De Beers Jeff Cunningham – Margaret Campbell
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Case Study & Questions: De Beers Jeff Cunningham/Margaret Campbell
1. What are the key problems facing De Beers?
De Beers Marketing approach for entering the Asian Markets was based on Western Cultures and ideas and based on the concept of “a diamond is a gift of Love” (Engagement and marriage) An embedded culture of western society (US, Europe). The CMD felt this message was crucial to fulfill its business objectives of maximizing profit of the CSO. This approach was applied to Japan form the 1960s to 1980s with success. With personal incomes rising in Japan during those times, Japan became the development model for entering other Asian markets as Japan became the 2nd largest market in the world for diamond Jewelry. De Beers strategy was to focus on existing customs like yuino… a traditional engagement ceremony of which ¾ utilized these ceremonies. Yuino Diamond engagement rings grew from 0% to a peak of 76% in 1994. One problem/challenge De Beers faced in Japan was result of extended economic downturn thus engagement ring acquisition rates dropped to 64% in 1996. Even though success in Japan, Only 40% of women approaching engagement thought of diamonds as a “symbol of love”. Japans acceptance of diamonds as engagement rings provided a somewhat false sense of security in understand Asian Multicultural Marketing market segments. Challenges arose again when De Beers looked to enter East Asia… Seeing a similar trend as with Japan in the 1960s – 1980s, East Asia in the 1980s experienced significant economic growth, a youthful population… an environment to spread modern ideas and openness to change. De Beers learned quickly that Asia was not a homogenous region… there was no such thing as an Asian Consumer. The Japan model does not fit in other nations/cultures and the other East Asia countries all differed in relation to their markets as a result of historical, cultural and demographic difference (Multicultural Marketing) (Behavioral Segmentation). Many different languages meant advertising costs rise or incorrect messages get communicated. Korea, Hong Kong, China and Singapore, people primarily viewed jewelry as a store of wealth, not a “symbol of love”. Attitudes towards love, romance and marriage were different… No “I Love You” or open signs of affection. In fact, the word, “romance” does not exist in languages like Chinese, Thai, Malay and Korean. When entering China in the late 1980s, early 1990s, consumer knowledge about diamonds was limited to scientific facts… did not have a personal allure. China also experienced challenges with counterfeiting. Demand was initially limited to government and business elite. Challenges on how to address short and long term opportunities in Shanghai without forgetting the 50% of sales that took place outside the targeted cities. With over 2 million marriages in 1994, De Beers was looking to utilize their regional strategy of the diamond wedding ring… this posed a challenge as “love” was rare or essentially meaningless in Chinese culture… men and women in China described it as “the graveyard of love”. Diamonds in china were historically never related to marriage. Challenges continued in China in 1997 with economic crisis… diamonds seem to be considered discretionary spending thus sales of diamonds were now getting impacted by fluctuations of markets in East Asia. Considering it was difficult to value a diamond (required special skills) it was difficult to sell diamonds in economic hardship as opposed to gold which value is based on weight… an easier method of measuring value. The late 1990s in China also showed slow growth of middle class this stymieing the market.
Summary and Other factors that were challenges:
In Asian cultures women usually did not wear their diamonds everyday thus no exposure. De Beers also learned of a distinction between modern and traditional
The gift of love message did not mean the same thing to everyone.
Japan was vulnerable to the rejection of the “symbol of love”
Asian markets hit with multiple economic downturns while attempting to establish diamonds a need and thus not discretionary spending.
Multicultural Marketing
Different needs and wants
Behavioral Segmentation
Traditionalist
Roles in buying decisions
Initiator
Influencer
Decider
Buyer
Buyer-Readiness Stage
Aware
Ever Tried
Recent Trial
Occasional User
Regular User
Most Often Used
Market Segmentation = Group of customers who share similar set of needs and wants
Psychographic –
Culture differences
Lack of Grassroots marketing early on
Demographic Segmentation differ for diamonds between Western and Eastern cultures
Income – Market in cities with elevated incomes… Incomes were growing in Eastern Asia over 1950s – 1980s.
Religion
Generation
Nationality
Social Class
Life Stage – how Eastern Countries deal with the concept of Love, Engagement and marriage
Gender – Who buys the Diamond?
Western countries the guy purchases engagement ring for women
Eastern Countries – Women buy for themselves.
2. What is a diamond? What is the role of diamonds in the US? What part has De Beers played in establishing that role?
The De Beers, a diamond is a gift or symbol of love and long term affection… A diamond is forever. A social status symbol