Brand Case Study: De Beers,Volkswagen and Nokia

DEBEERS

The market for diamonds has never been characterized by free, dynamic and open competition. Everything about diamond industry is manipulated: supply, pricing, processing and retailing. The leader of the diamond industry is De Beers, a company that produces half of the world’s high-quality diamonds. This case explores the impact of marketing on the diamond market and how it helped to shape the public perception of diamonds as a desirable gift over the course of the 20th century.

De Beers ‘Diamonds are Forever’ advertising campaign, which started in the 1940s, was to become one of the most effective of the 20th century. It enabled De Beers to manipulate demand as well as supply. With the help of their agency, they created a mindset, which later swept the world, in which diamonds came to be perceived, not simply as precious gems (of which there are many) that could be traded according to volatile market prices, but as an inseparable part of life. Most specifically, diamonds became a significant love token, marking the engagement that could lead to married life. It is now difficult for courting couples to contemplate engagement without, at some stage discussing, the purchase of diamond solitaire ring. Anything less would appear to devalue the courtship, and be a less than permanent token. The size of the diamond, or its number of carats, was somehow perceived to signify the grandeur of the affection. It was a potent place to occupy in the mass of consciousness.

Before the 1940s, however, diamonds were not held in such high esteem and it did not hold such a cherished place in the minds of women. The idea of a long historical tradition of giving a diamond ring for an engagement was a post war invention. The giving of diamonds to mark an engagement had been around since then 19th century. But it was a low key, optional activity. In Germany, Austria, Italy and Spain, the notion of giving diamond rings to commemorate an engagement was not even entertained. On the eve of the Second World War, Germany saw diamonds as important for industrial and military purposes; given it is the world’s hardest substance. In the UK and France, before the war, diamonds were perceived as a jewel for the upper classes. In America, the gift was usually confined to a lower quality, inexpensive diamonds. Diamond sales had actually been declining in America since the early 1920s, both in quality and value.

The man who decided to change the pattern of demand for diamonds was Harry Oppenheimer of De Beers. Oppenheimer was at the time concerned by the post depression collapse of diamond prices, despite the best efforts of the DeBeers cartel to manipulate prices by control of supply. He selected the N.W. Ayer advertising agency in New York to achieve this extraordinary piece of marketing manipulation.

A. W. Ayer, following extensive research, very typical of the early days of ‘scientific’ advertising, came up with a plan to change the attitudes of American public towards diamonds. The dominant characteristic of half a century of diamond marketing is the direct and manipulative association of diamonds and romance. It was a long term strategy – to change the mind set and behaviour pattern – rather than the attempt to drive short-term sales of diamonds. Therefore, marketing of diamonds was essentially an appeal to emotions, rather than a focus on the product itself. Through multiple messages and images the world would begin to perceive diamonds as the jewel of romance, esteem and enduring love.

As a result of such marketing, the diamond market developed in a curious pattern: for such an icon of female decoration, the market is mainly composed of men as buyers – 90% of all diamonds are bought by men for women. Yet the wearers are almost always women; women rarely buy diamonds either for themselves or for others. Moreover, women rarely involved in the selection or purchase of the diamond. The reaction of the women, rather than the object itself, is the primary driver in the male purchasing decision. The element of surprise following the presentation of the diamond ring to the women, and the gushing delight as it is received is an abiding mental image, portrayed in many films and television shows.

The result of the first 40 years of marketing was that Ayer helped De Beers expand its sales of diamond in the United States from $23 million in 1939 to over $2 billion by 1980. In same period, expenditure on diamond advertising for De Beers in North America increased from $200,000 a year and to $10 million.

How did they do it? Ayer sought out the glamorous role models who where able to influence the purchasing habits of Middle America. In the 1940s, movie stars had a huge bearing on American Society. The agency began negotiations with Hollywood to use diamonds in the titles of their movies. Movie scripts started to include leading man using diamonds to make wedding proposals. News stories and society photographs were planted that emphasized the link between diamonds and romance. In 1946, the agency began a weekly service called Hollywood Personalities, which published stories in 125 leading newspapers with descriptions of the diamonds worn by major movie stars. In 1947, the agency produced portraits of socialites showing off their diamond rings for recent engagement. Nationwide lecture tours were organized to introduce high school girls to different ranges of diamonds and to start to plant the idea in the minds of the young. Fashion designers were encouraged to use diamonds in their new creations. The British royal family were even used to enhance the status of diamonds: for example, Oppenheimer presented Queen Elizabeth II with prize diamonds during her trip to South Africa.

The De Beers advertising campaign continued unabated during the Second World War, although diamond mines were being closed all over Africa and cutting centres in Europe being abandoned. Ayer even promoted the message that diamond were contributing to the war effort and, consequently, buying diamonds was adequate with patriotism. By 1941, the campaign was starting to show results: the sale of diamonds had increased by 55 percent in the United States. After the war, the Ayer agency focused upon the millions of American servicemen from the war.

The American market for diamonds was around 70 million people in the immediate post war period. The agency, on behalf of De Beers, sought to influence men to buy more, and bigger, diamonds in the name of an invented ‘tradition’ that was linked emotionally to romance. In 1948 an Ayer copywriter came up with the legendary and enduring slogan “A Diamond Is Forever”. Within a year it became the official signature of De Beers, and it remains so today.

In the 1950s, the era of conspicuous consumption in America, N.W. Ayer used the new medium of television to influence American public opinion. Famous actresses and other celebrities displayed diamonds to the television audience. A diamond not only became a way of legitimizing a romance, of finding a man, it also became a status symbol in status hungry culture. The more the carats, the deeper the love, the more enduring the relationship, the greater the prestige. A famous song of the time stated, ‘ diamonds are a girl’s best friend’.

During all this time the agency also promoted the idea that De Beers diamonds were authentic and that they were made from the rarest stones. This enabled them to fend off the challenge of synthetic diamonds (such as the process developed by GE in the 1950s).

In the 1960s the agency proposed the global expansion of the idea that they had successfully nurtured over a 20-year period in the United States. They proposed the invention of the same ‘tradition’ in other countries where it did not previously exist. Japan, Germany and Brazil were targeted. Within ten years, De Beers succeeded even beyond its most optimistic expectations in creating a billion-dollar-a-year diamond tradition in Japan.

Once the international market had provided expanded sales, the agency promoted the idea of buying a second diamond ring as a symbol of ‘renewal’ of marriage and of long-term love. These became known as ‘later in life’ diamonds. This came at a time as diamond production expanded and there was a risk of flooding the market.

With the production of diamonds of a smaller caratage in the Soviet Union (which De Beers distributed, the company now had to make small diamonds respectable. The average size of a diamond, which was one carat in 1939, fell to one-quarter carat by the late 1970s. the consequence of this was to diminish the market for large diamonds, which came to be seen by the American consumers, who had become gradually accustomed to the idea of buying smaller diamonds, as gaudy and brash. Conversely, the demand for small diamond is a low growth market, and in recent times the diamond mining industry has come under greater scrutiny. De Beers has taken the decision to re-invent itself as a luxury goods company.

VOLKSWAGEN

The story of Volkswagen, the car as famous for its appearance as it is for advertising, is strongly intertwined with the history of the last century. It is also one of the greatest brand successes ever.

The Volkswagen Company was originally operated by the German Labour Front (Deutsche Arbeitsfront), a Nazi organization specifically charged with the organization of the German workforce without trade unions. The legendary German car design, Ferdinand Porsche, designed the original ‘People’s Car” during Hitler’s tenure of power. Nazi propaganda heavily promoted the Volkswagen as a symbol of German progress and community. World War II interrupted production of the Volkswagen. By 1945, both the Volkswagen factory and its home city of Wolfsburg were in ruins. Volkswagen was see through its association with the Nazi regime as having a tainted brand and, for some, an unsaleable brand. The British, who administered the region in the postwar period, refused to transfer the plant to the UK. The French tried to get the British to sell the equipment to the France, but that did not happened. The machinery was also taken as payment in kind for war reparations. The British occupiers looked for a car company to manage the Wolfsburg plant. The Ford Motor Company was contracted and Henry Ford II assessed the plant. Their opinion was that the Volkswagen was not worth their investment. Eventually, and despairingly, the plant was turned over to German management under Heinz Nordoff. The Volkswagen Corporation that we know today was born. Exports to the most part of the world grew in strength. However the vast, market of the US remained elusive until the 1950s. The Volkswagen car’s unusual rounded appearance, its engine in the rear, together with its historical connections with Nazi Germany originally proved a disincentive in the US. This changed in 1959, when the New York advertising agency, Doyle Dane Bernbach, began a landmark advertising campaign, dubbing the car ‘the Beetle’ because of its shape and pointing to its size as an advantage to the consumer. This campaign was very successful, and for some years following, the Beetle was the leading automobile import sold in the Unites States. It was the ‘hero’ of the popular Disney ‘Love Bug’ movie series.

Although the German government had founded the company, in 1960 the state denationalized it by selling 60% of its stock to the public. Volkswagen acquired the Audi auto company in 1965. Volkswagen and its affiliates operate plants throughout most of the world. In addition to cars, the company produces vans and minibuses, automotive parts, and industrial engines. Its own several other auto companies, including Audi in Germany and SEAT (Sociedad Espanola de Automoviles de Turismo) in Spain, and it also makes and markets cars with Fiat of Italy and Skoda of the Czech Republic. The Volkswagen hardly changed from its original design, however, and by 1974, with increasing competition from other compact foreign cars, Volkswagen came near bankruptcy. This spurred the company to develop newer, sportier car models; among them were the Rabbit and its successor, the Golf. In 2000 the Beetle design was revived with a new engine, with great international success. Billboards in New York for the new Beetle read ‘The World’s Cup is half full Again’. See also ADVERTISING: Volkswagen’s ‘Think Small’ campaign.

NOKIA

Founded in 1860, Nokia Corporation, headquartered in Helsinki, is the world’s leading mobile phone supplier. It is also a leading supplier of mobile and fixed telecommunications networks, including related customer services, and supplies solutions and products for fixed and wireless data-com and multimedia terminals, and computers. Nokia accounts for almost a quarter of Finland’s exports, and nearly 4% of its GDP.

Nokia is an outstanding example of re-invention and brand positioning.

In 1965 the Finnish mining engineer Fredrik Idestam established a wood-pulp mill in Southern Finland and began manufacturing paper. Named after the river Nokia, where its lumber mills were sited, Nokia started off in forestry, and later moved into making paper, rubber and electric cables. The Finnish Rubber Works, initially opened in 1898, established a factory on the river Nokia after its executives passed through the area and recognized the value of hydroelectricity available there. In the 1920s, The Finnish Rubber Works started to use Nokia as their brand name. in addition to footwear and tires, the company later went on to manufacture rubber bands, galoshes, industrial parts, raincoats, and other rubber products. The company that later became known as the Finnish Cable Works opened in 1912 in Helsinki. The increasing need of power transmission and telegraph and telephone networks meant that the company grew quickly. After World War II, the Finnish Rubber Works bought the majority of the Finnish Cable Works’ shares, and gradually the ownership of these companies consolidated. Finally, in 1967 the companies were merged to form the Nokia Group. The company evolved dramatically, growing first into a conglomerate encompassing diverse industries. However, by the 1980s it was an unfocused conglomerate that made everything from galoshes to TVs. Nokia’s operations had rapidly expanded into too many business sectors, countries and products. The strategy was to expand relentlessly on all fronts. In 1988, Nokia was Europe’s third-largest television manufacturer and the largest information technology company in the Nordic countries. During the deep recession in Finland at the beginning of the 1990s, the telecommunications and mobile phone divisions were the supporting pillars of the company. Despite the depth of the recession, Jorma Ollila was appointed to head the entire Nokia Group. Nokia made the major strategic decision to divest its non-core operations and focus on mobile telecommunications.

The groundwork for the shift to mobile communications had been laid in the 1960s, when Nokia’s electronics department was researching radio transmission, Nokia started to make mobile phones for the military, which took off after the establishment of a multinational cellular network by a consortium of Scandinavian state operators. This network gave the Scandinavians an advantage when it came to setting up Europe-wide networks, based on the digital GSM standard in early 1990s.

Nokia took the major gamble and it paid off. Under Ollila’s leadership, Nokia became focused on being a mobile phone company with a global brand. Nokia has led the mobile phone industry by emphasizing its brand and its design – mobile phones are fashion statements – with easy to use software. The company has also positioned itself to take advantage of the coming convergence between mobile phones and the Internet.

Bookmark the permalink.