The case study titled **"SoulCycle: You Say ‘Cult.’ I Say ‘Loyal Customer Base.

’"** focuses on the rise

of SoulCycle, a boutique indoor cycling chain known for its loyal following and profitable business
model. Here's an in-depth analysis and explanation of the case study in detail:

### **1. Introduction to SoulCycle's Success**

SoulCycle’s financial performance has surprised many. Unlike many companies preparing for an IPO
that report rapid growth but little profit, SoulCycle entered the market with strong financials. In
2014, it reported $25 million in profit on $112 million in revenue, giving it an impressive profit
margin of 23%. This financial stability positioned it well for an initial public offering (IPO), setting it
apart from companies like Twitter, which had not yet turned a profit before its IPO.

SoulCycle operates 47 studios across seven states and the District of Columbia, and it charges high
prices for its classes—up to $35 per session in Manhattan, with additional fees for shoes required to
use the bikes. Despite these high costs, the company averages around $1,153 in participant fees per
class, indicating that its pricing model works well, even though it may seem high for a fitness service.

### **2. The Economics Behind SoulCycle’s Profitability**

SoulCycle’s impressive profit margins raise the question: Why hasn’t competition driven down its
prices? Typically, when a company demonstrates high profitability in an industry with low barriers to
entry, competitors enter the market and reduce profit margins through price competition. Full-line
gyms, for example, offer cycling classes to members for no additional charge.

However, SoulCycle differentiates itself from these alternatives by providing a more immersive,
personalized experience. It combines mood lighting, curated playlists, choreographed movements,
and motivational instructors to create a unique workout environment. While competitors can try
to replicate these features, it’s not easy to duplicate SoulCycle's strong brand and cult-like following.

### **3. The Cult-like Following of SoulCycle**

Much of SoulCycle's success comes from the loyalty and devotion of its customer base. The
experience it offers goes beyond just a workout; it positions itself as a lifestyle brand, promoting
personal growth, wellness, and community. Many of its customers feel a sense of psychological
and emotional attachment to the brand, describing their experiences with terms like “personal
growth,” “therapeutic progress,” and “clearing the mind.”
One user, Ben Dreyfuss, mentioned that SoulCycle combines the calming aspects of yoga with the
teamwork mentality of group sports, creating a powerful and addictive experience. Others echoed
similar sentiments, with some even describing the experience as “strangely sexual,” indicating the
deep psychological and emotional connection that SoulCycle fosters.

These testimonies underscore why SoulCycle's business model might not be easy to replicate. It’s
not just the candles, music, or instructors that set it apart—it's the holistic experience that
convinces customers they are on a journey of personal transformation. This brand loyalty is akin to
that seen in cult-like followings, which is why some detractors describe SoulCycle as a “cult.”
However, from a business perspective, such a dedicated customer base is an enormous asset.

### **4. Sustainable Competitive Advantages**

According to Harvard Business School strategy professor Jan Rivkin, sustainable competitive
advantages come in three main forms:

- **Unique resources**: A resource that competitors cannot access, such as a patent or a secret
formula.

- **Positive feedback loops**: A situation where a company’s leading market position helps it
strengthen that position further. For example, Walmart’s dominance allows it to negotiate lower
prices with suppliers, creating more value for customers and further reinforcing its leadership.

- **Complex business models**: These models are difficult for competitors to replicate because
they involve more than just one key element. Rivkin cites Southwest Airlines as an example, where
imitators have struggled to replicate its no-frills, low-cost model.

SoulCycle seems to fall into the third category. While competitors can copy some of its features,
such as mood lighting or curated playlists, they struggle to replicate the brand’s holistic and
emotionally engaging experience. Rivkin warns that the fitness industry is highly competitive, and
companies like Bally Total Fitness, which went bankrupt twice, serve as a reminder that even
successful companies must maintain a truly unique offering to avoid being overtaken by
competitors.

### **5. Competition in the Boutique Fitness Market**

SoulCycle has inspired several competitors, such as Peloton and Flywheel. These companies offer
similarly upscale cycling experiences but have taken different approaches. For example, Flywheel
introduces a competitive element with its "Torqboard," which displays riders' performance in real
time, allowing users to compare their efforts against others. However, SoulCycle takes a different
approach, focusing on self-improvement and personal growth rather than competition.
This distinction is important. SoulCycle's customers are drawn to the brand for its emphasis on
inner transformation rather than external comparisons. Katherine Petti, a lawyer who attends
SoulCycle regularly, expressed that she prefers SoulCycle because it focuses on self-improvement
rather than competition, which aligns with her personal fitness goals.

### **6. Cult vs. Brand Loyalty**

One of the most striking aspects of the case study is the discussion around SoulCycle’s following.
Detractors may refer to it as a “cult,” but from a business perspective, this kind of customer
loyalty represents a powerful competitive advantage. Cult-like brands, such as Apple and Harley-
Davidson, have shown that deeply loyal customer bases can drive long-term success and
profitability. For SoulCycle, this means that its customers are not just paying for a cycling class—
they are paying for an experience that they feel is integral to their personal identity and growth.

### **7. The Challenges of Replication**

The case study suggests that while some competitors may try to replicate SoulCycle’s model, it won’t
be easy. The brand’s unique combination of fitness, personal development, and community
creates a deep emotional bond with its customers, one that is not easily duplicated by just adding
candles or a custom playlist. Furthermore, SoulCycle's emphasis on inclusivity and self-
improvement rather than competition gives it an edge over competitors that might focus more on
performance metrics.

### **8. SoulCycle’s IPO and Future Prospects**

SoulCycle’s financial success and its devoted customer base have made it an attractive option for
investors as it prepares for its IPO. However, the company must continue to differentiate itself in the
increasingly crowded boutique fitness market. The loyalty of its customer base and the unique
experience it offers give it a competitive advantage, but maintaining that advantage will require
continued innovation and investment in the customer experience.

The case study suggests that SoulCycle's greatest strength—its ability to foster a deep, emotional
connection with customers—could also be a challenge as it scales. As the company expands to new
markets, it will need to ensure that it can replicate the same intimate, community-driven experience
that has made it so successful in its existing studios.

### **Conclusion**
The SoulCycle case study highlights the power of brand loyalty in driving profitability and growth,
especially in a highly competitive industry like fitness. By positioning itself as more than just a
workout, SoulCycle has built a strong emotional bond with its customers, who see their
participation as a path to self-improvement and personal growth. This deep connection gives the
company a significant competitive advantage that is not easily replicable by competitors.

As SoulCycle moves forward with its IPO, it will need to focus on maintaining its unique value
proposition while scaling its business. If it can continue to foster the same level of loyalty and
emotional engagement in new markets, SoulCycle is well-positioned for long-term success.

---

This detailed breakdown explores how SoulCycle has created a highly profitable business model by
cultivating an intensely loyal customer base, positioning itself as a lifestyle brand, and offering a
unique, transformative experience that competitors struggle to replicate.

### **1. What makes SoulCycle financially successful compared to other companies preparing for an
IPO?**

**Answer:**

Unlike many companies that experience rapid growth but struggle with profitability before going
public, SoulCycle has already established a profitable business model. In 2014, the company
reported $25 million in profit on $112 million in revenue, yielding a 23% profit margin. Its revenue
model, based on premium pricing for boutique indoor cycling classes, is both scalable and
profitable, which differentiates it from many companies that are still in the growth phase without
solid earnings.

---

### **2. How does SoulCycle generate revenue, and why are its profit margins so high?**
**Answer:**

SoulCycle charges a premium price for its classes, up to $35 per session in Manhattan, plus $3 for
shoe rentals. On average, the company generates around $1,153 in participant fees per class,
despite charging lower prices in locations outside New York City. A single sold-out class in a 60-
bike studio can gross about $2,000, and the company can offer up to nine classes per day in one
studio. These high prices, combined with the brand’s premium positioning, contribute to its
impressive profit margins.

---

### **3. What factors differentiate SoulCycle from free cycling classes offered by traditional gyms?
**

**Answer:**

SoulCycle sets itself apart from traditional gyms through a unique, immersive experience. It
combines mood lighting, choreographed movements, curated playlists, and highly charismatic
instructors who focus on personal growth and self-improvement. Unlike gym cycling classes, which
are often free for members, SoulCycle markets itself as a lifestyle brand that goes beyond physical
exercise, offering an emotional and transformative experience.

---

### **4. Why do some people refer to SoulCycle as a “cult,” and how does this help the company?**

**Answer:**

Critics sometimes call SoulCycle a “cult” due to the intense loyalty and emotional attachment its
customers have to the brand. However, this so-called cult-like following actually represents a
significant competitive advantage for SoulCycle. Its customers are not just paying for a workout;
they are paying for a personal growth experience, which fosters deep customer loyalty. This
loyalty allows SoulCycle to maintain its premium pricing and defend itself from competition.

---

### **5. What are the three types of sustainable competitive advantages described by Harvard
Business School professor Jan Rivkin, and how does SoulCycle fit into these categories?**
**Answer:**

According to Jan Rivkin, businesses can achieve sustainable competitive advantages through:

- **Unique resources**: Owning a resource that competitors cannot access, like a patent or secret
formula.

- **Positive feedback loops**: A situation where the company’s leading market position reinforces
its advantage, like Walmart’s ability to negotiate lower prices with suppliers.

- **Complex business models**: A business model that is difficult for competitors to replicate in
full.

SoulCycle likely fits into the third category—a complex business model. While competitors can
imitate some of its features, such as mood lighting or curated playlists, they struggle to replicate
the entire experience SoulCycle offers, which includes emotional engagement, community
building, and a strong focus on personal growth.

---

### **6. How does SoulCycle build an emotional connection with its customers?**

**Answer:**+

SoulCycle creates an environment where customers feel that they are not just working out but
undergoing personal transformation. Its classes are designed to be emotionally and mentally
engaging, with instructors promoting messages of self-improvement, personal growth, and mental
clarity. Many customers view their participation as more than physical exercise, describing it as a
way to clear their minds, de-stress, and achieve inner peace.

---

### **7. How do competitors like Peloton and Flywheel differ from SoulCycle, and why hasn’t this
competition significantly hurt SoulCycle’s business?**

**Answer:**

While competitors like Peloton and Flywheel offer similar upscale indoor cycling experiences, they
emphasize different aspects of fitness. For instance, Flywheel uses performance-tracking technology
like the "Torqboard," which encourages competition among riders by showing how hard each
participant is working. In contrast, SoulCycle focuses on personal improvement rather than external
competition. This differentiation has allowed SoulCycle to retain its customer base, as many of its
clients prefer the emphasis on self-improvement rather than competing with others.
---

### **8. What challenges does SoulCycle face in maintaining its competitive advantage as it scales?
**

**Answer:**

As SoulCycle expands into new markets, it faces the challenge of maintaining the same intimate,
community-driven experience that has made it successful in its current locations. The deeply
emotional connection and sense of personal growth that its loyal customers enjoy may be difficult to
replicate on a larger scale. Additionally, as more competitors enter the boutique fitness market,
SoulCycle will need to continue innovating to maintain its unique brand identity and customer
loyalty.

---

### **9. What is the significance of customer loyalty in SoulCycle's business model, and how does it
contribute to long-term success?**

**Answer:**

Customer loyalty is the cornerstone of SoulCycle's business model. The company has cultivated a
strong following of devoted customers who view their participation as more than just a fitness
class—they see it as a personal and emotional journey. This deep customer loyalty enables
SoulCycle to charge premium prices and ensures repeat business. Loyal customers are less likely to
switch to competitors, even if they offer lower prices, because they are emotionally invested in
the brand and the experience it provides.

---

### **10. How does SoulCycle’s focus on inclusivity and personal growth contribute to its brand
identity?**

**Answer:**

SoulCycle promotes itself as a place where people of all ages, sizes, shapes, and fitness levels can
come to "connect with their best selves." This message of inclusivity and self-improvement
resonates with its diverse customer base, reinforcing the brand's identity as a welcoming and
empowering space. By focusing on personal growth rather than competition, SoulCycle creates an
environment where customers feel valued and supported, which strengthens their emotional
connection to the brand.

---

These questions and answers cover the key elements of the case study, including SoulCycle's
business model, competitive advantages, customer loyalty, and future challenges. They provide
insight into why the company has been so successful and what it must do to maintain its competitive
edge in the boutique fitness industry.