‘Peloton doesn’t offer discounts’

One of the challenges of running a business is seeing a business from the customer’s perspective. Internally your worldview is all website updates and payment processing, employees and benefits, and hiring and HR. Externally the customer wonders: does this do what I want?

Enter jobs-to-be-done.

Job-father Bob Moesta joined Customer Camp to conduct a mock-interview with Amanda about her Peloton purchase. It’s really good. You don’t even need to conduct ‘JOBS’ interviews to get something good from watching. For instance, framing.

Amanda wanted a Peloton. After getting and liking an Oura ring, and hearing her friends talk about Peloton she wanted one. It was better than a treadmill—if she wanted to run she could just run outside. So, Amanda and her husband watched for a Black Friday deal. None came.

A holiday deal? Nope. Is there any discount? No. There’s not really a Peloton discount, and Amanda was hearing about shipping delays (thanks Covid). So Amanda and her husband ordered one, financed with Affirm.

“Finance a stationary bike?!?!?” – Boomer

Well not really, it’s a 0% loan. It’s basically a payment plan. Actually Amanda notes, it’s like a gym membership.

Now here’s the magic trick business model: Peloton pays Affirm a commission for each bike sold and financed. 50M$ in Q3 2020. Peloton doesn’t offer discounts but it does offer 0% financing. And that’s the magic.

This, as regular readers know, is Alchemy. The financial picture is the same for Peloton: they have a retail cost and accept less than that to sell more units. The question is how much less and to who? Having Affirm be the who and the amount be vague creates value. Buyers hold Peloton in higher esteem and it just feels good to finance something at 0%. As one friend told me “it’s free money.”

To the accounting office it’s the same. To the market it’s different.

The JTBD of WINE

A group of investment bankers sat down. It was going to be a good night for Danny Meyer. That was good, it was three-months into his first restaurant.

The man at the head of the table asked for a chardonnay. Meyer delighted. He’d just got in a premier cru Rousseau. It was $45 a bottle. In 2015, Meyer joked, that might buy you half a glass.

Meyer walked out and proudly presented the wine.

“That’s not a chardonnay,” the big banker said.

“What I needed to have done at that very moment, which I trust I’ve done since. When he said, ‘This is not a chardonnay’, I should have said, ‘It sounds like you want a California chardonnay.'”

Danny Meyer, YouTube 2015

Instead, Meyer argued that it was. It went back and forth and the banker brought in the table, each member of which nodded in agreement that it was indeed not a chardonnay.

It was probably less than a minute. Meyer retreated and returned with a cheaper wine from California and that’s the story behind his most important lesson, the irrelevancy of being right.

Wine is odd. People buy wine for all kinds of reasons. The Barefoot founders figured out one way. But there always is a reason. That’s the lesson Danny learned. It’s their reason.

Part of the wine boom from 1980 onward was because wine was presented as doing one job: conveyed in an inaccessible language. Robert Modavi first communicated differently. The Barefoot founders did too. They found out there were other ‘jobs’ of wine.

When I delivered newspapers as a kid I loved the Best Buy ads where I could compare MB and GB and RAM on every new Dell, Compaq, and Gateway computer. But what really mattered was the job: will this play Warcraft II?

Apple figured this out.

Meyer figured this out.

This trips up operators all the time because it’s economic to use shorthand. But shorthand cuts out the magic, the feeling, the job—which is the soul of what a customer hires a product. Don’t be right, do your job.