Finding Target Market Opportunities With Market Segmentation

Read the case and answer the questionsArgyle Diamonds. Finding Target Market Opportunities with Market Segmentation: Diamonds have always been associated with glamour and privileges. In the past, South Africa’s De Beershas promoted white stones as the ultimate gift of love and while pink diamonds did sell, brown stoneswere, until recently, completely neglected. For Argyle, the operator of Australia’s largest diamond mine,this represented a marketing nightmare. The 40-hectare Kimberely mine was discovered in 1979 andsince 1986 has supplied more than a third of the world total output of diamonds. Unfortunately, only 5percent of these are of the gem quality, of which 50 percent are coloured. In 1993, the mine producedapproximately 41 million carats and generated A$0. 5 billion in revenue. Jewellers prefer white gems. Research shows that consumers exposed to the coloured gems expressfavourable attitudes toward them but that retailers still perceive them as risky. It is a catch-22 situation: retailers won’t stock brown diamonds which they think won’t sell and this results in no customerexposure and therefore no sales!De Beers has complete control of the world market, buying 80 percent of Argyle’s industrial and neargem quality products and nearly 100 percent of gem quality stones of colour but it does not promotethem. Argyle, which produces 50 per cent of the world’s output, therefore took the initiative andtargeted the US, the largest initiative diamond market in the world, valued at US$12 billion. Thecompany made sure, however, that sales would not harm sales of the white diamond variety and hencewould not threaten De Beers. The product name was changed to Champagne and Cognac, which had classy and desirableconnotations. Rather than presenting it as the ideal romantic gift, Argyle portrayed the product assuitable for the thirty-something woman, upwardly mobile and able to pay for her own indulgences, apopulation on the increase and expected to provide more growth opportunities. In Australia, demand for Champagne and Cognac is still quite small but in the US sales have increaseddramatically. Awareness of the product among retailers increased from 5 per cent to 95 percent in thepast four years and the market grew to $200 million during the same period of time. Argyle alsoarranged for the diamonds to be cut in India rather than Europe, lowering the costs. Diamond mining is arisky business, but with the emergence of exotic stones from exotic places it seems ripe to tap thegrowing market of wealthy women. 1. How Argyle did changed the Problem into an Opportunity?2. Define the characteristics of the segment chosen by applying the relevant theory?3. What are the advantages of choosing the Segment