, as well as to get dangerous product out of the market.
Initial loss of brand goodwill can be turned into the credibility earned only by quickly taking responsibility. Peloton showed us a casebook study of what not to do in this case.
After Peloton initially rejected the CPSC’s request for a recall, the agency reacted by releasing a public warning notice in April telling consumers to immediately stop using the Tread+ treadmills. That warning even included a somewhat disturbing video of one small child being sucked under the Tread+ (fortunately he was not injured, but it’s obvious he could have been). At that point, Peloton had received some 72 reports of adults, children, pets and other objects being pulled under the back of the treadmill. Of the reported injuries to children, 29 included broken bones, cuts, and third-degree abrasions, and there was one tragic incident where a child died. The CPSC advisory to consumers was to stop using the product if there were either small children or pets at home.
Peloton responded to the actions of the CPSC by doubling down on its earlier position and issuing a statement calling the agency’s claims about the dangers of the Tread+ “inaccurate and misleading.” Peloton chief executive John Foley said the company had “no intention” of taking the treadmills off the market. The statement said there is "no reason to stop using the Tread+, as long as all warnings and safety instructions are followed." Peloton further accused the CPSC of unfairly characterizing the company's efforts to collaborate, saying: "Peloton knows that the Tread+ is safe for the home when used in accordance with warnings and safety instructions.”
The backlash against Peloton for appearing to not prioritize consumer safety was swift. Peloton once had an impressive Net Promoter Score of 94, which is high enough to indicate that many customers actually advocate for the product via word-of-mouth and earned media. An NPS in this range is a tremendous brand indicator of consumer and a significant business asset — and there is every chance this recall will impact that NPS.
Peloton’s stock price started spiraling down when word of its fight with the CPSC was first revealed in April, falling about seven percent. The stock fell another 14 percent on May 5th after Peloton changed course and announced a voluntary recall of 125,000 Tread+ treadmills. Peloton offered consumers full refunds or the option of keeping their treadmill, with Peloton offering to move the treadmill free of charge to a room where pets and children cannot access the treadmill. The company is also implementing updated software that will automatically lock the Tread+ after each use. While there’s no way to know how many owners will opt for a refund, the misstep could still cost Peloton hundreds of millions of dollars. The Tread+ (previously named the Peloton Tread) has been on the market since 2018 and today’s pricing for this upscale Peloton treadmill starts at $4,295. A smaller treadmill, also named the Peloton Tread, was scheduled to go on sale on May 27, 2021, with some 1,000 units already sold in the U.S. as part of a friends and family resale.
About 1,500 units of the Peloton Tread treadmills were sold in the U.S. and another 5,400 sold in Canada between November 2020 and March 2021. Those units are also being recalled due to an issue with the touch screen possibly detaching and falling, 18 of which reports have already been received. Like the Tread+ recall, consumers can either contact the company to return the Peloton Tread for a full refund, or work with the company on repair options.
The lasting damage to the Peloton brand because of this unforced and unfortunate business error is hard to judge. From Tylenol to Chipotle, other brands have recovered from being a consumer pariah to flourish once more. But the real key is to step up, claim responsibility with transparency, and communicate a solution. Are your suppliers ready to team up with you when their product fails? You should really know the answer to that question before you need it.
Jeff Jacobs has been an expert in building brands and brand stewardship for 40 years, working in commercial television, Hollywood film and home video, publishing, and promotional brand merchandise. He’s a staunch advocate of consumer product safety and has a deep passion and belief regarding the issues surrounding compliance and corporate social responsibility. He retired as executive director of Quality Certification Alliance, the only non-profit dedicated to helping suppliers provide safe and compliant promotional products. Before that, he was director of brand merchandise for Michelin. Connect with Jeff on Twitter, LinkedIn or Instagram, or read his latest musings on food, travel and social media on his personal blog jeffreypjacobs.com. Email firstname.lastname@example.org.