Argyle Diamonds 1 MKT 2200

Table of Contents
1. 2. Executive Summary ............................................................................................................................... 2 Introduction .......................................................................................................................................... 3 2.1 2.2 2.3 2.4 2.5 2.6 3. Purpose ......................................................................................................................................... 3 Background Information ............................................................................................................... 3 Scope ............................................................................................................................................. 3 Methodology................................................................................................................................. 3 Assumptions and Limitations ........................................................................................................ 3 Plan................................................................................................................................................ 3

Body ...................................................................................................................................................... 4 3.1. 3.2. Situation Analysis of Argyle Diamonds (SWOT) ............................................................................ 4 Analysis of Argyles Marketing and Sales Strategy ....................................................................... 5 Key Objectives ....................................................................................................................... 5 Strategies and Tactics (Value Chain Analysis) ....................................................................... 6

3.2.1. 3.2.2. 4 5

Conclusion ............................................................................................................................................. 8 Recommendations ................................................................................................................................ 9 5.2 5.3 Brown Diamond Sales Strategy ................................................................................................. 9 Other Recommendations and Sales Strategies ....................................................................... 10

6 7

References .......................................................................................................................................... 12 Appendices .......................................................................................................................................... 13 Appendix A .............................................................................................................................................. 13 Appendix B .............................................................................................................................................. 14 Appendix C .............................................................................................................................................. 15 Appendix D .............................................................................................................................................. 16 Appendix E .............................................................................................................................................. 17 Appendix F .............................................................................................................................................. 18

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1. Executive Summary
The diamond industry is a burgeoning industry with high profit margins that is attractive to any organization around the world. However with production limited to a handful of companies and the opportunity to conduct sales promotions hindered by the monopoly of De Beers Diamond Company, the opportunities for growth are limited, at best. This report examines the situation of Argyle Diamonds of Australia. It provides a SWOT analysis for a deeper look into the current situation as well as analyzing the key objectives, strategies, and tactics that are employed by Argyle Diamonds in its efforts to promote coloured diamonds through the use of a value chain analysis. Finally, recommendations have been provided for Argyle Diamonds on how to capitalize on its strengths in the coloured diamond industry with particular emphasis on the opportunity they possess with the large production of brown diamonds. The overall analysis suggests that Argyle Diamonds are moving in the correct direction; a direction which embodies great potential for financial success in an industry dominated by De Beers.

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2. Introduction
2.1 Purpose

The purpose of this report is to review and analyse the key objectives, strategies, and tactics employed by Argyle Diamonds in its efforts to make full use of the free license afforded to them by De Beers to promote and sell its coloured diamonds.

2.2

Background Information

Argyle Diamonds is the worlds leading producer of diamonds, contributing to approximately one third of the worlds volume of diamonds produced. Argyle also mines 90% of the worlds supply of rare pink diamonds (Appendix C). Half of Argyles production is of coloured diamonds, dominated by brown shaded diamonds. The agreement between De beers and and Argyle diamonds gives Argyle the right to promote most of its diamonds.

2.3

Scope

The main focus of this report is to identify where Argyle Diamonds can capitalize on its promotional efforts in selling coloured diamonds, especially brown diamonds, which are generally regarded as cheap. By enhancing these efforts, it is possible to change customer perceptions of coloured diamonds as a whole, and provide a financial cash cow for Argyle.

2.4
In

Methodology
this research report, several online sources are used including

champagnediamondcenter.com, which is a site dedicated to promoting the exceptionality of brown diamonds, as well as the accepted course material and other literature.

2.5

Assumptions and Limitations

The main limitation of this report is the assumption that the case study is of recent events and the strategies recommended have not been currently put into widespread practice.

2.6

Plan

Firstly, a situation analysis is conducted using a SWOT analysis for Argyle Diamonds in order to identify the issues they had to face before the entry into the American market occurred. Lastly, the strategies employed by Argyle Diamonds are analysed and suggestions for changes are provided considering the strengths and opportunities of the company identified through the SWOT analysis.

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3. Body
3.1. Situation Analysis of Argyle Diamonds (SWOT)
Strengths Argyle Diamonds possession of cutting edge technology related to mining operations and diamond cutting Worlds leading producer of diamonds, contributing to about a third of the world volume Deal with De Beers allowing it to market some of its diamonds independently Provides 90% of the world's supply of rare pink diamonds and 45% production of coloured diamonds

Weaknesses
Lower interest for coloured diamonds around the world due to the perception of it being cheap substitutes Less profits from coloured diamonds due to discounts The virtual monopoly of De Beers, being the sole promoter of diamonds globally The limited budget and resource allocation available for sales and marketing The absence of a proper accepted standard for coloured diamonds

Opportunities
The opportunity to capture the global market with their trump card: The rare Pink Diamond The matured diamond market in the United States The United States is a trendsetter for new fashion Women becoming self-purchasers

Threats
The uncertainty regarding De Beers position on the contract providing independence for Argyle on the promotion of coloured diamonds Competition from other world producers The perception of world industry of coloured diamonds as substitutes The adoption of grading standards that might be detrimental to coloured diamonds, especially brown diamonds The concern of economic downfall in Europe and the effects of the global financial crisis in markets such as the United States Appearance of Synthetic Diamonds

Massive appetite for diamond jewellery in the United States Rapidly growing Asian markets, especially India and China

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3.2.

Analysis of Argyles Marketing and Sales Strategy

3.2.1. Key Objectives

The key objective of Argyles marketing and sales strategy, mentioned in the case study, is to provide maximum effort in order to change customer perceptions of coloured diamonds. Due to the promotional campaigns conducted by De Beers for white diamonds, the perceptions of coloured diamonds have been along the lines of a cheap substitute for white diamonds, and one lacking the quality of white diamonds. The fact that Argyle Diamonds have identified and sought to counteract these notions is proof that they have prioritized their objectives correctly. To quote a well-known jewellery expert: Beauty is everything. Your clients arent buying a piece of paper (diamond certificate) or an alphabet soup (quality grades). All those things are fundamental and support the sale, but at the end of the day, if its not a beautiful diamond in the eyes of the client, they wont buy it. The other objective that has been identified, complemented by the first objective mentioned above, is to penetrate the American market and gain a foothold for Argyles coloured diamonds (Appendix B). The American market is one that is matured, and thus provides an opportunity for Argyle to offer something new and fresh to pique the interest of the diamond hungry segment (US$12.5 billion in annual sales). What this does is not only provide a massive market for its coloured diamonds, but also open up opportunities all over the world, as the American market is seen as a trendsetter for the rest of the world. American celebrities and personalities are popular in many corners of the world, and thus provide the ideal exposure for access into other lucrative markets. Therefore the objective of initially conquering the American market is highly justified.

Argyle Diamonds 6 MKT 2200 3.2.2. Strategies and Tactics (Value Chain Analysis)

The strategies and tactics employed by Argyle Diamonds in its venture into the United States are seen to be quite effective in achieving its key objectives. Using a value chain (Appendix A) to analyse its strategies and core competencies from the information that has been provided in the case it can be seen that Argyle has attempted to create value through differentiation (using coloured diamonds). In terms of the firms infrastructure, there already exists the ability to mine large quantities of diamonds using existing facilities, however as a mining company, it is typical to assume that infrastructure for the sales and marketing function are inadequate, at best. The limited budget allocated for promotional activities (US$6 million over 2 years) highlights this shortfall. Information on the management structure, order taking or customer relationship management are not available, therefore a proper analysis in not possible. 3.2.2.1 Promotion When taking the promotions mix into consideration, it can be seen that Argyle has utilized sales promotion and public relations to a great extent. The Argyle Library Egg was a great promotional tactic to garner customer and press attention to the beauty of coloured diamonds, and the cost can be justified in its effectiveness in alleviating the doubts behind the value of coloured diamonds. One other major promotion tactic, and future opportunity, is the annual Argyle Pink Diamond Tender, which is an exclusive event in the diamond industrys calendar. So far they auction the rare pink diamond, but the opportunity exists to offer other coloured diamonds such as blue (once in a blue moon) and green, perhaps even champaigne or cognac colours to boost the profile of those colours. As Still, R. mentions, the costliest channels are the shortest ones. Personal selling that has been done by Argyle has concentrated on marketing channels that have been identified as the most effective, in terms of cost, by targeting retailers. This push strategy was complimented by the use of popular designers such as Kuchinsky and Nova Stylings. The trunk shows conducted for the 50 strategic retailers involved very little attention to consumer promotion. Retailers are selling a stunning array of branded products today, but the brand that starts and makes the diamond sale is the store brand. Jewellery retailers tend to build long term relationships with their customers, and those customers, in turn, trust the jeweler to pick out the best jewellery for

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them on most occasions. People rely on their jeweler. They made a decision to buy a diamond from that jeweler because they had a good experience with him and trust him, and theyll go back to him to repeat that experience in the future. This provides justification for the retailer heavy promotion strategies. However, it will be necessary to revise these strategies when awareness of coloured gems has grown. A more customer centric promotion approach would then have to be implemented. 3.2.2.2 Product In terms of the other Ps of marketing, the product itself comes with designs that are only limited by imagination. After all, people buy jewellery if they perceive it as beautiful, and product designs can be used to enhance the beauty of brown and other common coloured diamonds, as well as using them in combination with white diamonds. 3.2.2.3 Price Argyle has attempted to abolish the discounts given for coloured diamonds, thus using a high price to influence perceptions of its value and exclusivity. However there is a threat with the grading of coloured diamonds (Appendix F). By employing its own grading scale, Argyle has created a tactical advantage in dictating prices, however any future adoption of an official scale by a government or regional gemological organization might undermine Argyles pricing policies. 3.2.2.4 Place In terms of place, they have chosen the best market to foray a change in perceptions for its coloured diamonds, as mentioned before; America is a trendsetter for most of the world. While procurement is not a major supporting activity for Argyle, human resources and technology can play a significant role in their marketing and sales. For example, consultative selling can be conducted (more information under general recommendations) using highly trained professionals who are experts in jewellery designs, fashions, and cuts. Technology, apart from the mining process, can be employed through the use of social media for competitions and articles to boost the profile of coloured diamonds. This is one of the most cost effective tools for marketing and sales activities and provides exposure to millions of potential customers on the exclusiveness of coloured diamonds.

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Conclusion
Although there are many obstacles in the way of unleashing the full financial potential of

coloured (especially brown) diamonds, the strategies and tactics that Argyle have employed are a step in the right direction and would be greatly beneficial to the growth of the coloured diamond industry as a whole. In conclusion, the name of the game is to shift pre-conceived notions about coloured diamonds, created as a result of De Beers promotion campaigns for white diamonds, which would then unlock the full potential of the market. In addition to the strategies that have been mentioned in the case study, further avenues can be explored to attain this level of exposure for coloured diamonds. Some of these are mentioned as recommendations for future strategies below.

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Recommendations
5.2 Brown Diamond Sales Strategy

There is a saying that diamonds are a girls best friend. But this is mainly regarding white diamonds. Many consumers dont know much about brown/Champagne diamonds. Argyle has to increase the consumers awareness of brown diamonds in order for them to generate more sales. One way Argyle can do to increase the demand for brown diamonds is by having promotional campaigns just for the champagne colored diamonds using celebrities, such as providing them with natural coloured diamonds for Red Carpet events. When potential consumers witness Hollywood actresses or professional sports stars (Appendix E) using these jewellery as an ultimate fashion statement (champagnediamondcenter), it will make those individuals crave for it. This is because especially female consumers love to keep up with the latest trends, and when they see their favorite actresses embracing them it would make them want them more and thereby create desire, leading to action. Another point is that they should offer a greater variety of different diamond designs and styles (Appendix D). Having a large collection of brown diamond jewellery would also tempt the consumers to buy them because when new designs and styles are introduced, it catches the attention of the consumers. Argyle should also promote the brown diamond in wedding exhibitions. Most of the time consumers buy diamond rings or diamond jewellery for their weddings (engagement rings, diamond studs, diamond bracelets etc). Argyles can promote brown diamonds for these occasions. For example, Argyles can show how nice a brown diamond will look good on a yellow, white gold or platinum ring. Argyles can show different deigns of these jewellery (Soule, E.).

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Finally, in terms of providing greater exposure and changing customer and jeweler perceptions of brown diamonds, Argyle can use part of its marketing and sales budget on having articles written about these amazing champaigns, chocolate, or cognac coloured diamonds by well-known jewellery experts in the field, where potential customers would look towards them for guidance and direction on latest trends. These articles would then be published in popular jewellery magazines such as Jewellery World Review, The Jeweller Magazine, and country specific magazines such as Art of Jewellery for the ever expanding Indian market.

5.3

Other Recommendations and Sales Strategies

Apart from the recommendations provided above for the promotion of brown

diamonds, there are other strategies that can be employed to great success, not only for brown diamonds, but for most of the common coloured diamond variants.

5.3.2

Capitalize on fast growing economies such as India and China

India has a very distinctive upper class, whose massive spending sprees are well documented. The market itself is not matured as yet, and this provides the ideal opportunity to highlight the exclusiveness of coloured diamonds compared to the white ones. China is another cash cow in the making, with a reported one million millionaires. This wealth can be tapped by Argyle using careful promotional methods after extensive market research, which would result in designs that incorporate the rich heritage of these proud societies.

Argyle Diamonds 11 MKT 2200 5.3.3 Incorporate Consultative selling into its sales and marketing strategy

This is where a long-term, mutually beneficial sales relationship is created with the customers by helping them to improve profits through products and services (Still, R. et al.). How this would be done is to first identify key strategic customers, that is, individuals that others look upon to as trendsetters. These can be celebrities, as mentioned before for brown diamonds, as well as bloggers, journalists, or jewellery designers and jewelers. Building up a permanent relationship with these strategic customers is vital for Argyle, providing them consultations on their fashion requirements and thereby promoting the coloured diamond jewellery as an option would do wonders for the profile of coloured diamonds globally. They have to appeal to the client on an emotional level, and show them how beautiful the diamond is. For people who buy diamonds, emotion drives their experience. If you try to sell by price, you will lose them to the Internet. Youre selling a memory, something to be cherished forever and you have to connect with the customers emotions.

5.3.4

Encourage innovative thought in the design process

This can be accomplished through design competitions, perhaps on an annual basis, open to applications from anywhere in the world. Social media can be used to great effect for the implementation of such competitions. By rewarding the winners, and providing them with honorary titles, as well as attracting press attention, this would not only garner the attention of people all over the world, but would result in great designs for future jewellery for a very marginal cost. The profile of coloured diamonds would see a large increase in the country of the winners, providing even greater exposure. Other methods include allowing the customer to participate in the production of the item by providing contact with the artist of allow the customer to pick out diamonds for the items they request. In addition, the creation of story based jewellery is an amazing PR tool, where you make the customer understand the origin or the special story of each design/stone/artist, providing them with a connection to the jewellery, creating desire and action to purchase.

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References

Barmecha, V.S. (2007), De Beers: A Dying Cartel- Formation, dynamics & repercussions of its fall, New York University Champagne Diamonds: Natural Colored Diamonds-Champagne Diamond Jewelry. (n.d.). Champagne Diamonds: Natural Colored Diamonds-Champagne Diamond Jewelry. Retrieved June 17, 2012, from http://www.champagnediamondcenter.com Diamond Industry Report, (2011), Global Diamond Industry: Lifting the Veil of Mystery, Bain & Company Donahue, P. J. (n.d.). New Group to Promote Natural Diamonds. Welcome to Professional Jeweler. Retrieved June 17, 2012, from http://www.professionaljeweler.com/archives/news/2004/020204story.html

Janine P. Roberts (2003). Glitter & greed: the secret world of the diamond empire. The Disinformation Company. p. 243. Jewelry Insurance Issues - November 2008 - How Fancy Is Brown?. (n.d.). JCRS - Jewelry Insurance products, services, and support for insurance professionals and jewelers and their customers. Retrieved June 17, 2012, from http://jcrs.com/newsletters/2008/2008_11.htm Soule, E. (n.d.). What are champagne diamonds and where do they come from - by Erinn Soule Helium. Helium - Where Knowledge Rules. Retrieved June 17, 2012, from http://www.helium.com/items/878925-what-are-champagne-diamonds-and-where-do-they-comefrom. Still, R.R., Cundiff, E.W., Govoni, N.A.P (1988), Sales Management: Decision, Strategy and Cases, 5th ed., Pearson Education Inc. Value Chain Analysis. (n.d.). NetMBA Business Knowledge Center. Retrieved June 17, 2012, from http://www.netmba.com/strategy/value-chain

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Appendices

Appendix A

The Value Chain

To better understand the activities through which a firm develops a competitive advantage and creates shareholder value, it is useful to separate the business system into a series of valuegenerating activities referred to as the value chain. In his 1985 book Competitive Advantage, Michael Porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. Porter identified primary and support activities as shown in the following diagram:

The firm's margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation. (Source: http://www.netmba.com/strategy/value-chain)

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Appendix B

Consumer Market Statistics

(Source: Argyle Diamonds: Industry Review 2001)

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Appendix C

Argyles Diamond Production Statistics

(Source: Argyle Diamonds: Industry Review 2001)

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Appendix D

Innovations in Brown Diamond Designs

(Source: http://jewelrybrief.com)

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Appendix E

Promotion of Brown Diamonds using Celebrities

(Source: http://georgepress.com/wp-content/uploads/2011/03/brown-diamonds-celebs-400x300.jpg)

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Appendix F

Argyle Diamonds Grading Scale

(Source: http://www.hopediamonds.com.au)