2016 2017 左永安顧問 左記歐洲商行 安永經營管理顧問 台北左府(無極)道德宮 台大 台師大 EMBA 共通核心職能 TTQS ICAP PMP eHarmony Learning Objective: 1. Why do people want to meet others on-line instead of finding them in the real world? 2. Does eHarmony have a competitive advantage? If so, where does it come from? 3. Identify eHarmony’s target market. 4. Which of the four options should Waldorf pursue?
e Harmony HBR Case By: Hoa Nguyen & Ahmad Haynes
e Harmony
Learning Objective:
1. Why do people want to meet others on-line instead of finding
them in the real world?
2. Does eHarmony have a competitive advantage? If so,
where does it come from?
3. Identify eHarmony’s target market.
4. Which of the four options should Waldorf pursue?
Does e-Harmony have a competitive advantage? If so, where does it come from?
E-Harmony definitely has a competitive advantage due to the fact that it is one of the first online personals site centered on connecting marriage minded individuals. Not only did it focus on connecting people but they were also exclusive on who they allowed to use the site. E-Harmony has an extensive registration system consisting of a patented matching system, a guided communication system and a paying membership. One of the founders of this website, Dr. Neil Clark Warren, has much experience in the field of marriage and family relationships. He practiced psychology in this area for 35 years. He took what he learned through his practice and decided to help people with selecting a potential partner. He created E- Harmony for this reason and had the experience to do so.
E-Harmony is for single people who are interested in a serious relationship. This distinguishes e-Harmony from other sites where people are looking for what is referred to as “quick hook ups.” This site is for people looking for something long-term, a commitment. E-Harmony focused in on this untapped market and gained a competitive edge that was hard for other sites that would come along in the future to match. They also have a membership growth that has been unmatched by competitors. While competitor websites stalled in their membership rates, e-Harmony soared. Their members proved to be more loyal.
All in all, e-Harmony’s competitive advantage comes from being one of the first online personals site in its target market and also because of the system they have created to match individuals. They have a unique process that other competitors have tried to replicate to no avail.
How serious is the competitive threat to e-Harmony?
The competitive threat to e-Harmony is pretty serious. Although, other sites have not matched their membership rates or how much revenue that has been made who knows what will happen in the future. Many of e-Harmony’s competitors try to copy their system of match making and one day one of them may take their idea and make it better possibly tapping into markets that e-Harmony has not. Currently, Match.com is their biggest competitor. Recently, Match has started a new website named Chemistry that caters to the “serious relationship market” that e-Harmony has catered to. They even have a three step process for matching potential mates just like e-Harmony. Other websites are also easier to join. They have a shorter registration process which attracts customers that were deterred away from the e- Harmony process.
Free sites are also a competitive threat due to the fact that people like things that are free. They are growing rapidly in membership. Paying is seen as a barrier and these web sites do not have it. Plenty of Fish is an example of one of these websites and they receive 20% more visits than e-Harmony. Niche sites are a threat in my opinion because of their biggest segment being the gay/lesbian market. This is a market that e-Harmony has not tapped into. Online social networks are a threat because it serves as a valuable search tool for people who are looking into dating someone.
What is your recommendation to e-Harmony?
I recommend that e-Harmony broadens their customer base. There are so many markets that e-Harmony could cater to. The only thing about that is broadening the customer base goes against what e-Harmony has built their member base on, marriage minded individuals. This is why I suggest e-Harmony start a new website that caters to casual daters. This casual dating website can also cater to the growing niche of gay and lesbian daters. I believe it is important that e-Harmony caters to the changing demographic of their potential customers and build a new website to do so. I also believe that e-Harmony would compete more with the other like-minded websites by lowering the price of their membership so they will be able to compete with sites like Match in the long run.
E-Harmony should also consider a geographic expansion. This would bring in more members if they offered e-Harmony in other places of the world that doesn’t have the site currently. There is no reason why e-Harmony should not be worldwide and the time is now to make this expansion.
In conclusion, in order for e-Harmony to maintain its title as one of the leading online personals site it is time for them to expand in every way. E-Harmony needs to expand the markets that it caters to and also expand geographically.
Hartline, O. F. (2011). Marketing Strategy. Mason: South-Western Cengage Learning.
Although Columbia Business School often gets pigeonholed as a finance school, it’s really a top-notch program to learn about strategy. My professors in various subjects – from marketing to tech investing – have pushed my classmates and me to think deeply about competitive advantage. Indeed, this semester I am taking a course called Economics of Strategic Behavior, which provides a focused approach to business strategy and demystifies competitive advantage.
Every business school student is introduced to Michael Porter’s five forces, the most prevalent framework to analyze the structure of an industry. These forces are: 1) barriers to entry, 2) existing industry rivalry, 3) threat of substitutes, 4) bargaining power of suppliers, and 5) bargaining power of buyers.
What I like about my “Economics of Strategic Behavior” class is that it builds on Porter’s framework by prioritizing the five forces. My professors opine that barrier to entry is, by far, the most important force when analyzing the competitive dynamics of an industry. Competitive advantage therefore stems from the ability of companies to create moats around their industry in such a way that they deter potential entrants from capturing any value. The outcome is an out-sized return on capital for long periods of time.
Competitive advantage can be derived from unique capabilities or unique positioning. It’s the latter, however, that provides a more durable and sustainable advantage. These positional advantages can be distilled as:
Demand advantages in the form of customer captivity and network effects
Supply advantages in the form of patents and unique technologies
Economies of scale when high fixed costs are spread out to generate low avg. costs
Information or regulatory advantages
When an industry incumbent has a pronounced advantage, it’s incredibly difficult for an entrant to gain traction or turn a profit.
During this week’s class, we analyzed eHarmony, the leading online dating site to find Mr. or Mrs. Right. Although the eHarmony case was written in 2008, the company still maintains a leadership position in the relationship-seeking segment, which speaks volumes of its competitive advantage: in fact, about 2% of marriages in the US are due to eHarmony!
As an online marketplace, eHarmony developed a demand advantage that stemmed from targeting, attracting and maintaining a quality pool of singles seeking a serious relationship. One of the toughest things about online marketplaces is that they are devilishly difficult to initialize because of the proverbial chicken-and-egg problem: when there is nobody on the other side of the platform, then there is no real value proposition for an initial user.
To get over this hump, a founder’s credentials, experience and networks can served as thespark of trust essential to seed an online marketplace. As a practicing psychologist, eHarmony’s founder, Dr. Neil Warren, had developed a reputation as an expert after writing several books on the subject of love and marriage, making numerous speeches at conferences, and appearing on national TV and radio programs. By tapping into the psyche of conservative and faith-based communities, eHarmony was able to get over 100,000 quality registrations in just a matter of weeks.
Dr. Neil Warren, eHarmony’s founder and relationship expert.
With initial liquidity in the marketplace, eHarmony managed to build several levers that effectively captured customers. Leveraging Dr. Warren’s credibility, eHarmony built a matching algorithm for prospective customers. At the time, no other online dating site provided anything remotely close to effectively match highly compatible people. The algorithm served as a powerful hook to incent users to fill out the 250 question Relationship Questionnaire.
The Relationship Questionnaire was instrumental on two fronts: first, it generated an important filter that weeded out casual daters, thus ensuring the quality of the marketplace by increasing the signal-to-noise ratio; second, the significant upfront investment – in time and effort – to complete the questionnaire lowered the relative cost of the subscription. After users’ personality profiles were fed to the algorithm, users could see but not communicate with their matches – an incredibly effective teaser for non-paying members to purchase a subscription. As a result, eHarmony’s conversion ratio was 3x higher than that of its competitors.
To sustain its customer captivity, eHarmony imposed several measures of control that initially seemed counterintuitive to me. First, eHarmony rejected the membership request of roughly 20% of users who were willing to pay. This additional filter ensured that the quality of paid users was very high, enhancing the value proposition for existing and potential members looking for a serious relationship. Second, unlike other online dating sites, eHarmony deliberately limited the number of matches available to its customers.
Given eHarmony’s target customer, it actually made sense to artificially restrict the set of choices because it reduced the level of competition among users, implicitly increasing their expected payoff. Limiting the number of matches also created an illusion of scarcity. This illusion induced users to pay up since they were not-so-subtly reminded that there were only a couple of fish left in the sea. More powerfully, by controlling and limiting the number of matches, eHarmony mitigated user skewness, the phenomenon in which a few of the “hottest” members command a disproportionate interest and hits throughout the platform. Many dating sites suffer from this, which would often lead to way too many men trying to connect with only a couple of women, consequently producing a poor user experience on both sides. Nearly 60% of eHarmony’s members were women, though, indicating that its user base was well balanced and of high quality.
As eHarmony gained greater control over the serious relationship-seeking customer segment, the company exerted positive network effects. Both sides of the marketplace – men and women – benefited from each additional high quality member of the opposite sex. This virtuous cycle is inherently defensible and difficult to break for competitors looking to gain market share. While eHarmony’s network effects were a function of its high quality and expensive-to-acquire membership base, the network effects also enhanced and reinforced its customer captivity. Accordingly, eHarmony charged a 10% premium relative to Chemistry, its closest competitor.
Strategically, one of the most important decisions eHarmony made was to choose the right niche within the online dating industry. After targeting this niche, eHarmony tailored its product and services in such a way that it efficiently captured the hearts and minds of those souls looking to find “true love.” Online marketplaces are hard to build, but if done right, they can become incredibly successful businesses given their network effects-based competitive advantage.
eHarmony is facing emerging threats from competition eHarmony needs to address recent competitor actions while keeping in mind the dynamics of the modern marriage markets (primary source of consumers)
Which of the four strategic options that are being considered by eHarmony’s CEO and COO should be pursued? What are the available options? With its available resources, eHarmony should pursue options 1 and 2 Option 1 - Maintain Segment Leadership Achieved through the rapid increase in the number of paying members in order to sap market share from competitors Option 2- Broaden The Customer Base Conclusion Choosing to pursue option 1 of defending segment leadership and option 2 of expanding customer base is the best course of action for eHarmony In its first year, Chemistry spent $10 million in advertising gaining approximately 2 million new users
eHarmony must increase advertising to regain market share
Increased Advertising > Greater Awareness > Increases Revenues Reduce # of barrier for membership Over one million people have been rejected because they did not meet eHarmony's strict standards
This represents potential loss of revenue for eHarmony as well as potential revenue increases for competitors
Must find correct balance with entry barriers to increase membership Encourage the use of Fast Track This feature allowed the faster progression of interactions between members
Members who opted to use Fast Track had more matches and renewed their subscription more often
A definite competitive advantage for eHarmonry because Match's Chemistry does not have an equivalent feature
Focus on Differentiation Competition has no differentiation
Can easily sneak in and gain customers Target other Segments Can compete with Yahoo's personals and Match.com
Yahoo personals attracted 7million visitors
Several people interested in medium term relationships(Waldorf) Option 1 Defend eHarmony's position as the leading matchmaking company in the long term relationship segment
Option 4 Rapid geographic expansion, beginning with the European Union where online dating was already very popular Defend segment Broadening Customer Base Based on Jim Harvey's speech structures Who are the Competitors? Match.com (Chemistry)
Yahoo! Personals (Premier)
Free Do-It-Yourself Sites (Plenty of Fish)
Online Social Networks (Facebook)
Niche Sites (Christian Mingle) What Does the Modern Marriage Market Look Like? About 16% of US singles are looking for a romantic partner
Marriage had reached its lowest point in recorded history
Divorce rates are about 45% with 25% remarriage rate and 6% for a 3rd time Increase advertising Marriage Market Statistics Short-term competitive threat Long-term success Option 2 Option 3 Broadening customer base to include more casual daters Create a new site based on life stage transitions The End Questions? eHarmony can expand to include medium term relationships without damaging it's brand
2. Type of Case What type of case is it? Decision Case Why? As stated in the end of the case, eHarmony’s CEO needs to decide on how to address short-term competitive threats and position the company for long-term success
3. eHarmony Background Founded by: Dr. Neil Clark Warren (PhD in Psychology) and Greg Forgatch When: 1998 Why: Saw an opportunity to help singles in their search for a serious long-term relationship. Launched: in 2000 after receiving $3 million from an investment firm Today, eHarmony has over 20 million registered users eHarmony currently owns 13.9% of online dating market share
4. Internal Environment 2004: Technology Crossover Ventures and Sequia Capital invested in eHarmony 2005: New CEO and President Grew to 230 employees, half of which were in customer service 2007: eHarmony Labs open Goals: Turn results into insights that would help them create new business opportunities Convert users to paid subscribers Become the leading match-making company in the long-term relationship segment
6. Industry 5 Forces Threat of new entry: Low Competitive intensity: High Buying power: Low Threat of substitute: High Supplier power: High In this case, suppliers = customers
7. Match.com eHarmony’s biggest competitor Owned by InterActiveCorp (IAC) Owns 28.1% of online dating market share 2003: AOL and MSN co-marketing leads to overseas expansion 2006: Chemistry launched, entered serious relationship segment 2007: Ad spending increased to match eHarmony % of sales
8. Customer Environment Social acceptability Privacy concerns Trends: Only 16% of US singles (7% of adult population) reported currently looking for a romantic partner Men less active in dating Marriage rate on the decline Divorce rate changing
9. Segmentation Gender, marital status, race, age, education, employment status, and income are all factors in determining compatibility Type of daters Casual daters and lurkers “Medium” daters Serious daters
10. Targeting & Positioning Targeting Heterosexual Single Looking for a serious relationship If you’re looking for a life partner, you use eHarmony Positioning “eHarmony is committed to helping singles find love every day, and with over 20 million registered online users, we are confident in our ability to do so.”
11. Core Competencies Matching algorithm based on science Extensive registration process filters lurkers and casual daters
12. Competitive Advantage Differentiation Advantage 29 Dimensions of Compatibility Ability to match people effectively
13. What Should the CEO Do? Defend position as the leading matchmaking company in the long-term relationship segment? Broaden customer base to include more casual daters? Grow a new business based on eHarmony’s own research and development efforts? Rapid geographic expansion?
14. What Should the CEO Do? Defend position as the leading matchmaking company in the long-term relationship segment? Broaden customer base to include more casual daters? Grow a new business based on eHarmony’s own research and development efforts Rapid geographic expansion
15. New Business Opportunities Opportunities to build sites catering to niche markets Same-sex couples Dating sites for ethnic groups Religious dating sites Dating & relationship advice Pregnancy & parenting advice Built upon eHarmony’s existing research
16. Global Expansion Expand first to English-speaking countries Next, expand to countries with similar cultures and values Use eHarmony Labs to obtain information Compete with Match.com on a global scale
沒有留言:
張貼留言