Marketing and Online Social Networks

admittance Situation Synopsis Competitors read developed different approaches to attract consumers in the online dating market place just about of which admit been copying eHarmonys product features and using alternative strategies to attract singles. Companys on-line(prenominal) Strategy eHarmony uses a focused differentiation strategy. It focuses on singles seeking a serious kin and long-run compatibility. It distinguished itself from opposite sites by using a unique coordinated algorithmic rule. They have also invested substantial resources into market and R&D.Problem Statement eHarmony has opened the door to their competition by declining authorization customers as a way to ensure quality mark. eHarmonys CEO must decide how to react to imitations of its moving in model, encroachment by competing models and the rise of free alternatives. ANALYSIS 1. EXTERNAL ANALYSIS 1. General External environs Demographic get on with 40 and 50 year olds becoming the fastest gr owing surgical incision Age structure 60% of eHarmony users were women Members reflect the geographic distri bution of the US quite wholesome Legal Lawsuits for discrimination, etc. Privacy settingsSocio-Cultural Average age to get married is increasing The wedding ceremony rate had reached its lowest even in recorded history Cultural changes and economic factors had a substantial effect on the marriage market Fluctuating divorce rates One-fifth of marriages were initiated with online encounters Technological Increasingly sophisticated colloquy and recording technology R kindred dynamics, corporeal attraction, and couples Must obtain apparents for co-ordinated systems Global Competitors have expanded globally 2. constancy Situation summary 1. 2. 1 Industry StructureThe online personals industry usher out be segmented into 4 different categories where the 3 main players eHarmony, Match, and Yahoo Personals ar represented by the Paid Do-it-yourself category Paid Do-it-yourself Sites Free Do-It-Yourself Sites Niche Sites Online Social Networks 1. 2. 2 Industry Direction and Trends Competition is steadily increasing. Many companies within this industry try to develop crude approaches in an attempt to divert customers away from market leaders such as eHarmony. Some either put up few barriers to join or allow people to join for free. The industry is pass judgment to rise and perhaps double by 2012.Trends that may be important for this industries future include the pastime Subscribers to these sites tend to be repeat users 40 to 50 year olds are the fastest growing segment Marriage rate has reached its lowest point in recorded history Divorce rates are constantly fluctuating 1. 2. 3 Industry Economics The online personals market grew very slowly, reaching only $40 cardinal in 2001. In 2007, as a result of changing attitudes amongst consumers, the industry increased to $900 million. Observers have predicted that the industry may double in size by 2012. 1. 2. 4 Industry Driving Forces lucre As the number of people becoming internet savvy increases, so does the number of potential customers for online personals. globalization Some competitors, for instance Match, have already branched out to markets overseas. Industry Growth Rate Industry expected to double by 2012. Who buys & how it is used Online personals are most popular for middle-aged (40-50) peoples. Used to generate potential mates for those seeking various different types of relationships. Marketing Innovation eHarmony is iodine of the few online companies that make offline marketing work and pay for itself. Many companies end up spending large quantities on their marketing strategies but do not necessarily acquire more than customers. Changes in Societal Concerns, Attitudes & Lifestyles More and more people are becoming internet savvy at that placefore increasing the market potential for online personals. 1. 2. 5 Key Success Factors (See Appendix A) 1. 2. 6 Strategic Groups Map (See Appendix B for Strategic Groups Map) be to join and barriers to join an online personal site are the two dimensions which are relevant to a firms operation within this industry. Harmony possesses the highest membership fees in the industry along with particularly high barriers to join. Even their grade competitors Match and Yahoo Personals differ from eHarmony in that they have much lower barriers to join as well as lower sign up fees. Most of their indirect competitors are free and have olive-sized to no barriers to join. 1. 2. 7 Strategic Issues in the Industry Industry was plagued by people misrepresenting themselves and putting bogus personal information Users are concerned about the privacy of their information Level of customer dissatisfaction rest high . 2. 8 Opportunities & Threats Opportunities This industry imparting continue to rise in popularity due to increasing practise of computer technology. Due to it creat ion a more affordable means of match making, people will generally turn to online personals as opposed to other offline services. Convenience also plays a factor. Increasing their market share, plying to more market segments. (Niche markets). Threats Online personals sites with more resources pose a threat to those lacking resources. Security issues colligate with sharing information on online personals. Online dating scams) Reduction of barriers could also mean expanding globally before other competitors capture foreign market segments. 3. warring Situation psychoanalysis 1. 3. 1 Competitive Forces (See Appendix C for analysis). After analyzing Porters five forces it is concluded that the online personals industry is attractive. 1. 3. 2 Competitive Approaches Match They scrape individuals looking for enduring romance. They have also expanded their markets overseas. Yahoo Personals The types of consumers they target are not specified in the case.Although they have expande d their markets overseas Online Social Networks relies on viral process through which friends encourage their friends to join. 1. 3. 3 Competitive Strengths & Weaknesses (See Appendix D) 2. INTERNAL ANALYSIS 2. 1 Company Situation/Resources Analysis (See Appendix E) 2. 2 Operations Analysis not applicable to this case 2. 3 R Analysis E-Harmony Labs In which scientists study different aspects of love (Biological, sociological, and neurological foundations of love) Scientists continue to do research on physical attraction.They believe that the initial encounter is the crucial in determining the long-term success rate of relationship. Invested heavily on studies on couples. These studies analyzed how relationships were affected after specific life stages, for example, after a archetypical child is born. 2. 4 Procurement Analysis not applicable to this case 2. 5 Marketing and Competitive Position Successful marketing formula the use of testimonials enabled their offline marketing efforts to pay for itself. Competitive position matching on the basis of long-term compatibility. Focus on direct-response marketing and only work with firms who truly understand this form of advertising. They purchase media at lower rates. Advertise only on guinea pig cable networks and avoid broadcast television. (Less wooly approach) ? of budget spend on TV and radio advertising, ? is dog-tired on Internet search and banner ads (expensive). 2. 5 HR Analysis The company grew to 230 employees, half of whom were in customer service. They also employ a squad of uniquely positioned research psychologists. 2. 6 Managerial Preferences/ set Analysis The CEO, Greg Waldorf values the exclusivity of the site. Their customers values long term relationships. 3. APPRAISAL OF strategic ISSUES 3. 1 Evaluation of ongoing Strategic Performance 3. 1. 1 Strategic Resources Tangible Financial Ability to generate internal specie marketing campaign paid for itself within the first week B orrowing capacity Received 3 million from an investment firm at start up Technological Scientifically produced matching algorithm *** Organizational Resources and Physical Resources do not guard to this caseResources Intangible Human resources knowledgeable team of psychologist Innovation resource labs were tasked with studying the biological, sociological, and neurological underpinnings of love Reputational resources eHarmonys focus on serious relationship resonated well with faith communities Capabilities Marketing Highly successful marketing formula R secured a patent for the matching algorithm Strong vision *** Distribution, Human Resources, Management information systems, Management, and Manufacturing do not apply to this caseCore Competencies Sustainable Competitive Advantage Patented matching system and guided colloquy system Unique positioning of its team of research psychologists Successful marketing formula *** Value range of mountains does not apply to this c ase 3. 1. 2 Financial Borrowing capacity Received $3 million from an investment firm at start up. Opportunity Cost Declines to sell memberships to at least(prenominal) one million people annually costing the company an estimated $100 million per year. Break Even By early 2002 registrations had grown to over 300,000 allowing the firm to break even that year and become cash escape positive the next. Fixed Costs Advertising Marketing expenses reaching as much as $80 million per year, firm profitability depended on efficient customer acquisition 4. FORMULATION AND DISCUSSION OF STRATEGIC ALTERNATIVES 4. 1 Option 1 Reduction of Barriers Pros Allowing more subscriptions will increase revenues Cost effective Would strike hard into niche markets such as the gay and lesbian communities (largest niche market). User satisfaction increase when there are more users Denies competitors a chance to grow (Chemistry) Cons Current members will not be as confident when recommending matches Less exclusive Spend money in R saucily matching models 4. 2 Option Broadening Customer base to include casual daters Pros Strong point of differentiation Introducing the matching algorithm to the casual dater segment Allowing more subscriptions will increase revenues Cons Undermining its credibility with individuals seeking individuals seeking long-term commitment Exposure to more competitive rivalry Spend money in R New matching models 4. 3 Option 3 Growing a stark naked business based on R Pros Greater audience which allows for more subscriptions thus an increase in revenues Reducing risk of being trampled by competitors by diversifying Cons Can tarnish eHarmonys reputation and name brand Risky because it may not gain as much as what was anticipated Growth strategy may not be concrete . 4 Option 4 Rapid Geographic expansion Pros Enables them to take control of target segments before their competitors do Increases their geographic scope which translates to increased revenues Cons The matching portfolio may not cater to foreign markets (Different cultures etc. ) Large investment in R in consecrate to create new algorithms Must take into account politics, religion, culture 5. STRATEGY RECOMMENDATIONSince its inception, the company has declined to sell memberships to at least one million people who sought to become paying customers. As a result, the opportunity cost of this decision has lost the company an estimated $10 million in revenues per year. eHarmony should continue to focus on its vision in creating long-term relationships, however while reducing the amount of barriers they have instilled in order to become a member. By reducing their barriers not only will they increase their market share, they will be able to cater to more market segments (niche markets).Reducing their barriers could also involve expanding their services globally before other competitors capture significant foreign market segments. On that note, they can also rejec t their competitors a chance to grow. This will also satisfy their current users since there will be a greater selection. On the other hand some users may not take well to the idea, but as long as eHarmony maintains some element of control regarding who is accepted the changes may not be noticed. To conclude, we believe the R expense of creating a new algorithm will prove to be a worthy investment. pic