Eharmony Case Analysis Essay

* eHarmony founded by Dr. Clark Warren and his son-in-law, Greg Forgatch, in 1998 * Officially launched in 2000 * First radio commercial in 2002 * First TV commercial in 2003 * They target serious relationship and marriage-minded individuals, offering a unique match-making product * They offer a tightly integrated system that encompasses a Personality Profile, which feeds into a patented matching algorithm, which then leads to a Guided Communication system * In 2007 Match.com launched Chemistry to directly compete against eHarmony * Direct competition: Match/Chemistry, Yahoo! Personals * Indirect competition: paid do-it-yourself sites, free do-it-yourself sites, niche sites, online social networks Decision Dilemma: * With the advance from direct competition and increased popularity of free personal sites and online social networks would eHarmony eventually fold amongst all of the recent competitor actions or would they be able to choose a marketing strategy that will help them innovate and prosper? Analysis: Contradictions: * On page 13 it says that in 2004 a Yahoo! Personals Premier subscription costs $34.95 a month which is $15 more than Yahoo!’s regular service making it $19.95. However, when looking at Exhibit 10 it has Yahoo! Personals listed with a $29.99 cost per month which contradicts what page 13 says. Exhibit 9 even has a higher cost listed, $23.91 per month, than the stated page 13 price of $19.95. * Why does exhibit 9, 10, and 11 have prices in 2008 dollars when the case was set in October 2007? Missing Facts or Details: * 2004 eHarmony had 3 million registration * .40 = 1.2 million active users * No info for 2007 to compare to the competitors * eHarmony was able to convert these 1.2 million active users into paying customers 3 times more effectively than the industry standard * No info on what the industry standard is to find out the total number of paying members to compare to the competitors * 2004 Technology Crossover Ventures and Sequoia Capital invested in the company * No info on how much or what eHarmony planned to do with the money * 94 million U.S. singles * .05 = 4,700,000 paying members of online personal sites * 2005 Match revenue = $250 million on 1.2 million paying members * 2007 projected revenue = $349 million * Chemistry demographics missing * 2007 Yahoo! revenue = $6.9 billion * .025 = $172.5 million revenue for Personals * No information in Exhibit 10 for Yahoo! Personals Premier even though the case brings it up * No current data for Exhibit 1 or 2. (Exhibit 1 only goes to 2001 while Exhibit 2 goes to 2000) * No international data for web users. (Exhibits 6 and 7 only show American statistics) * No breakdown to show how many users have 1, 3, 6, or 12 month subscriptions for each site * No mention of eHarmony’s revenue or yearly budget * Size of eHarmony’s market share compared to their competition? Personal Insight: * I feel that a significant rate of success is due to eHarmony’s branding and the use of an advertising campaign that appealed to a broad audience. They went from 300,000 registered members in 2002 to 3 million users in 2004 because of this. To me, this shows the mass appeal eHarmony has. Their successful campaign, which featured happy couples that found love by using their services, gave people a hope that this could happen to them as well. I think this hope of falling in love and getting marriage is a large priority of women. Accordingly, they account for eHarmony’s largest users at 60% and generate 2/3 of visits to the website. Kotler Text Teachings: * Core Competency: Refers to areas of special technical and production expertise. * eHarmony targets serious relationship and marriage-minded individuals, offering a unique match-making product * They use this to differentiate their brand image and services from their competition. * Value Proposition: A set of benefits that the company offers to customers to satisfy their needs. * eHarmony offers a tightly integrated system that encompasses a Personality Profile, which feeds into a patented matching algorithm, which then leads to a Guided Communication system * eHarmony needs to keep this evolving in order to keep growing and maintaining profitability. * Industry: A group of firms that offer a product or class of products that are close substitutes for one another. * eHarmony’s success has brought competition into this industry creating a surge in market growth. * Niche Market: A customer group seeking a distinctive mix of benefits. * eHarmony’s niche is targeting serious relationship and marriage-minded individuals along with faith communities (with an emphasis in women) * Porter’s Threat of Substitute Products: A segment is unattractive when there are actual or potential substitutes for a product. * eHarmony needs to be wary of this. Especially now that Match has introduced its new dating site, Chemistry. * Porter’s Differentiation Strategy: The business concentrates on uniquely achieving superior performance in an important customer benefit area value by a large  part of the market. * eHarmony achieves this by doing in-house R&D, using a unique matching algorithm, and other processes mentioned in the facts * Competitive Advantage: A company’s ability to perform in one or more ways that the competitors cannot or will not match. * eHarmony acquired this by heavy use of off-line advertising and by leveraging Dr. Warren’s 35 years of professional counseling experience, focus groups, and in-house R&D, Something their competition has tried to emulate but has been unsuccessful. * Sustainability: The business must be sufficiently committed and willing to devote enough resources to create an enduring positioning. * This is where the importance of eHarmony’s commitment to one of the decision options becomes a factor. They could look at a lower-level brand extension to bring in revenue from users who are unwilling to pay the premium fee. They could also look at using their strong brand equity to venture into untapped markets, i.e. international and gay. Another possibility is expand internationally which has a potential to expand globally adding long-term success. Decision Options: 1. Defend eHarmony’s leading position in the online matchmaker market by reducing barriers and promoting Fast Track Pros| Cons| Increase in paying customers| Time consuming match-making process| Increase in revenue| Losing out on other niche markets| Decrease Chemistry from being successful| Higher subscription prices| Keep core competency| Lacking continuous innovation| Keep competitive advantage| Possible backlash from members| 2. Enter into the medium-term relationship market to increase paying members (casual daters) Pros| Cons| Increased customer base| Increased competition| Increased revenue| Reduce core competency| Keep differentiation with proprietary algorithm| Lower fees due to less serious relationship %| Increase market share| No medium-term relationship experience| 3. Growing a new business based off of internal R&D focusing on key life stages, and building a network of free eHarmony-branded websites; revenue mostly coming from advertising. Pros| Cons| Increased advertising revenue| Increase costs to build a network websites| Strengthen brand image| Unpredictable revenue since sites are free| Reduce short-term competitive threats| No market research conducted on key life stages subject matter| Potential for brand extensions | Possible brand dilution| Increase in brand awareness| | Potential for diversification growth| | 4. Rapid geographic expansion Pros| Cons| Strong European market | Have to act quickly| Untapped market segments| Competition already internationally active| Potential for higher profit | No global brand equity yet| Reduce single market dependency| No international relationship market research conducted| Strengthen brand image| Might not understand foreign preferences| My Decision: * My decision is to go with option #3: Growing a new business based off of internal R&D focusing on key life stages, and building a network of free eHarmony-branded websites; revenue mostly coming from advertising. Reasons: * Long-term success can be accomplished by eHarmony extending its brand by using these innovative websites focusing on key life stages and differentiating itself from its competition, i.e. Chemistry. * This will allow eHarmony to capture the market and reduce the chances of Chemistry becoming successful. * eHarmony has a strong brand equity that will keep their members loyal to them as they transition through these  key life stages. * There is also a great chance that other brands will want to pair up with eHarmony increasing their brand portfolio. * Example: Gerber Baby Food for couples going through the parenting stage. * With revenue gained from these sites, eHarmony can re-invest it back into them. Funds can then be used to improve its core competency strengthening their brand image. * This will also strengthen their brand portfolio, increase advertising, and support more R&D. * Additional R&D can be used to study the niche market for gays and lesbians. * With sufficient research eHarmony could then use its brand equity to start a new website targeting this niche demographic. * As eHarmony continues to develop their cores services and grow in market share it is unlikely that their direct competition, Match/Chemistry and Yahoo! Personals, will be able to compete.