De Beers Assignment of Branding.pdf

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An Assignment

On

De Beers

Submitted by:

Indravijaysinh G. Jadeja

SEM: 3rd

Guided by:

Nirav bhatt

Academic year: 2014-2016

Subject-product & brand management

Submitted to:

Department of business administration

M.k.Bhavnagar University

Bhavnagar-364001

Date:-12/12/2015 Sing :-

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Introduction:

The company was founded in 1888 by British businessmanCecil Rhodes, who was

financed by the South African diamond magnateAlfred Beitand the London-basedN M Rothschild &

Sonsbank In 1926,Ernest Oppenheimer, a German immigrant to Britain who had earlier founded

mining giantAnglo American plcwith American financierJ.P. Morgan,was elected to the board of

De Beers. He built and consolidated the company's global monopoly over the diamond industry until his

death in 1957. During this time, he was involved in a number of controversies, includingprice

fixing,antitrustbehavior and an allegation of not releasing industrial diamonds for the US war effort

during World War II.

The De Beers Group of Companieshas a leading role in thediamond exploration, diamond

mining, diamond retail,diamond trading andindustrial diamond manufacturing sectors. The company is

currently active in every category of diamond mining: open-pit, underground, large-scale alluvial,

coastal and deep sea. The company operates in 28 countries and mining takes place in Botswana

Namibia, South Africa and Canada. De Beers currently sells approximately 35% of the worlds rough

diamond production through its distribution subsidiary.

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Type Private

Industry Mining and trading of

diamonds

Genre Business

Founded 1888

Founder Cecil Rhodes

HeadquartersLuxembourg,703 5th Ave

New York, NY 10022

b/t 54th St & 55th St

Midtown East

Area served Worldwide

Key people Mark Cutifani (Chairman)

Philippe Mellier (CEO)

Products Diamonds

Services Diamond marketing and

promotion. Community

development.

Revenue$7.1 Billion (FY 2014)[1]

Number of

employees20,000+

Slogan A Diamond Is Forever

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1. How De Beers did branding of the diamonds

As per all knows that how t create a strong brand a make a strong brand first most required the

consumers need, satisfaction or trust on quality because consumer trust or relationship or services or

quality make a strong brand because when customer come in market or they have many choice to

purchase anything so how to create our brand image in customer mind thats why these all things must

be required so like that de beers also do thats all things for his brand.

BRANDS

The De Beers Group of Companies brings to life the diamond

dream, combining matchless craftsmanship with elegant design to create jewellery of

enduring beauty. It sells through two world-famous diamond brands Forever mark and

De Beers Diamond Jewelers.

DE BEERS DIAMOND JEWELLERS

De Beers Diamond Jewelers was established in 2001 as an independently

managed and operated joint venture by LVMH Mot Hennessy Louis Vuitton, the worlds leading

luxury goods company, and De Beers SA. It has a global presence with stores in the most sought-after

locations around the world. De Beers Diamond Jewelers expresses the art of diamond jewellery through

the elegance and timelessness of inspiring designs, impeccable craftsmanship and unrivalled expertise in

selecting only the most beautiful diamonds.

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Forevermark is the diamond brand from The De Beers Group of Companies. Each Forevermark

diamond is inscribed with a promise: that it is beautiful, rare and responsibly sourced. Only one per cent

of the world's diamonds are eligible to be inscribed with the Forevermark icon.

Each Forevermark diamond is assessed by diamond experts at one of the Forevermark

Diamond Institutes in Antwerp, Maidenhead or Surat. Those meeting Forevermarks standards are

inscribed with the Forevermark icon and a unique identification number, which is also recorded on the

certificate that accompanies every Forevermark diamond. Invisible to the naked eye, the Forevermark

inscription is 1/20th of a micron deep (or one five-thousandth the width of a human hair) and can only

be seen using a special viewer. Forevermark diamonds are available in more than 1,600 retail stores

across 34 markets.

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2. How they succeeded to branding diamonds across the globe?

De Beers Marketing Strategies

De Beers began advertising for diamonds in the United States in1939. Originally, the directors of

De Beers hesitated to advertise because they were afraid that advertising for diamonds would cheapen

them. They worked with N.W. Ayer to research why people bought diamonds and ultimately put

together the ad campaign. In conducting research, they discovered that people did not buy diamonds for

high fashion, as they previously thought, but as a symbol of love. As a result, this concept has been the

center of many campaigns. In 1947, the tagline A Diamond Is Forever was coined. The A Diamond

Is Forever campaign continued all the way until the 1990s.

The diamond as a symbol of love strategy was particularly important for several reasons. First,

they marketed for the entire diamond industry, instead of for De Beers themselves. At the time, they

held a monopoly over the diamond industry, so marketing for the entire industry did not help any

competitors, but in the future, it became a problem. Second, De Beers managed to create the illusion that

diamonds are rare by selling them at very high prices and marketing them as a special occasion purchase

when in fact, diamonds are not rare. Finally, by marketing diamonds as a symbol of love, they started

the tradition of diamonds being given as an engagement ring.

De Beers used several other subtle techniques to reinforce the connection between diamonds and

love to the consumers. They had romantic scenes in movies rewritten to include diamonds. They

actually gave diamonds to celebrities to give to their significant other to use as signs of indestructible

love. De Beers would also place stories and photographs in magazines and newspapers of celebrities

with diamonds being used as a symbol of love. Also, they used fashion designers to talk on radio shows

about trends toward diamonds. Finally, De Beers commissioned famous artists like Picasso and Dali to

paint pictures for their advertisements in order to convey the idea that diamonds are unique and rare

works of art.

In 1963, De Beers hired J. Walter Thompson to assist in the development of new marketing and

advertising plans. Through their market research, they concluded that the decision to buy a diamond is

not spontaneous. In fact, the lead-time to buy a diamond is about nine to eighteen months. In order to

attract consumers to this luxury purchase, they divided the market into two kinds of purchases.

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The occasion purchase was a campaign targeted mostly at men. Engagement rings fall into this

category. De Beers also began promoting a three-stone anniversary ring using the tag line, for your

past, your present, and your future.

The celebrating women campaign was targeted at both men and women. They advertised with

humorous ads in mens magazines and even duringfootball games to encourage men to celebrate their

partners. They used a second campaign that focused on empowering women to buy themselves

diamonds. The right-hand ring can be bought to celebrate an achievement and is an important

campaign because it expanded the target market.

De Beers is credited with opening up the diamond market to ordinary people.

De Beers introduced the Diamond is forever advertising campaign in 1939 & has used with great

effectiveness all over the world since then.

De Beers established a diamond retailing venture with the luxury goods company of Lois Vuitton Moet

Hennessy(LVMH) of France.

In 2001, De Beers introduced the branding of its diamonds with a De Beers label & marketing the De

Beers brand. They did this partly so that De Beers would no more be associated with conflict

diamonds. The De Beers diamonds cost about 10 to 15% more than comparable diamonds without the

De Beers labels.

De Beers then came up with diamond branding ideas like the Millennium Diamond which was a

limited edition diamond engraved with the year 2000.

Some of the other branding strategies they came out with were:

(a) Women of the world raise your right hand: A campaign to encourage unmarried women to wear

rings on their right hand.

(b) Celebrate Her campaign: To encourage man to gift diamonds on non-wedding occasions.

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Here some analysis which show how they are creating diamond images on customers mind some

occasions or some special life movement how they are effective that show by de beers brand some campaign or

marketing with some strong strategy they attract to customers to input brand image & now in global diamond

world they make a successful image.

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Troubled Times for De Beers (1983)

Saturated marketplace

Problems with public relations

Rumors of De Beerss demise

Contract negotiations with key suppliers

Emerging suppliers from developed countries

From Rock to Ring

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The Central Sales Office

Serves as gateway between producers and the rest of the diamond pipeline

Enforces relationships by minimizing benefits of defecting and punishing those that do

Is the Market Maker by stabilizing prices and enforcing market discipline

Is the original No Haggle pricing innovator

Dictates pricing, packaging and fulfillment

Aggregates and sorts diamonds by grade

Pursues marketing activities that benefit the entire marketplace

The perfect vehicle for De Beers to build their unique relationships

Marketing Magic

Focused, primarily, on the jewelry market

Began calculating number of marriages worldwide and adjusting output accordingly in 1890

Reinforced the symbolism of diamonds, wealth, prestige, love and devotion

Launched 1939 Diamonds are Forever marketing campaign

Educated purchasers

Moved into new markets Influenced Japanese women to wear diamond wedding rings, with 65% in 1982

Primary challenge: diamonds are not a store of value and have little intrinsic value

Global Perspective

Marriage rates declining

Divorce rates rising

Economy unstable

Recession in primary jewelry markets

Civil unrest plaguing Africa

Middle East in conflict

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Customers

Sight holders

o 80% cut their own stones before selling

o 20% mark-up on polished stones

o

20% sold to independent cutters

Dealers

o 10% mark-up

Jewelry Manufacturers

o 50% mark-up

Retailers

o 100% mark-up

Consumers

Industrial buyers

Plan

Alternatives

Establish secondary market for diamonds as investments

Liquidate smaller, lower-quality diamonds, use proceeds to purchase and hold higher quality stones

Find new sources of capital, continue to buy surplus inventory

Decrease production

Increase demand

Secondary Market

Pros

Creates new demand

Cons

No universal grading system

Increases speculation

Takes time to establish market

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Liquidate Low End

Pros

o Creates much needed liquidity

o Provides Consumers an affordable choice

o Maximizes profit on larger, higher quality stones

Cons

o Must sell diamonds below market

o Creates imbalance in inventory

New Funding Sources

Pros

o De Beers can continue purchasing excess inventory

o

No change in strategy necessary

Cons

o Long term debt increase

o Cost of interest

Increase Demand

Pros

o

Maintain pricing

o Benefits others in supply chain

Cons

o Relatively slow process

o Advertising can be costly

Three Components

Acquire additional financing to fund the purchase of excess inventory through the CSO

Reduce output of De Beers-controlled mines

Employ aggressive advertising strategy aimed at increasing demand.

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Implementation Plan

Address the cash shortage - secure additional financing

Decide on operational strategy to ramp production down in company-controlled mines

Evaluate or hire advertising agency to begin working on ways to pull product through the channel more

effectively

Today Brand Situation

De Beers offers diamond products to manufacturers. In the year of 2006, De Beers reported

$6.15 billion in sales of their Diamond Trading Company (DTC), which is a 6% decrease from 2005,

$6.54 billion. De Beers attributed their decline in DTC sales to the reduced Russian supply to the DTC

Also, they saw an increase in financing costs and margin pressure to the pipeline demand. In addition,

there was a lack of liquidity of the pipeline demand. They also reported a 6% decline in their diamond

sales from $7.05 billion to $6.63 billion. Their net earnings increased 32% from $554 million to $730

million. De Beers is able to leverage the fact that they own over 40% of the worlds diamonds to price

their diamond products. Manufacturers and other buyers must purchase the De Beers products with the

stipulations and prices that De Beers sets forth. Since pricing of the De Beers diamonds is not public

data, the information cannot be disclosed within this report.

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3. Why diamonds are expensive?

Consumers are becoming increasingly comfortable spending large amounts of money online. In

the past, people have liked to know and trust their diamond salesman and buy their jewelry with a

personal experience in a jewelry store. But now, we are able to purchase so much online, why not buy

diamonds online as well? According to BlueNile.com, the largest online jewelry retailer, the average

price spent on a diamond engagement ring from their site was $5600 in 2004. The national average in

the United States at that time was $2300. This is a major difference indicating that not only are people

willing to purchase diamonds online, but they are willing to spend more money when buying online. De

Beers.com has averaged over 200,000 people on their site per month over the course of the past year, an

increase from previous years. They report that most of these visitors are within their target demographic

women, ages 18-34. These women visit the site to design engagement or right hand rings and email

their designs to friends. This is good for De Beers because not only are these women unknowingly

advertising De Beers to their friends, it also makes consumers think of De Beers retailers, a relatively

new venture for De Beers.

The second trend in the diamond industry is that women are becoming self-purchasers. Perhaps

the combination of womens rise in the workplace and the Right Hand Ring campaign by De Beers

women are empowered and encouraged to buy jewelry to celebrate among themselves. This shift is great

for the industry because self-purchasing women are another segment to target diamonds towards, which

can only lead to more sales.

GLOBAL CONSUMER DEMAND

The fastest growing consumer market in 2014 was the US with a 7% increase in diamond

jewellery consumption. Growth of 6% local currency saw China remain the second-fastest growing

market.Indian demand increased by 3% in local currency terms, while 2% growth in local currency was

achieved in Japan and the Gulf region.Global demand for polished diamonds contained in diamond

jewellery increased by 3% in 2014 (measured in USD polished wholesale prices), totalling just over

US$25 billion. Growth in polished diamond consumption was more mixed in the major diamond

markets, owing to the weakness of some currencies against the USD, slower than anticipated growth

over the Christmas season and slowdown in demand in China. The US led global polished diamond

demand growth with a 7% increase, followed by China with 5% and the Gulf region with 2%.

However, in India and Japan, local currency depreciation against the US resulted in negative growth of

1% & 11% respectively.

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As a result of these growth dynamics, the US grew its overall share of global polished demand

with its 42 per cent share representing a level not seen since 2008, before the global financial crisis

China (including Hong Kong and Macau) increased its overall share of demand to 16 per cent, while

India was the third-largest market for polished diamonds in 2014 with eight per cent, followed by Japan

with 5%. With the Gulf region accounting for 8% of global demand, the top five markets accounted for

almost 80 per cent of global demand for polished diamonds in 2014. Global diamond consumption has

seen a significant resurgence since the global financial crisis with the 5 years compound annual growth

rate (CAGR) since 2009 standing at five per cent for diamond jewellery & 6% for polished diamonds

Looking at the composition of polished diamonds consumed in the leading markets in 2014. there were

areas of both growth and decline in carat terms. The main growth areas globally have been smaller

diamonds below 0.18 carats. Fewer carats were consumed globally in the 0.18 carats and bigger ranges

ofmedium quality, driven mainly by the slowdown in Chinese demand growth.

Diamond is expensive

Structure

1. Diamond structure made with the help of law of total internal reflection.

2. This matter of total reflection is increasing inside internal structure that diamonds demand is high.

3. The weight of the diamonds is also include in its expense.

4. The internal diamond structure unbreakable in any kind of pressure, this type of diamond is

Including in expensive market.

The Concept of Intrinsic Value

In finance, there is concept calledintrinsic value.An asset's value is essentially driven by the

(discounted) value of the future cash that asset will generate. For example, when Hertz buys a car, its

value is the profit they get from renting it out and selling the car at the end of its life (the "terminal

value"). For Hertz, a car is an investment. When you buy a car, unless you make money from it

somehow, its value corresponds to itsresale value.Since a car is a depreciating asset, the amount of

value that the car loses over its lifetime is a very real expense you pay.

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A diamond is a depreciating asset masquerading as an investment. There is a common

misconception that jewelry and precious metals are assets that can store value, appreciate and hedge

against inflation. That's not wholly untrue.

Gold and silver are commodities that can be purchased on financial markets. They can appreciate

and hold value in times of inflation. You can even hoard gold under your bed and buy gold coins and

bullion (albeit at a~10 percent premium to market rates). If you want to hoard gold jewelry however

there is typically a retail markup so that's probably not a wise investment.

But with that caveat in mind, the market for gold is fairly liquid and gold is fungible -- you can

trade one large piece of gold for 10 smalls ones like you can a 10 dollar bill for 10 one dollar bills.

These characteristics make it a feasible potential investment.

Diamonds, however, arenot an investment.The market for them is neither liquid nor are they

fungible.

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The occasion purchase was a campaign targeted mostly at men. Engagement rings fall into this

category. De Beers also began promoting a three-stone anniversary ring using the tag line, for your

past, your present, and your future.

The celebrating women campaign was targeted at both men and women. They advertised with

humorous ads in mens magazines and even during football games to encourage men to celebrate their

partners. They used a second campaign that focused on empowering women to buy themselves

diamonds. The right-hand ring can be bought to celebrate an achievement and is an important

campaign because it expanded the target market.

Target Market

With the recommended plan, we hope to target the individuals in the exploration regions. We want to continue

to target the online market with the current trend as well as the women to continue the women as self-buyers

trend in these regions. With some of our proposed plans, we hope to target highly fashion conscious individuals

Also, we believe that the target will continue to be in the age range of the current buyers.

Marketing MixAs consultants to De Beers, we have created a marketing mix that will address the problems and opportunities

De Beers is facing and will be facing in the near future.

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Product

Firstly, the general product that De Beers offers is already one of excellent quality, so we do not

want to change their basic product. However, we do suggest that with the new diamond laser engraving

technology available, we would advise De Beers to imprint a small logo into the diamond that can only be

viewed with an eyeglass. This will be a very subtle but effective strategy in branding De Beers diamonds

When consumers purchase a diamond they will know who produced their diamond and eventually we want

them to associate the imprinted logo with the excellent quality that only De Beers offers.

Pricing

We do not intend to change the price of the products because diamond prices are subject to market

conditions and contracts that we cannot alter.

Placement

Channels for distribution should remain unchanged for the most part. The current situation is

extremely profitable for De Beers and is the most risk averse distribution channel as each purchaser of

diamonds is bound by contract to continue to purchase De Beers diamonds for a set amount of time and at

any price. However, we do suggest that De Beers increases the amount of retail jewelry stores it has in all

the major fashion capitals of the world. Currently there are only 5 De Beers jewelry stores in the world, but

if they are able to reach a bigger portion of the affluent and fashionable community, De Beers sales will

increase, and they will even be able to receive free publicity through celebrity magazines if they are seen

purchasing De Beers jewelry in these stores.

Promotion

According to our survey, consumers generally do not know what De Beers do. Part of this brand

awareness problem can be attributed to De Beerss previous advertising campaigns. In these older

campaigns, De Beers marketed for the diamond industry, but did not attach their name to any of the ads.

So consumers were encouraged to buy diamonds but knew nothing about where their diamonds came

from or what company had mined them. We want to increase the brand awareness for De Beers by

continuing to advertise for diamonds as a luxury good and exploring new markets, but we want to

clearly attach the De Beers name to this new advertising campaign.

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We want consumers to have an unmistakable impression of the superior quality of a De Beers

diamond, and when they walk into a retail jewelry store, we want consumers to ask for and intend on

purchasing a De Beers diamond. We want to achieve this by increasing advertising in print and media

but also host more fashion shows and cultural shows. This way we can reach out to our target market

(the highly affluent and fashionable) more directly as they are the kind of people that attend these shows

This will help to get the DeBeers name out there. This will also prove to be a effective advertising

technique in Europe as these kinds of shows are very popular & highly publicized. We intend to increase

advertising in all the target regions: Europe, Middle-East, and Australia.

Another channel we plan on using to increase De Beers brand knowledge is th rough the sales

force. We intend to provide incentives for salespeople to mention to customers that a particular diamond

has been produced by De Beers. We want consumers to be aware of De Beers as the premium diamond

producer, so if they hear about De Beers more and associate the company with excellent quality, thenthey will believe that a De Beers diamond is the best diamond to purchase.

Another problem that we have uncovered in our survey process was that the consumers who are

aware of De Beers have a poor brand image of the company. They associate negative things with the De

Beers name, such as monopolists or blood diamonds. These associations are valid, because first of all, in

1994 De Beers and General Electric were involved in an antitrust lawsuit, and then again in 2005, De

Beers was the target of several class action lawsuits and had to settle by paying $295 million, and had to

agree to comply with antitrust laws of the United States and refrain from acting as a cartel with sight

holders and third party producers. Also, De Beers has faced some bad public relations with the release of

the movie, Blood Diamond. After carrying out initial market research, we found that many consumers

are aware of the conflict diamond issue and take this into consideration when purchasing diamonds. In

order to ensure that sales are not affected by this issue, De Beers must counter any negative public

image they might have as a result of the recent publicity surrounding conflict diamonds.

Budget and Costs

New costs will certainly be incurred from our new marketing strategy. For example, in order to

increase advertisements, there must be an influx of magazine and TV ads, in addition to other indirect

methods of advertising, such as fashion and cultural shows. Below, Figure 5 shows the estimated cost to

be $470 million for our new marketing strategy.

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New Marketing Strategy Projected

Costs in 2007 New Marketing

Strategy

Costs in 2007 ($ in

millions)

Endorsements $50

Fashion Shows 10

Cultural Shows 10

TV ads 10

Magazine Ads 40

Research and Development 350

Total Cost $470

The current sales revenue, cost, and profit compared to the projected revenue, cost, and profit in

2008. Profits increase significantly by 36% from 2006 to 2008 as a result of the implementation of the

new marketing strategy. In addition, costs in 2007 increase from 2006 due to the costs associated withthe increase in advertisements. However, the costs decrease in 2008 after 2 years of implementation. The

initial increase in costs causes profits to decrease slightly, but after a year of implementation, profits

increase.

Projected Net

Income with

NewMarketingStrategy ($ in

millions)

Projected Net Income

With New Marketing Strategy

2006 2007 2008

Total Sales

Revenue

$6500 $7450 $6680

Total Sales

Cost

5737 6830 5425

Gross Profit 763 620 1255

The increase in revenue and costs and a decrease in profits after the first year of implementing

the new marketing strategy. However, after it has been in place for 2 years, revenues and costs drop and

profits increase.

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References

1.

http://www.businessinsider.com/history-of-de-beers-2011-

12?IR=T

2. http://www.debeers.co.uk/jewellery/category/rings

3. https://www.debeersgroup.com/en/index.html

4. http://www.debeers.com/engagement/engagement-rings

5. http://www.debeers.com/

6.www.bloomberg.com/.../de-beers-said-to-cut-diamond-prices

7.pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf

8. www.contrib.andrew.cmu.edu/.../B4%20-

%20Marketing%20Final%20Pa...