I need help with just question 2, which reads:

If diamonds were in the same market as weekends in Paris, Dior dresses and luxury cars, what are the implications for the way they might be marketed? (refer to attached picture of the case study)

Diamonds are for ever . . . and so are the payments In 1998, the diamond industry was in trouble: brand, as it has developed the technology to etch Demand from South East Asia and Japan had minutely and invisibly the De Beers logo and a declined dramatically because of the turmoil in serial number on its top-quality diamonds. This financial markets and although the US still remained could become a guarantee of quality and a lucrative market, there was so much over-supply differentiate its products from the competition. that producers could not maintain profitable prices This might have to happen. In 1998, the slump The world trade in rough of uncut diamonds is in demand was so severe that prices for rough dominated by De Beers from South Africa, with diamonds continued to fall, despite cutbacks in around 70 per cent market share. In 1998, however, production and supply. In addition, some De Beers' sales of rough diamonds fell by 28 per cent producers left the De Beers controlled CSO, to $3.3bi Although De Beers only mines around preferring to supply to the open market at lower half of world production, through its Central Selling prices that will stimulate extra demand and Organisation (CSO) it manages the distribution of 80 weaken the CSO's dominance. per cent of all diamonds, either by entering into In the longer term, of course, demand might distribution contracts with other mining companies recover, Sales could increase with the expected or by buying diamonds on the open market. 1.5 billion individual parties expected for the De Beers considers its current arrangements as a year 2000 celebrations. It has been estimated that "benevolent monopoly', concerned with protecting if just 1 per cent of people involved in these consumers' investments in diamonds and celebrations bought diamonds it would add bet wee maintaining suppliers price levels. Thus in the 20 and 25 per cent to the 70 million pieces normal past. De Beers could influence world prices for sold annually. This would help strengthen the diamonds by adjusting supply to meet fluctuations position of the CSO. Alternatively, it seems likely in demand. If prices started to fall because of weak that De Beers' dominance could be eroded as, for demand, it could cut supply and sustain prices by example, new Canadian mines come on stream ar producing diamonds to keep in reserve as 'buffer take an estimated 10 per cent market share. In thi stocks' rather than for the open market. This is an event, The Economist (1998-99) sees De Beers as !) expensive option as It means carrying stock worth Coca-cola of luxury goods, facing competition bi up to $5bn. This does little to stimulate demand with the marketing and distribution skills to be for the benefit of all producers. De Beers can direct successful. A director of De Beers understands the its production into buffer stocks and so is more task ahead. immune to short-term market fluctuations than We must now compete for the consumer's smaller producers that cannot afford to carry discretionary dollar - not just against other increased buffer stock levels. jewellery, but against weekends in Paris, Dior The company was thus in a strong monopoly dresses and luxury cars. (The Economist, 1998-94 position and could dictate to the market - as long as consumers valued diamonds. De Beers has spent But will diamonds continue to be a girl's best fr over 100 years building a glittering image for Sources The Econbevel (1997-98 1958-99), Gooding (1945). Morrison (1098), News (19081 http /wwecata.coza hittp /www.adiamond.alcriver cunt diamonds. Slogans such as 'diamonds are for ever" and 'diamonds are a girl's best friend' helped Questions consumers to attribute 'luxury', 'special', 'mystique" and 'romantic' characteristics to diamonds and also 1 To what extent is it in a marketing manager made De Beers a very wealthy organisation. De interests to restrict supply of a product and Beers also invented 'occasions' products, such as the maintain high prices? 10th wedding anniversary diamond eternity ring 2 If diamonds are in the same market as week "'show her you would marry her all over again'), the Paris, Dior dresses and luxury cars, what are 25th anniversary necklace and the 'sweet 16' implications for the way they might be mar pendant. De Beers $200mn annual promotional 3 Should De Beers commit itself to developing spend has tended to go on generic advertisements brand? What are the potential risks of doing for diamonds, which benefits the whole market, 4 How do you think that the market for dian rather than on specifically promoting its own name. likely to change in the future as new produ It is possible for De Beers to establish its diamond come on stream? 336 Due date 28/w / 20