The resignation of Gareth Penny as CEO of De Beers has generated certain fears among the DTC clients regarding the possibility of re-targeting the marketing for rough diamonds from the program of Supplier of Choice towards auctions and online sales. Obviously, these fears were warmed up by an apparent speculative rise in prices in the first half of 2010 and by numerous persuasive forecasts saying that rough will turn more and more deficient in the nearest years mainly due to depletion of the global mineral reserves. Nicky Oppenheimer, Chairman of the De Beers Group, was quick to assure the sightholders that “the management of De Beers is fully committed to building upon the success of our Supplier of Choice (SoC) strategy in the months and years ahead.” Nevertheless, this episode has once again underlined the value of marketing strategies pursued by diamond-mining companies as one of the pace-setting factors in market development.

Really, sales through auctions and tenders allow the mining company to gain a price which is maximal for the given moment. As is known, BHP Billiton sticks to this rule regarding diamond trade as basically no different from trading in other commodities. The reasons for such a radical view of this specific market are quite transparent: this “diamond division’s” incomes make less than 1% of the total profits of BHP Billiton, while the Ekati diamond field reserves will end within the next 7-8 years after which the company’s share in the global diamond output will fall from the present 10% down to zero. In view of such a perspective the tactics of squeezing a ceiling price is quite justified.

However, those who wish to stay in the diamond market longer profess quite another philosophy of sales. Nicky Oppenheimer is not at all inclined to view diamonds as just one of many other raw materials: “We will continue to put DTC Sightholders at the centre of our business and will continue to treat our diamonds as the special, unique and valuable treasure that they are.” Although Diamdel, a marketing outlet of De Beers rendering services to one-time customers, is successfully practicing auctions (in the first quarter of 2010 they sold 138 lots), still long-term contracts tied up with sightholders appear to be the back-bone of De Beers’ marketing policy. In the above quotation the words “our diamonds” are far from being incidental. The Supplier of Choice Program has initially been designed to involve sightholders into marketing diamonds made by De Beers. This idea was further developed in the Everlon and Forevermark programs.

The basic difference of these new marketing programs is that they are funded by all the links of the vertically integrated chain: from the diamond-mining company to jewelry retailers. A new feature is added to the information shell (which is actually the true vendible) of the polished diamond – it is a brand which is absent in other competitors’ production. Diamonds are forever, but if you are in for diamonds then it is Forevermark. Consumer confidence about the brand is guaranteed by De Beers, the elite sightholders and hand-picked retailers. It is no coincidence that the brand is first of all intended for China and India – the main areas of growth in the diamond market in the next decade.

Is it possible to work out and implement this kind of marketing strategies if the diamond-mining company’s customers are not sightholders but participants of one-time auction transactions? It is a rhetorical question.

Situations when the rough market is swept by speculative demand and the growth rate of rough prices is many times higher than that of polished prices are not all rare. These phantoms quickly emerge and as quickly disapear leaving disappointment behind. Consumer demand for diamond jewelry is the only genuine market driver. New marketing technologies of De Beers stimulate demand, but not for polished diamonds as a whole; they stimulate demand for the company’s own branded production which involves its long-term partners. This idea is in fundamental contradiction with the idea of generic marketing. But IDB is only good intentions, while Forevermark is a real tool of competition.

The garland for this know-how may hardly be given to De Beers. An “initial outlay” of such marketing technology was green-tested in 1993 when Argyle Diamond in team with two Indian sightholders ran a successful advertising campaign to promote diamond jewelry made of “Indian goods” in the United States. And today Rio Tinto has an opportunity to make such marketing moves in the sector of its basic production at Argyle together with its numerous Indian sightholders, all the more so as the underground mine on this pipe will not be put into operation before 2013. But the unique pink diamonds of Argyle are really exclusive auction goods.

ALROSA has finally managed to make up a pool of customers operating under long-term contracts. It is an opportunity for branding Russian diamonds. Will it be properly realized or not depends on many circumstances, but the first step is made, and the necessity to go further along this way is hardly doubtful. The forecast pointing to a future deficiency in the rough market is highly probable. But it is by far not equal to one. Yes, the mineral resources base is depleting and diamond output is decreasing, but tough inter-industry competition and complete disregard of generic marketing may seriously affect eventual consumer demand. And in this case the one who will be able to convince consumers that the best diamonds are “our diamonds” will survive in the market.

Ref: <a href="http://www.rough-polished.com/en/news/41190.html" target="_blank">Rough-Polished.com</a>