E-Harmony Case

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Strategy Case
Analysis

Executive Summary

Executive Summary
eHarmony is uniquely placed in the online personals market through strategic innovation

eHarmony is placed in a highly competitive market
* Different segments exist within the market- e.g. free do it yourself, niche sites, paid do it yourself, etc. each having many players * Emerging threat from substitutes like social networking sites * Direct competition launched by biggest competitor ‘Match’ through its ‘Chemistry’ offering eHarmony’s key valuable resource is its vast bank of customer data that it uses to match customers based on its proprietary algorithm, and its brand/reputation * Data bank is rare and inimitable for competitors or new market entrants, making it a critical resource leading to competitive advantage * “Match for life” reputation as a result of rigorous registration process attracting customers interested in long-term relationships eHarmony offers a higher value to its customers in comparison to its competitors in terms of specialization of service offered, efficiency and quality of matches and the detailed screening process Going forward, eHarmony should focus on expanding service offerings (offering services for parenting, weddings, etc.) and explore geographic expansion to other English speaking Western countries * Expansion would be re-enforcing with eHarmony’s critical resources like its intensive R&D capabilities, customer loyalty and reputation eHarmony’s Strategy

eHarmony Strategy
The Business Model
Who
eHarmony provides services to US based individuals actively engaged in the search of long term relationships. These individuals have to be heterosexual, single, and not have divorced more than 3 times. What

The company provides an online highly customised matching service, which is priced at a premium against competition. How
eHarmony has a web based system that encompasses a questionnaire to prospective customers (Personality Profile), which is fed into a matching algorithm (internally developed based on empirical research). The algorithm matches registered users according to their personality profile. Subject to paid subscription, the company provides access to a guided communication process, where matched individuals may start interaction. The interaction process may be circumvented by mutual consent. The company promotes its services via a strong offline advertising campaign mostly using real cases to illustrate the effectiveness of its methodology. Internal consistencies

Through a lengthy questionnaire of 258 questions and charging a premium fee, the company self-selects individuals that are effectively committed to searching for serious relationships. This choice reinforces the company’s business model despite representing a significant cost estimated in $10mn per year as a result of declining potential paying customers. The matching algorithm is based on psycho-social factors that have a proven track record for stable relationships in the US, reinforcing its application of customers targeted by eHarmony.

Five Forces Analysis

eHarmony is positioned well to compete in this difficult market. While the US on-line dating market is large (and growing) there are a significant number of competitors. There is particularly intense competition between directory-based dating sites, but eHarmony insulates itself from this competition by offering a differentiated product—a targeted matching service. The threat of rivalry is further weakened by competitors offering complementary products that expand the market as a whole.  For example, customers may be introduced to on-line dating through free sites and then ‘graduate’ to premium services such as eHarmony.  

New entrants are able to easily set up the infrastructure required to service a dating site, but other factors prevent them from competing effectively. It takes time to develop the prospect pool of established competitors, which is made more...
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