Lindsay lengthy questionnaire. Creating a separate platform

Lindsay
Ligon & Tommy Medawar

Professor
Lee

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16
January 2018

Case Analysis #1: eHarmony

Introduction

eHarmony
is a matchmaking website founded in 1998 by Dr. Neil Clark Warren. The site
targets marriage-minded individuals, and grew quickly due to increased societal
acceptance of dating sites as a legitimate option for those seeking serious
relationships, despite charging a premium for its services. More recently, the
company has experienced a lower rate of growth, due to several changes within
the industry.

 

Strategic Issue & Explanation

eHarmony
faces increased competition within rapidly changing industry, as well as
changing attitudes about relationships and marriage among their customers. In
order to maintain steady growth and profitability, eHarmony must find a way to
modernize its services without alienating its target market of singles seeking
marriage. As the market shifts more toward mobile dating applications and
marriage rates decrease, the company will need to do more than increase
operational efficiency. For this reason, we recommend that eHarmony adjusts its
strategic positioning to serve singles seeking medium-term or casual
relationships, rather than marriage, in addition to its current target market.

We suggest that eHarmony create a separate mobile application with lower time
and financial commitments for its users, who will not likely be willing to pay
a premium for the “lighter” version of eHarmony’s services or spend significant
time on a lengthy questionnaire. Creating a separate platform for this new
market will also help to ensure that eHarmony’s main site maintains its
reputation among its current target market as a site for those seeking serious
relationships

 

Adults
in the 20-24 age range are the most prevalent consumers of online dating
services, and the number of adults within the age range is expected to grow in
coming years. However, as young people opt to focus more on career development
and less on finding a spouse until later in life, they will continue to rely on
online services to find medium-term and casual relationships (Madigan 2017).

Since eHarmony has maintained its target to serve exclusively individuals
seeking marriage, many of these young adults turn to sites like Match or mobile
applications like Tinder, which do not emphasize marriage as the goal. By
focusing on marriage and failing to provide an alternative, eHarmony is missing
a large segment of the population that uses online dating services. Internet
connections, smartphone usage, and online dating services are all on the rise,
and if eHarmony wishes to stay relevant, a new strategic position is necessary
(Appendix 2).

 

External Environment

In
recent years, societal views on relationships and marriage have shifted from a
traditionalist and religiously-influenced system with marriage between a man
and a woman as the only legitimate goal, to a more modern attitude in which
relationships vary greatly. In addition, the goal of marriage has changed
significantly. Previously, marriage had been used as a transactional exchange
for economic or political gain, for convenience and security, or to satisfy
familial pressures. Today, marriage is sought in the pursuit of happiness, and
spouses have changed from “search goods” to “experience goods.” With new
attitudes about the purpose of marriage has also come a decline in overall
marriage rates. Fewer people are getting married, and those that do tend to
marry older than in the past. Instead, couples often live together without ever
marrying, or wait several years to marry (Piskorski 2008).

 

With
the dismantling of historical structures such as arranged marriages, single
people of almost all backgrounds and religions have more freedom than ever to
freely choose a partner. For those who wish to marry, this has created a
problem of actually finding a partner who satisfies the more pragmatic needs
(economic, family, etc.), but also provides fulfillment and happiness. The
collision of this problem and the internet created an entirely new industry:
online dating. While self-advertisement in search of a spouse dates back to the
1600s, the internet brought an entirely new dimension of opportunity for
singles, making it easier than ever to find potential partners and communicate.

However, in the early stages, a stigma was attached to online dating and the
service was viewed as being reserved only for the “truly desperate.” It wasn’t
until the 2000s, when online dating had become so prevalent that nearly
everyone knew a couple that had met online, that public opinion began to
improve. While the stigma has not completely disappeared, it is fading fast and
a large percentage of today’s internet users engage in online dating in one
form or another (Madigan 2017).

 

eHarmony
is facing competition from several others in the industry, including free and
paid do-it-yourself websites, such as Yahoo! Personals, Match, and OKCupid,
niche sites like JDate, and online social networks like Facebook and Instagram.

More recently, eHarmony also faces competition from location-based mobile
dating applications such as Tinder and Bumble, which now account for
approximately a quarter of the industry (Madigan 2017). Although research shows
that online dating has only become more prevalent over time, users are
dissatisfied in almost all aspects with each of the top 14 dating sites
included in a recent Consumer Reports survey (Appendix 1). This dissatisfaction
may present an opportunity for sites to differentiate themselves by improving
one or more of the criteria for customer satisfaction.

 

Internal Environment

From
the beginning, eHarmony has targeted heterosexual singles seeking serious,
committed relationships, and specifically marriage. eHarmony uses an algorithm
created by founder Dr. Neil Clark Warren, a psychologist who has published
several books on relationships and marriage. The algorithm, meant to assess the
personalities and preferences of clients to ensure compatible matches, takes
approximately 45 minutes to complete and also acts as a tool to eliminate
individuals who are not serious about finding a long-term relationship. At the
end of the questionnaire, the algorithm decides whether or not the customer is
able to be matched, and allows those who are “matchable” to buy a subscription.

 

eHarmony
is popular with older singles, often divorced, who are seeking a stable
partner, and within faith communities, which value marriage. The service is
exclusive in that, unlike other similar sites, users can be denied for several
reasons, including being underage, married, or simply “unmatchable.” The site
also does not provide services for women seeking women or men seeking men. One
problem that eHarmony users have experienced is that users are not required to
buy a subscription to be matched–only to communicate with matches. This leads
to users sending messages that go without reply because the user on the other
end does not want to purchase a subscription. Another eHarmony feature that has
mixed reviews is the guided communication feature, which forces users to go
through several rounds of questions before they’re allowed to talk freely. A
“Fast Track” feature was introduced to help alleviate some of the problems for
those who prefer not to use the guided communication. Finally, eHarmony invests
significant resources into marketing, using real, successful couples who met on
the site, and in R to further improve the algorithm, and to study
couples.

 

Alternative Solutions

 

Geographic Expansion

One
option eHarmony might consider is rapid geographical expansion, starting with
English speaking countries and moving into countries within the EU. This would
allow the company to gain a competitive advantage on local competition, and tap
into new markets. This option is high risk because almost all of eHarmony’s
R&D has been U.S.-based studies. This would require more international
research, which would add to the cost of this solution. In addition, dating
culture tends to vary between different countries, and moving into these
markets without a full understanding of cultural differences could be
problematic. Expanding overseas may also result in fast-following competitors
within the same markets, who may have more resources to allocate to
international expansion. While the potential benefit of building brand salience
internationally is high, the risk associated with this is very high as well.

 

Increased R&D

eHarmony
has invested significant resources into their R&D centers. They have proven
to be industry leaders in their research efforts and can utilize this by
expanding on those efforts. Building on their competitive advantage by sticking
to what they do best and creating a new business focused on utilizing the
research they have done on life-stage transitions will help control another
niche market. eHarmony could provide a network of branded sites that give free
services to couples seeking advice about key life stages like weddings,
parenting, and elder-care. Revenue would be generated through online advertisements.

Investing heavily in R&D will also allow us to better understand how to
improve match satisfaction, which, according to the results of the Consumer
Reports survey in Appendix 1, received a poor score from users. Improving match
satisfaction will increase repeat customers, improve the brand image, and
provide more revenue for further research. This solution is relatively low
risk, low reward, and is more focused on the long-term health of the company
rather than than the short-term issues. This solution focuses more on improving
operational efficiency than strategic repositioning, and risks being too small
a change to save the company from a changing industry and fierce competition.

 

Expansion to Casual Market (Final
Recommendation)

The
solution that will most effectively solve short-term challenges while
maintaining long-term growth is to serve an additional customer segment of
users seeking casual and medium-term relationships. Most online daters are
young adults interested in medium-term relationships. Serving this segment
could give eHarmony a chance to utilize a lighter version their matching
algorithm in the cheaper, more casual market to differentiate themselves from
competitors like Yahoo! Personals and Match, and build a competitive advantage
in the casual online dating market. The new service would be aimed at singles
seeking relationships that are more serious than one-time “hookups,” which
location-based applications like Tinder target, but less serious than marriage,
eHarmony’s current target.

 

In
2003, eHarmony’s heavy investment in marketing paid off substantially. They
found success by focusing purely on direct-response advertising, and not on
general brand building, which resulted in high conversion rates. While
expanding into the medium-term relationship market, they should maintain this
strategy by using a mobile application for their new target market. This will
be advertised as a separate, free mobile app that gives basic eHarmony features
for the casual dater. The application’s branding and advertising should be
significantly different from eHarmony’s main site branding. This will maintain
eHarmony’s reputation as the traditional long-term relationship service, while
also capturing the growing market of casual daters. While the revenue will come
from advertisements on the mobile app, it will also serve as a trial for
customers who might be interested in paying for the premium service that
eHarmony provides, focused on long-term relationships. eHarmony’s main costs in
this solution will come from application development and marketing expenses.

However, advertisement revenue and new users driven from the application to
eHarmony’s main site will increase growth and revenue, and expose eHarmony to a
younger market of online daters.

 

Conclusion

In
order to modernize its services without alienating its current target segment,
eHarmony must reevaluate and adjust its business strategy. As the industry
shifts away from long-term needs and towards casual dating, specifically
through mobile applications, eHarmony’s separate mobile application will target
the casual market without alienating customers that are committed to finding a
spouse. As the industry becomes more competitive and consumer preferences
shift, eHarmony’s new strategy will provide growth opportunity and market
expansion.