As Patrick puts it,
"The willingness to pay is about the same for unlimited, and SoulCycle customers are paying so much more for the experience."
SoulCycle started in 2006 as an alternative to “fitness routines that felt like work.” There are now 80 SoulCycle studios scattered throughout the U.S. and Canada. A SoulCycle subscription requires less commitment than a traditional gym membership. Classes are purchased individually or in bundles, making it easy to work out ad hoc. Bundles offer a slight, but not very significant, discount to the base price of $30–$34 per class (the 30-class pack comes out to about $28 per class). All classes and packages have an expiration date, so customers are faced with a “use it or lose it” deal.
SoulCycle has executed an extremely successful branding strategy that includes wholesome taglines, such as “Find your soul”; uplifting yellow branding; trendy workout apparel; and a robust social media presence. On Instagram, #soulcycle has 316K posts, #findyourSOUL has 36K, and #soulstyle has 26K. Its community-building efforts have paid off: SoulCycle has been called a “cult” by the likes of Harvard, and the did a story about “crazy front-row [people]” who book spin spots like groupies buy concert tickets.
While overall price sensitivity is about the same for Peloton and SoulCycle customers, SoulCycle is able to capture die-hard spinners with deep pockets at a high price point. Our survey showed that SoulCycle customers who spin every day of the week are willing to pay the studio up to $300 per week.
The differentiating factor for SoulCycle is the in-studio, in-crowd experience. SoulCycle customers value the camaraderie and competition that come from proximity to a couple of dozen other exercisers, and the up-close-and-personal motivation from instructors. Customers get to be part of an “in” group that has its own lingo, like “tapping it back.” They leave their phones and cares at the door to enter a dark, candlelit room for 45 minutes.
Though poised to IPO, SoulCycle could face some problems with its business model in the future, especially as Peloton picks up speed. For one, it's simply too expensive, especially when you compare the price of $34 per class to Peloton's $39 per month of unlimited classes.
Secondly, it will become harder and harder for SoulCycle to secure recurring subscribers. Customers who want variety in their workouts may find themselves drifting toward other boutique fitness options in the $40 range, from treadmill runs, to prison-style workouts, to boxing, to bootcamps. True commitment-phobes may choose ClassPass, which has plans that start at $45 per month.
Lastly, it will be tough to draw increasingly connected customers to a brick-and-mortar experience. As fitness hardware and software improve, people will begin to expect workouts that are more personalized and flexible. If SoulCycle fails to keep up with these demands, they may lose their elite customer base.
Peloton Cracks the Code on Hardware-to-Subscription
When it arrived on the spin scene in 2012, Peloton presented a novel business model: Customers pay $2K for a stationary bike upfront and then follow up with a $39 monthly subscription for unlimited virtual classes. Classes are streamed via a screen attached to the bike, and the monthly cost applies per bike, not per rider, so an entire household can use it.