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-Selling-Organisation 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 What could be De Beers` motives for making this “forward integration” into retail and consumer market? Is it a wise decision? How should De Beers develop its Internet strategy following this “forward integration”? 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 > Direct contact with the end consumer Control of the whole retail & distribution channel More revenue through higher Mark-up (from Mine sales to Retail sales the value of 0.5 carat rises from 100 $ to 920 $ Stores in Countries where the retail share of the DB-Group is only 10 %, makes them more competitive in these areas.

Q2: Is it a wise decision? Disadvantages > The CSO could lose Power 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 consumer confidence online

Q3: Internet Strategy? Six step process: Integration Maintain strong image of QUALITY Cross-promote their online services in print and brochures to encourage online traffic to their site 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: Implement techniques for audience creation Use strategic “linking” from wedding or beauty websites 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: Use effective promotions that attract attention Contests: Win a £10,000 wedding ring if you register online etc. (contest could be worldwide) 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?

Standardization vs. differentiation of the marketing strategy 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

Standardization vs. differentiation of the marketing strategy 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