External Analysis of the Online Matchmaking Industry - Assignment Example

Q Ans. External analysis of the online matchmaking industry The online match making industry has evolved over the centuries. Although its foundations had been established in the 18th century, yet it particularly flourished with the advent of technology in general and the Internet in particular. Advancement of technology paved way for increased acceptability of these services in the society. Media played a very important role in this as it inculcated this perception in the audience that it was not only possible but also ethical and completely right to seek partners using the services of matchmaking organizations. With the growth in the popularity of dating in the 20th century, people started advertising for their spouses more often. In the start, people placed personal ads in the magazines and the newspapers. The downside of those ads was that they generally gave a very brief account of the individuals as well as the type of partners they were looking for. As the recording technology became increasingly sophisticated, telephone personals were created. Images were brought to the personal ads with the advent of the video tapes. The dating services cataloged the images and shared them with the seekers of partners. For a long time in history, men looking for matches on such public forums as newspapers and media were deemed acceptable socially whereas people did not approve of women looking for matches using the same mediums. This can be attributed to the conservatism of the old model of society and culture. Men in the old society were in greater control over women both politically and in domestic affairs. Therefore, men were allowed freedom while women were not. Over the passage of time, this trend has changed as women have become more empowered in the society. Nowadays, men and women commonly find matches using the online match making industry. This can, in part, be attributed to changes in the sociocultural environment; attitudes toward online matchmaking changed and social acceptability of such services grew as people increasingly came across others who had found their spouses with the use of such services. The attitude changed so intensely and dramatically that even the offline matchmakers running the matrimonial businesses in brick-and-mortar organizations could benefit from it along with the online matchmaking service providers. Initially, the users of services of the matchmaking industry were generally young people since a vast majority of the users were the Internet savvy people, though it did not take much time for the older population i.e. those in their 40’s and 50’s to become the users of these services. One reason for the growth of use of these services was their economic feasibility. There was a considerable population of people that used these services upon recommendation or request of other family members that had already benefited from these service providers. The contemporary online match making industry has more opportunities for the people interested in opposite-sex matches since the same-sex matches are still stigmatized in the society to a large extent despite the immense efforts of the agencies working for the legalization of gay marriages. Threats to the online match making industry are from the tendency of people to sue the companies considering the restrictions on their relationship status or sexual orientation. The online match making industry makes the information about subscribers, members, and users available to the interested persons. This information is acquired with the use of questionnaires and such other tools. Competitive environment of the online matchmaking industry The competitive environment of the online matchmaking industry can be analyzed with the help of Porter’s five forces that include suppliers, potential entrants, buyers, industry competitors and substitutes. The Internet has the power to influence the structure of the industry because of its ability to provide information to all the people at the same time. Nevertheless, this neither changes the basic structure of the industry, nor eliminates the five forces of Porter. The Internet’s leveling effect actually complicates the use of the Internet for the obtainment of increased profitability for the companies. The proliferation of information makes marketing and purchasing significantly simpler for all. Among the five forces of Porter, three that are from the horizontal competition include threat of substitute services, threat of new entrants, and threat of established rivals whereas two forces are included in the vertical competition including the customers’ bargaining power and the suppliers’ bargaining power. Suppliers Financial institutions are the first and the foremost suppliers of the online matchmaking industry. A company establishes online when it has a certain capital to spare. In the case of eHarmony, the capital worth $3 million was lent by Fayez Sarofim & Company that is a Houston investment firm. The company was established with this money. “Many online firms thought that the lack of barriers to entry, and the need for fewer assets, would make them profitable simply because they would have to spend less money to start conducting business. For most, this was not true” (Smith, 2005, p. 24). In any case, an online matchmaking company needs inventory, warehouses, sales forces, and electronic data interchanges (EDIs). Potential entrants The potential entrants of the online matchmaking industry are the organizations that had been running the same business but in a different format i.e. brick-and-mortar setting in the past. Just like many businesses have transited from the brick-and-mortar form to the online form, the organizations offering matrimonial services are also moving online. Nevertheless, many people with no such prior experience are also the potential entrants of the online matchmaking industry, an example of which is eHarmony. Buyers Buyers of the services of the online matchmaking industry are the people, mostly single, who are in search of partners with whom they can form relationships. Different people have different reasons for using the services; “Some join to save time, others to experiment to “see what’s out there”” (Smith, 2005, p. 24). People come with certain minimum expectations from the providers of these services; Firstly, they would get to learn about the individuals. Secondly, they expect that the information provided by a certain individual would have been compared against that given by other individuals so that the users would be able to access a list of people with similar traits. Finally, the individuals needing these services and paying for them expect to be able to communicate with the individuals they select for further investigation or development of relationship that may lead to marriage at a later point in time. Industry competitors One of the main competitors of sites like eHarmony that render online matchmaking services for opposite-sex couples are the dating sites offering services to people interested in matches from the same sex. eHarmony has even faced litigation once because of the complaint made by a female user who was denied the services because she was interested in women. Similarly, eHarmony has mostly declined sale of memberships to the people who were already married, the underage applicants, and the applicants that had been divorced over three times. Many competitors of eHarmony do render services to these communities also. eHarmony has also faced lawsuit filed by a married man who accused the company of discrimination against him because of his married status. Substitutes Substitutes of the online matchmaking industry are the brick-and-mortar businesses run by organizations that render the same services but in the setting of an office. These organizations are approached by the interested individuals where they are shown pictures of the individuals deemed suitable for them. The organization’s representative arranges meeting between the individuals and charges a fee for this services. The brick-and-mortar setup remains more convenient for certain individuals who do not want to disclose it to a wider audience online that they are in search of a partner. Other substitutes for this service are advertisements in the weekly journals, magazines, and newspapers. Newspapers and weekly journals have been used to find partners since the 17th century. Q. 2: Ans. Internal analysis of eHarmony Strengths of eHarmony One strength of eHarmony is the familial relationship between Dr. Neil Clark Warren and Greg Forgatch who are the founders of the company. Existence of the familial relationship between helps in reaching decisions with mutual consensus, and increases the dependability and development of comfort between the two. Another strength of eHarmony is formal education and years of experience of Dr. Warren in the field of psychology in general and the management of marriage and family relationships in particular. Dr. Warren is quite experienced in this field and has authored nine books on the subjects of emotional health, love, and marriage. He also has served as a speaker and dean at some points in his career. His experience of professional counseling spans over decades as a result of which, he is able to give expert opinion and judgment that helps him make right policies for eHarmony including the development of questionnaire, selection of questions, and such other factors. eHarmony keeps its quality of pool extremely healthy even if it incurs the company some cost. eHarmony has declined the sale of memberships to over a million people that were interested in becoming the paying customers since the inception of the company, which cost eHarmony no less than $10 million a year. But the company’s management does not regret having taken this decision; “We leave a lot of short-term value on the table, but the idea is to keep the quality of our pool really healthy” (Waldorf cited in Piskorski, Halaburda, and Smith, 2008). Weaknesses of eHarmony The matching system of eHarmony did not include information from the matches that was not pursued by a customer in spite of the fact that the system fully benefited from the Personality Profile. One of the team members expressed this concern in these words, “You don’t like that this person has a pet, or you’re a vegetarian but you keep being matched with hunters” (Piskorski, Halaburda, and Smith, 2008, p. 6). One drawback of the system of eHarmony is that the users that do not pay might not respond even if they are sent messages by the paying users. One of the users expressed it in these words, “If I am a paying user and you are not, I can send you a message and you might never respond because you don’t want to pay. And then I don’t know—did you not like me? Did you even see me? I want some kind of feedback. Otherwise, it feels like I am investing all this time to start communication but after all this investment, I never hear back” (Piskorski, Halaburda, and Smith, 2008, p. 7). eHarmony added a feature to address this problem which enabled the users to see the read messages. Core competences of eHarmony One factor that provided eHarmony with a competitive advantage over other personals sites was the tightly integrated system offered by eHarmony based on a Personality Profile that led to a matching algorithm, that was fed into a system of Guided Communication. eHarmony has a very skilled workforce of professionals and experts that have helped it develop just the right kind of assessment tools that have led to the achievement of optimal results. We went through the whole process of establishing content validity and developing a voluminous set of items to assess the domain. We then had different people look at the items and pare them down and give them to focus groups, and then to larger groups to get some initial estimates of reliability. We were quite rigorous in every step of developing the questionnaires of personality, values, and interests, which were the three primary constructs. (Buckwalter cited in Piskorski, Halaburda, and Smith, 2008, p. 5). Q.3: Ans. eHarmony’s Business level strategy eHarmony did not display cost leadership since it charged its customers more than its rivals in the industry because of its high reputation for successful matches. eHarmony uses the business-level strategy of differentiation as well as focus strategy. Right from its inception, eHarmony placed emphasis on the establishment of serious relationships among its users that showed great resonance with the faith communities, which the traditional dating sites untapped as a market segment. This provided the company with the addition of over 100,000 registrations in a matter of only few weeks. Later, eHarmony expanded its advertising campaigns on TV and radio in order to reach a larger user base. This helped the company further increase its registrations to over three millions. The success of the company can be gauged from the fact that many of its active members frequently converted into paying members at a much faster rate i.e. three times more effectively as compared to the average rate that prevailed in the industry. eHarmony chose not to render services for the same-sex market because of two main reasons; its limited resources and small size of the market for people interested in the same-sex matches. Although it does not currently serve the people interested in the same-sex matches, yet the company does keep the possibility of engaging in the necessary research for this purpose in the future. eHarmony has not only been very selective in the choice of its target audience, but has also adopted a unique advertising formula that helped the company get to where it stands today in the industry. eHarmony has been quite judicious in the advertising money’s use so that it avoided the brand-building activities and instead placed emphasis upon the marketing of direct-response. The marketing team of eHarmony only worked with the media and advertising agencies that had real sense of the direct-response advertising and very diligent about purchasing the media at lower rates. Q. 4: Ans. Although Chemistry shares many features with eHarmony, yet it has certain additional facilities to offer that eHarmony does not have. Chemistry is a threat to eHarmony since Chemistry has not differentiated among people on any basis to sell its memberships unlike eHarmony that has been incurring a lot of cost for declining the sale of memberships to the people that were already married, the underage applicants, and the applicants that had been divorced over three times. Chemistry provided people with a minor and major personality designation unlike eHarmony. Likewise, unlike eHarmony, Chemistry’s algorithm placed emphasis upon the presence of interpersonal chemistry among the matches instead of psychosocial compatibility that let Chemistry determine the personality characteristics of its users. In its advertising campaigns, Chemistry presented it as a totally unbiased service meant for all categories of people looking for matches. The strategy option that should be chosen in this case is to diversify the product internationally. eHarmony needs to rapidly expand geographically, commencing its expansion from the English speaking countries to include the European Union nations in which the online dating is commonly used. Users in many of the European Union countries have already been using the services of Match and Chemistry is likely to expand globally in the near future as well. If eHarmony does not diversify its services internationally, there is fair chance that the target segments would have already been consumed by such competitors as Chemistry. References: Piskorski, M. J., Halaburda, H., and Smith, T. (2008, July 1). eHarmony. Harvard Business School. pp. 1-26. Smith, A. D. (2005). Exploring online dating and customer relationship management. Online Information Review. 29(1), 18-33. Read More