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De Beers
A Diamond is forever
Introduction – The De Beers Group
45% by value of the total annual global diamond
production is produced by the DB-Group & its
partnerships with the governments of Botswana and
Namibia.
Introduction – The De Beers Group
Until 2001 DB concentrated on supplying its
diamonds to brand manufacturers, such as Cartier.
Core business was the mining and marketing of
diamonds.
“De Beers” is a very well known Brand
Supply and distribution chain: Central-SellingOrganisation
75 % of the world’s diamonds pass through the
CSO to cutters and brokers (43 % through own
mines and 32 % through other producers)
Regional Share of Retail Market 2003
« A DIAMOND IS FOREVER »
• High positioned product
• Perpetuate the myth that diamonds are scarce
and should command high prices
• Maintained hight price stability
The Change in 2001 / forward integration
The DB-Group decided to make a Joint Venture together
with LVMH Moet Hennesy – Louis Vuitton and created
the company “De Beers LV”.
“De Beers LV” should be a combination of diamond
expertise and style.
The first two retail stores opened in London and Tokyo
in 2002 to bring their products to the End-Consumer
Case-Study Questions
1. What could be De Beers` motives for making
this “forward integration” into retail and
consumer market?
2. Is it a wise decision?
3. How should De Beers develop its Internet
strategy following this “forward integration”?
4. Would it be possible for De Beers, with its
branded diamonds, to standardise the
international marketing strategy across
borders?
Q1: Motives for forward integration:
• De Beers controls yet the production thanks to its
cartel:
Central Selling Organization (CSO)
• With the joint venture De Beers LV, it can control
the retail of its production, and therefore the
whole channel.
Q1: Motives for forward integration:
• De Beers seeks control of its business of the
wholesale and retail levels of the channel.
• This vertical marketing system, allows a real
channel stability.
Q2: Is it a wise decision?
Advantages >
1. Direct contact with the end consumer
2. Control of the whole retail & distribution channel
3. More revenue through higher Mark-up (from Mine
sales to Retail sales the value of 0.5 carat rises from
100 $ to 920 $
4. Stores in Countries where the retail share of the DBGroup is only 10 %, makes them more competitive
in these areas.
Q2: Is it a wise decision?
Disadvantages >
1. The CSO could lose Power
2. Stakeholders have more influence on their business
Recommendation
Stores only in countries with low share in retail market
Because of products nature only a few stores
Q3: Internet Strategy?
• Take advantage of their strong brand name
• De Beers = credibility
online
consumer confidence
Q3: Internet Strategy?
Six step process:
1.
Integration
•
Maintain strong image of QUALITY
•
Cross-promote their online services in print and
brochures to encourage online traffic to their site
2.
Create unique design requirements
•
Easy to use (and design jewellery) = major draw to
for users
•
Attractive design that highlights the beauty of
diamonds
Q3: Internet Strategy?
Six step process:
3.
Implement techniques for audience creation
•
Use strategic “linking” from wedding or
beauty websites
4.
Advertising on the site
•
Although DeBeers will want to maintain an
“upscale” image, they could benefit from:
•
Banner advertising: For honeymoon
packages, wedding invitations, flower
delivery etc.
Q3: Internet Strategy?
Six step process:
5.
Use effective promotions that attract attention
•
Contests: Win a £10,000 wedding ring if you
register online etc. (contest could be
worldwide)
6.
Audience qualification:
•
Who are the DeBeers visitors?
• How long on they on the website?
• What percentage of visitors return?
• How many of these become customers?
Q4: Possibility to standardise the marketing strategy
Standardization vs. differentiation of the
marketing strategy
Standardization is possible:
•Prices do less depend on production costs
• less competition (as 75 % of the diamond supply market
is controlled by CSO)
•Positioning does not differ depending on country - the
perception of the customers is equal globally
•A diamond is a luxury good and therefore a complex
product
But:
• attention must be paid on the size of the retail outlets,
e.g. US focus on large retail outlets, while Japan prefers
more but smaller stores
Q4: Possibility to standardise the marketing strategy
Standardization vs. differentiation of the
marketing strategy
•
The product is already standardized and the promotion
should be too
•
same target group worldwide – people who are able and
willing to spend on high luxury goods
Conclusion:
by connecting the good names De Beer and Louis Vuitton,
which are both well known as high quality products
worldwide, it is definitely possible to create a standardized
marketing strategy for luxurious De Beers LV products