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Eharmony Final Case

Eharmony Final Case

eHarmony If you are single and looking for long-term love, eHarmony. com Inc. wants to find you the “perfect mate. ” With traditional values and modern matchmaking possibilities, eHarmony. com has taken the electronic dating scene by storm. eHarmony has united more than 10,000 couples in marriage in its short history and, during 2008, had more than seven million registered users. Background In 2000, eHarmony was founded by Dr. Neil Clark Warren an evangelical Christian who worked for 30 years as a psychologist specializing in counseling married couples.

He also authored two books, “Finding the Love of Your Life” and “Date…or Soul Mate? ”, the former selling over one million copies. After a successful career of counseling married couples and research into marital problems, he came to one solid conclusion. In his biography on eHarmony’s website he states, “In almost every case, these were two persons who should never have married each other! They really didn’t belong together. They thought they did, but they were not well matched”. From there, he identified 29 dimensions that he found were consistently present in successful marriages.

Dr. Warren found online dating as an opportunity to take his match making theories to a new level. eHarmony’s competitive advantage is that it established its credibility by using a scientifically developed questionnaire based on Dr. Warren’s 29 dimensions. The questionnaire does not just ask for personal hobbies and interests, to be superficially compared to other profiles, but measures the user by the measures that Dr. Warren developed. These metrics match people up by deeper criteria than simply their hobbies and interests. Harmony’s users are willing to pay a premium because of this credible method of match making. The website currently has 7 million registered members and acquires 15,000 new users a day. In the past year alone, eHarmony’s customer base has grown by 41%. When this figure is compared to Match. com, which only increased by 2%, eHarmony is seen as an increasingly threatening competitor. eHarmony – The Company The eHarmony concept was created in 1998 by Warren and Forgatch, to take Warren’s scientific approach to love and marriage to the masses.

Forgatch was eHarmony’s “idea” man and chief executive, while Warren used his three decades of clinical psychology to make the concept work. Everyone involved with eHarmony had high hopes about its science-meets-love matchmaking capabilities; yet to Warren finding a soul mate was more than a business proposition, it represented the single most important milestone in a person’s life. Finding a mate was tantamount to lifelong fulfillment and happiness—and he knew this firsthand, having been married for 40 years.

The eHarmony concept began with an in-depth 436-item personality profile (pared down to 258) covering 29 different “dimensions” of personality, such as character (curiosity, intellect, appearance), “emotional makeup” (anger, mood, and conflict issues), family values (background, education, spirituality), and traits (humor, sociability, ambition). Whereas some singles found the questionnaire tedious and exhausting, others applauded its thorough nature and found the results revealing and insightful.

This, too, was no accident; Warren and Forgatch figured that only those truly committed to finding an appropriate mate would complete the entire process. Once an interested person completed the questionnaire, eHarmony would search its database for matches, but only for individuals who met at least 25 out of the 29 compatibility areas. The results, according to the company’s web site, would be “matches unlike those on any other online dating service” and “scientifically evaluated to be uniquely compatible” with each prospective eHarmony member.

Once a match was found, however, love-seekers needed to officially become an eHarmony member by paying $59. 95 for a one-month trial membership, $39. 95 for three months, $29. 95 for six months, or $19. 95 for a year-long membership. eHarmony guaranteed at least one match per month (though there were often dozens), with the hope of falling in love for what Warren considered “the right reasons. ” The catch, however, was that only singles over the age of 21 and looking for a serious long-term relationship needed to apply; eHarmony was not for casual daters and routinely turned away up to 20 percent of its prospective clients. Harmony also turned away anyone who had been married more than three times, as well as those suffering from serious mental health problems such as depression (they were asked to take some time to heal before signing up for membership). Next came a four-step process for deciding which mate(s) truly met a member’s dating and relationship criteria, the possible exchange of photos, and eventually setting up an actual face-to-face meeting. The process apparently worked wonders for many lonely singles, as touted in numerous articles about eHarmony and popular print and broadcast advertising.

Warren, however, did not advocate a quick trip to the altar; he believed couples should continue to explore their relationship and not rush into marriage—taking up to two years before tying the proverbial knot. Industry Due to the popularity of the internet, the online dating industry has gradually become more saturated with the market predicted to make annual revenue of over $1. 8 Billion by the end of 2012. The industry is characterized by many niche agencies offering a focused and specific service, either by religion, region, age, or sexual preference.

The main business driver, pushing the market forwards can be attributed to sociable factors, such as the need to meet new people, communicate with both existing and new friends and ultimately find someone who would be a potential partner. Using Porters Five Forces to examine the attractiveness of the industry structure, first we should consider buyers power. In this case buyers (prospective daters) do have some power in that there are a plethora of other options online (from Match to free sites), as well as any number of venues in the real world.

However, since they are individual consumers, they do not have scale power and must accept prices. Further, there is an overall opinion that meeting the right person is very hard, and thus there is significant willingness to pay for a quality service. Second, looking at the competitiveness of rivals, it is clear that the industry is extremely competitive with companies like Match and Yahoo Personals who offer similar services, sometimes at a lower cost. The competition increases further when you factor in niche sites like JDate and GothScene.

The internet has created a very concentrated industry, a wide array of choice only separated by the click of a mouse. With low switching costs and a high threat of substitutes, both men and women are able to change sites when their current contracts expire, if their experience is not satisfactory. Third, exit barriers in this industry are low to nonexistent with sites opening and closing with little fanfare or notoriety. The primary competitive advantage in the online dating industry is product differentiation and brand identity. Harmony differentiates themself by catering to a demographic who are “serious about dating which may lead to marriage”. This is evidenced by the exhaustive 258 question survey each applicant completed and the selective acceptance policy (many applicants were rejected by eHarmony). Low exist barriers will ensure that eHarmony is continually evolving potential threats into areas of opportunity. They must recognize the need and the importance of constantly acting innovatively by developing a move-block-move strategy, ensuring that practices are unique as well as inimitable.

SWOT Analysis One of eHarmony’s main strengths is that it is a well-known brand. It is ranked as the number one online dating site on the internet. It has a lot of success stories, where some couples get married after meeting through eHarmony. Another strength that the company has is through the methods it uses to match people with each other. One of its best tools is the compatibility test it uses to match prospective partners. Thanks to this scientifically-based test, eHarmony has been able to successfully match many prospective partners based on compatibility.

One weakness that eHarmony has is that it charges too much on its subscription fees especially its monthly rate. This results in profit loss for eHarmony since its high subscription fees are driving some consumers away. Another weakness is its’ extreme selectivity. If they monetized half of the 20% rejected each year they would see a proportionate revenue increase. One opportunity that eHarmony has is that they can expand internationally. Since they are doing fairly well in the U. S. , they can use their resources to expand globally.

They may achieve scale and scope economies if the patented algorithm can be applied across different countries. The questionnaire would require tweaking to reflect local culture and preferences however. Finally, eHarmony faces stiff competition from other dating sites especially free ones. eHarmony needs to find more innovative ways to compete with these sites in order to sustain long term profitability. Key Success Factors * It is important that online dating agencies recognize the needs of customers looking for love and establish systems and processes to attract and retain these customers.

Using e-customer retention management strategies (E-CRM), companies can tailor their services to suit a specific demographic. E-CRM involves optimizing the customers experience and providing an integrated service. Processes relate to the customer acquisition, retention, loyalty and lifetime value management capabilities of an organization. This is essential as the number of alternatives for online dating services, are increasing. In order to do this, they need to gain a deeper understanding of their customer’s needs by developing a feedback loop.

This enables agencies to make improvements based on positive and/or negative comments. * eHarmony’s proprietary E-CRM strategy made its mark in the online dating landscape by establishing its brand as the site for the serious relationship seeker, particularly women. In some ways this is classic market segmentation – targeting your product, brand, and marketing to a particular market segment. However, to say that eHarmony had this explicit strategy as the result of an MBA-type marketing analysis is incorrect.

Dr. Neil Clark Warren believed that his years of research could be applied online to better matching people for successful marriages. His research pointed to the fact that some people just aren’t compatible for each other, and this is something that could be screened for with psychological testing. * The result was a dating site, that at the time, went against all the standard practices and conventional wisdom in the industry. eHarmony didn’t allow users to search and browse the database for potential mates.

Instead, eHarmony had users complete an exhaustive questionnaire and based on the results fed users an allotted amount of potential mates. This process made for a much better user experience for eHarmony’s target demographic in several ways; 1. Women didn’t feel like they were being judged mainly on their photograph and that potential suitors were being matched to them on criteria other than looks. 2. The entire eHarmony process is very time consuming. It takes 40+ minutes to fill-out the initial questionnaire, users must court potential mates through a series of essay questions, and users must review every potential mate.

By making the process so time consuming, eHarmony has the natural effect of weeding out non-serious users. This makes the product much better for the serious female relationship seeker who doesn’t have to spend as much time determining whether a male suitor is just seeking a casual relationship. 3. eHarmony did a good job of leveling the playing field for its users. On traditional dating sites, over 80% of e-mails go unanswered. This is due to what is called the “lightning rod” effect – a few attractive users getting the majority of inquiries. This leads to frustration for both parties.

Those sending the e-mails (mainly guys) never hear back after investing time to write, and those receiving either get too many inquiries or not enough inquiries. eHarmony forced users to consider and respond to a set of potential matches before providing that user with the next set of potential matches. eHarmony was the first site to moderate the flow of introductions between users, thereby leveling the playing field for all users. 4. The result of creating a product suited to women seeking marriage or serious relationships had two huge financial benefits for eHarmony.

One, they could charge much more and enjoy much better margins than competitors. Because the perception of finding a soul mate provides more value to the user than just finding a date, eHarmony was able to charge more ($60/month versus $20/month for other sites). Second, eHarmony was able to monetize women much more effectively than other sites. Many dating sites make most of their money on men. eHarmony makes more money on women – almost 60% of their paying users are women. For almost any other dating site the reverse is true. 5.

Finally, the perception of eHarmony (providing differentiation from other sites) worked with the woman target market. It produced a large number of success stories (marriages) for its users, which fueled the positive word of mouth amongst consumers. The company’s obsessive focus around its matching algorithms, and true desire to help its users find marriage, differentiated it from all other dating sites. There are a large number of extremely loyal former customers who believe that they never would have met their soul mate if it weren’t for eHarmony.

These very vocal customers are central to establishing the eHarmony brand and providing word of mouth and positive public relations. Strategy * Online dating services use the Internet as a platform to bring together buyers and sellers. They do not have to integrate the Internet into a traditional business model therefore they have created a model around the Internet’s abilities. E-business strategy is all about trade-offs a company makes in deciding where it wants to go and how it is going to get there.

Basic competitive forces as well as the market dynamics within the industry influence these trade-offs. Ultimately, a company’s goal is to sustain competitive advantage to be the best. A source of competitive advantage is to configure and manage the value chain, making imitation by competitors difficult. As start up costs are particularly low in the industry, online dating services such as Match. com and DatingDirect have had to gain a competitive advantage by specifying and communicating a purpose and the methodology used to deliver this purpose, ultimately sustains competitiveness. Michael Porter is perhaps one of the most influential authors on strategy and classifies the Internet as an enabling technology: “a powerful set of tools that can be used in almost any industry and any strategy”. As online dating agencies are built solely on the Internet, Porter recognizes that the only way to compete on being better is through operational competitiveness; “doing the same things competitors do, but only better” and strategic positioning; “doing things differently and adding a unique value to customers”. Ultimately, these factors are concerned with embracing technology for an advantage.

However, globalization and open standards such as HTML and XML have facilitated the ease of copying. Therefore, technology is a defensive weapon usually used to catch up with market leaders. The Internet is becoming more accessible through the use of mobile phones, as later discussed, and is a service online dating organizations are now using to gain a competitive advantage. * DatingDirect has already established a partnership with Vodafone to accommodate for the growth of mobile technology and is an arena other dating agencies have yet to enter.

To maintain market leadership, online dating services must continually innovate and make the service second to none. Inevitably, in such an industry it is easy to imitate new innovations, however focus should be on the pace to which new innovations are implemented. * As the dating industry is demographically and geographically very diverse, online dating services must ensure that they tailor services to satisfy all customer needs, as customer differences in age, religion, nationality, interests, location and other factors determine preferences when searching for a companion.

This technique of segmenting the market attracts a specific customer to a site and increases the chances of finding a suitable match as the majority of users will share an interest. * eHarmony should implement diverse promotional and advertising techniques to diversify the brand in the market and attract customers. In order to gain and retain customers, online dating services must advertise their service to emphasize that their information technology, infrastructure and customer service is better than that of their competitors. This advertising should be specific and targeted, local and relevant. It is extremely important for online dating industries to embrace technological advances in order to become market leader. By implementing new and innovative technology, online dating services are able to attract and retain customers and ultimately, be profitable. Therefore it is important for all companies, especially eHarmony, to invest in promotional techniques to firmly establish their brand in the market and benefit from returns on investment. Issues/Challenges * Competition from rivals in the online dating industry is intense and eHarmony needs to be extremely nimble to maintain its’ leadership position.

With competition coming primarily from Match. com, its spin-off site Chemistry. com and numerous niche sites catering to very specific target market demographics. * Additionally, with one of the highest membership fees in the industry, the competitive forces from rivals, particularly free sites, is intense. * The traditional ‘Christian” values that eHarmony based it’s algorithms on has changed significantly over the years with more singles choosing to cohabitate before marriage and are more likely to divorce within a short period of time. eHarmony is ignoring the growth of mobile computing as a vehicle for driving revenue growth. The fastest growing market segment could prove to be eHarmony’s largest growth opportunity. * eHarmony’s marketing efforts targeting radio and ignoring national TV ads seems to miss the mark. Few consumers listen to radio anymore and economies of scale could be realized by buying TV spots on a national level. Their focus on “remnant TV inventory”, suggests they are taking what’s left over from broadcasters instead buying TV spots to fit their strategy. * The 20% of applicants that eHarmony rejects each year, could be onetized by identifying their needs and creating a sister site focusing on this second tier clientele (security screening should remain intact however). * eHarmony shouldn’t ignore the same sex market as this market represents a significant revenue opportunity (one tenth of dating search market). The development of a niche category (to accommodate this market) within the eHarmony framework, would allow them to maintain their “Christen values” without alienating this valuable market segment. Recommendation * eHarmony is facing a maturing market for online matching services and increasing mainstream and niche players crowding the space.

With entry barriers extremely low in this industry (very little capital required to launch online dating site), this metric intensifies rivalry for all participants. The largest growth segment is coming from the mobile market segment which eHarmony should embrace. With over 3 billion smartphone users globally (and growing exponentially), the potential to drive market share is tremendous. * With mobile internet’s rapid growth, coupled with advancing technology, social interaction via mobile is now a common lifestyle trait.

So the real question for internet dating site owners is not “should” a mobile dating strategy be implemented, but “when”. Technically, there are numerous mobile dating service options and delivering a positive member experience is achievable. For the online dating industry, mobile dating could very well become a fundamental approach to attracting and maintaining a satisfied member base, making a mobile dating strategy a competitive benchmark. * An alliance with a current mobile company like Google’s Android (number two in global market share behind Symbian) would supplement eHarmony’s current desktop service.

Android activates approximately 300,000 phones per day, and is growing at 15% per month. This would provide a complementary service for existing (older) customers. It would also attract a younger demographic, who are more tethered to their mobile devices, and are more likely to embrace this service. This could be a win-win for both eHarmony and Android to develop a tailored business relationship based on mutual trust, openness, shared risk and shared rewards that yields a competitive advantage, resulting in business performance greater than would be achieved by the firms individually.

The press generated from such partnerships can also potentially boost member recruitment. * A relatively new app service gaining momentum within the mobile dating industry is the use of Bluetooth to allow users to identify if other (dating site) members are located nearby. This service is popular with younger users who are able to identify other single people within range of their device. There are obvious risks associated with this service however such as stalking or unwanted attention. This concern has become a significant factor affecting its development within the industry.

There are currently only a few online dating sites (Match, Zoosk, IceBrkr etc. ) currently embracing mobile technology. The opportunity is there for eHarmony to gain market share using this platform. * Mobile dating provides (eHarmony) members with the ability to find a date anytime, anywhere. Vicinity matching, SMS texting, video chat, flirt notifications, and match alerts with mini-profile views are the primary mobile dating functions. * Another strategy includes a strategic alliance with a social networking site such as Facebook.

This would enhance eHarmony’s presence and exposure to a new target market. With over 500 million current Facebook users, eHarmony could develop trusted relationships with users and potentially convert some to paying members. Social networking site users typically join groups that match their personality traits. This would enable eHarmony to identify users in specific demographic groups and target services more effectively towards them. * eHarmony should evaluate its’ pricing structure to be more competitive with rival market leaders. New Marketing/Advertising The marketing mix for eHarmony should include a combination of television, online and mobile banner and pop-up ads. With fewer customers listening to radio broadcasts, and more and more gathering their news while on the go, mobile promotion of eHarmony’s services would bode well to capture a new market segment. New Brand Enhancement * Brand enhancement can be gained through alliances throughout the value chain, from operating system platform developers to manufacturers, carriers and retailers. A collaboration would strengthen the eHarmony brand.

New Business Model * A mobile solution can be implemented to monetize the non-subscribing member base. Using triggering points on mobile, “impulse” purchases such as virtual gifts and short time passes can be presented and billed through the mobile device. This would also increase retention because during any 24 hour period, a member is at least 4 times more likely to be accessible by mobile than via a PC. Interacting with another member and bringing them back to a site leads to increased usage and enhances the member PC/mobile experience. Monetizing new members gained from a social network alliance would also boost revenue opportunities. With over 500 million users of Facebook, the opportunity to introduce them to eHarmony’s services, could transition into a monetization opportunity. * Member acquisition could also be enhanced because a mobile phone is a highly personal device that is constantly used for communicating with close friends. A phone call or message from a friend on a mobile device reflects higher levels of trust than alternatives such as email.

Using strong viral promotional techniques (reduced member fees) can enable members to recommend a site to their friends, mobile to mobile. * Member experience will be improved through the immediate response and member to member interaction. It also provides convenience and control in extending the PC dating experience, giving members 24×7 access to dating site activity – anywhere/anytime – even in the workplace, with no restrictions. * By far embracing the mobile tidal wave overtaking the industry is the best strategy for eHarmony moving forward. Harmony can also create complementary sites to attract users currently shunned (20% rejection rate). The same-sex niche demographic has the largest buying power of all market segments and is perhaps the most underserved. Understanding that eHarmony was founded under Christian principles, the business opportunity should outweigh ideological sentiment. The acquisition of existing niche sites would be the quickest way of achieving this strategy. Scale economies could be realized with the application of a (scaled down) application process and algorithm. A complementary site can be established to attract customers seeking medium term relationships. It’s common knowledge that marriages usually spawn from medium to long term friendships. Targeting this demographic could become an incubator for monetizing the development of marriage minded customers. * Finally, an international strategy starting with English speaking countries should be explored. Scale economies can also be achieved here with the application of their patented screening process. Prior to initiating this strategy however, a careful analysis of the targeted countries should be undertaken.

Recognizing that customs and culture differ from country to country, eHarmony may need to tweak their application process. An analysis of each countries competitive landscape for online and mobile dating services would be required. * Using the ARENA’S framework, eHarmony should embark on an initial expansion strategy into geographically nearby countries first (Canada) followed by distant regions. eHarmony will be able to leverage its’ brand to familiar consumers (similar culture, language, administrative heritage and economics).

This low risk strategy would facilitate a “test” case allowing eHarmony to examine the challenges of global expansion before venturing further afield. An analysis of the external environment and eHarmony’s success and challenges with this strategy is also provided by applying the CAGE framework. * The entry vehicle strategy used by eHarmony to expand globally ranges from alliances with local carriers, to mergers and wholesale acquisitions. The strategy of international growth through acquisition allows eHarmony instant access to proven local strategic demographic sensitivity and increase knowledge flows and learning. Harmony should delay entry into joint ventures until their knowledge of that foreign market is strong. Joint ventures will help eHarmony to adapt locally and the foreign company can help eHarmony understand the country’s laws and regulations as well as customs and culture. Conclusion * The online dating industry is extremely competitive with numerous rivals entering the market daily. Product differentiation and value creation are two key success factors eHarmony must embrace to maintain and gain market share. * The mobile internet tsunami is by far the most important growth opportunity that eHarmony should embrace.

With over 3 billion current mobile users globally, the potential to monetize even a fraction of these users, should entice eHarmony to explore this opportunity. * Global expansion of online and mobile revenue generation strategies is an important growth area for eHarmony to explore. Developing an arenas, staging and pacing, vehicles, differentiators and economic logic strategy is a critical success factor before implementing a global growth strategy. * eHarmony should consider going public through an IPO offering on the NYSE.

Although the regulatory framework for a public company is significantly more onerous than a private company, the revenue gain from an IPO could fuel global expansion and other growth initiatives. The opportunity for enhancing marketing opportunities and brand awareness could also be realized from exposure to the NYSE. * Developing or acquiring existing niche brands, targeting segmented markets (gay/lesbian customers), would be a vehicle (and opportunity) for eHarmony to broaden their customer base. These potentially polarizing sites can be operated independently (within the eHarmony network) without diluting eHarmony’s Christen sensibilities. A second tier site could be developed internally by eHarmony to monetize the 20% of users they currently reject from their site. This spin-off site could be targeted towards medium term dating customers looking for friendship but not ready for the commitment of marriage. A revised scaled down screening process (fewer broader questions) could be developed to target this demographic. They would enjoy the benefits of being in the eHarmony family without the commitment pressures. Those with social issues identified through the screening process would still be barred however.