The word peloton means "the main group of cyclists in a race." But Peloton means something different to the million or so fanatics in the United States who have paid up to $2,500 for an internetconnected indoor exercise bike and who pay $39 a month to stream live and on-demand classes from Peloton's New York City studio to the tablet connected to the bike. Riders can select their favorite instructor, class length, class type, and even music genre, and they can follow and compete with others. They can also access tons of recorded content. Peloton's success comes from being more than an exercise bike, studio, or cycling class- it is an experience that has created a cultlike following among its subscribers. Peloton's closed Facebook group boasts more than 429,000 members. Peloton offers its bikes and associated services in Canada, the United Kingdom, and Germany. Peloton is continuing its global expansion in Australia, with plans to expand into one or two markets a year. Its plans for Australia include physical showrooms in cities such as Sydney and Melbourne. Peloton bikes will be priced at its cost, $2,895 Australian dollars (AUD), including tax, and the all-access membership to content, where users can create accounts for the entire household, will be $59 AUD per month.

How many bikes must Peloton sell to break even on the Australian expansion if total fixed costs are $45 AUD million per year, variable costs are $2,895 AUD per bike (again, Peloton sells them at cost), and monthly service variable costs are $10 AUD? Assume that a consumer purchasing a bike at the price of $2,895 AUD will also subscribe to 12 months of the streaming service at $59 AUD per month. Refer to Break-Even and Margin Analysis in Appendix 3: Marketing by the Numbers to learn how to perform this analysis.

Data from Appendix 3

The previous analyses derived a value-based price of $171 for Wise Domotics's product. Although this price is higher than the break-even price of $152 and covers costs, that price assumed a demand of 1.5 million units. But how many units and what level of dollar sales must Wise Domotics achieve to break even at the $171 price? And what level of sales must be achieved to realize various profit goals? These questions can be answered through break-even and margin analysis.