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 :1

Introduction:The company was founded in 1888 by British businessman Cecil Rhodes, who was
financed by the South African diamond magnate Alfred Beit and the London-based N M Rothschild &
Sons bank In 1926, Ernest Oppenheimer, a German immigrant to Britain who had earlier founded
mining giant Anglo American plc with American financier J.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, including price
fixing, antitrust behavior and an allegation of not releasing industrial diamonds for the US war effort
during World War II.

The De Beers Group of Companies has a leading role in the diamond exploration, diamond
mining, diamond retail, diamond trading and industrial 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.

Type

Private

Industry

Mining and trading of

diamonds

Genre

Business

Founded

1888

Founder

Cecil Rhodes

Headquarters

Luxembourg,
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
employees

20,000+

Slogan

A Diamond Is Forever

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.

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.

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.
6

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.

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.

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.

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

 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.

13

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.
14

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 called intrinsic 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 its resale 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.

15

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, are not an investment. The market for them is neither liquid nor are they
fungible.

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4. strategies & success to diamonds across the

world & why its price high.

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.

17

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 Mix
As 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.
19

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 through 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, then
they 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
Endorsements
Fashion Shows
Cultural Shows
TV ads
Magazine Ads
Research and Development
Total Cost

Costs in 2007 ($ in
millions)
$50
10
10
10
40
350
$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 with
the 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
New
Marketing
Strategy ($ in
millions)
Total Sales
Revenue
Total Sales
Cost
Gross Profit

Projected Net Income

With New Marketing Strategy
2006
2007
2008

$6500

$7450

$6680

5737

6830

5425

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-201112?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...

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