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Lecture 7

BU481 Lecture Notes - Lecture 7: Direct Marketing, Eharmony, Switching Barriers

Course Code
Karin Schnarr

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eHarmony Case Policy 1
How should the company react to recent competitor actions?
Performance Assessment:
Industry Analysis:
Porter’s 5 forces
1. Power of Suppliers
a. Low
b. eHarmony has a matching methodology or system that no one can copy
c. However, buyers can find similar services on other personal sites
2. Power of Buyers
a. High
b. Customers have the power whether or not to use matchmaking products, and
customers can select which one they want
c. Buyers are restricted by the product / service offerings of suppliers
d. Buyers compare different matchmakers based on price.
e. Buyers have little switching costs; they simply let their prepaid service expire
3. Threat of New Entrants
a. High
b. Few barriers to entry
c. Low capital cost
4. Threat of Substitutes
a. High
b. Many alternatives for personal websites
c. Free do it yourself sites, niche sites, social networks
d. Match, Yahoo!
5. Rivalry Amongst Comp.
a. High
b. Most products are fairly similar, therefore creating a pricing war
Key Success Factors
1. Number of users the more users, the more people will likely join as there is a greater
network of people for them to connect with. Network effect becomes more valuable
as more people use it.
2. Strong and recognizable brand name
Environment Analysis:
1. Political:
2. Economics: The economy has impacted the modern marriage markets. Only roughly
16% of US singles were looking for a romantic partner. The trying times of money had
people thinking of themselves first and foremost.
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3. Social: The average age of marriage is on the rise. Has risen from men marrying at 26
and women at 22 to men at 27 and women at 26. Divorce rates have also changed
substantially, 45% of marriages were ending in a divorce. The remarrying rate has also
4. Technology: The advancement of the internet has led to eHarmony and the success of
the company. 16 million people had claimed to have visited an online personals site at
least once. As of 2005, 7 million had gone gone on dates with people they met online.
Direction (vision/mission):
- To empower people with the knowledge and inspiration needed to grow and strengthen
their most important relationships for a lifetime of happiness
Value Chain Analysis:
1. R & D
a. The study of physical attraction
b. Studied 400 couples during engagement and marriage to see life stage
2. Operations
a. Personality profile
b. Matching system
c. Guided communication
3. Marketing direct response marketing
a. Radio
b. Tv ads
c. Testimonials from users
d. Internet search and banner ads
Business Strategy Triangle:
- Goals
o Provide individuals with the opportunity to meet their long term loved online
o Targeted marriage-minded individuals
o 60% of users are women
o subscription fee nearly twice as much as other online personals sites
- Core Activities
o Extensive relationship questionnaire personality profile
o Patented matching system
o Guided communication system
o advertising
- Value Prop
o Offered a unique product
o Premium price for a premium product
o Long term relationships
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