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A Diamond is Forever
Aug 10, 1998 12:16 PM
By Martin Rapaport
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RAPAPORT...
Publisher
De Beers’ brilliant marketing concept “A Diamond is Forever” communicates a powerful message to consumers. “A Diamond is Forever” is much more than merely an advertising slogan that highlights the unique physical, emotional and spiritual aspects of diamonds. The powerful concept behind the slogan is that it links the physical characteristics of a diamond with the emotional needs of gift giving. Diamond’s geological history and durability therefore justifys its unique symbolic value as the ultimate token of everlasting love and devotion. For just as a diamond is forever and transcends time, so too our love is forever and will transcend our mortal lives.
While the slogan focuses on diamond’s durability, the power of the concept extends to all the other physical attributes of a diamond. The hardness, strength, clarity, purity, sparkle and rarity of a diamond all take on emotional meaning and symbolic value justifying the selection of a diamond as the ultimate gift.
Clearly, what makes a diamond so special is not merely its durability, as many other physical things are as durable. The diamond is very special because of its unique combination of physical attributes, most of which mirror society’s emotional, idealized notion of love. (Yes, love is also fragile.)
The “forever” concept recognizes that the foundation of diamond demand is based on symbolic rather than utilitarian value. When one gives a diamond one is not merely giving a stone, but rather all of the things that the stone represents. When one receives a diamond as a gift, the value of the gift is much more than the value of the diamond. This is because the “diamond gift” is most often associated with a special occasion, or special person, and therefore includes emotional value. While the diamond and its value are important to the recipient, the symbolic meaning of the diamond gift is much more important.
Symbol of Love
A young woman receiving a diamond engagement ring certainly appreciates the ring and its value, but far more important to her is the intent of the present and what it signifies. What is really going on is that the young woman is getting much more than a stone; she is getting a husband.
The gift of a diamond is therefore most often associated with something more important than the physical stone. When a man gives a woman a diamond in the classic context of love, marriage or anniversary, the man is really signaling his life-long commitment of love. Since this gift of commitment is intangible, there is a need to give something physical as a symbol of the relationship.
While the wedding ring is the most obvious symbol of marriage, De Beers to its credit, has been able to position the diamond as a highly recognizable symbol of love. Over the years in a variety of cultures the diamond gift has evolved into much more than the gift of a pretty stone; it has come to symbolize the gift of love.
The development and maintenance of the symbolic value of diamonds is no easy task. While the “forever” marketing concept is very powerful it is also very complex and expensive to maintain. De Beers makes a good point when it points out that the industry would not be where it is today without the constant investment of advertising funds to maintain the positioning of diamonds as a symbol of love. In fact, its recent suggestion that other diamond producers participate in the promotion of the symbolic value of diamonds makes sense. What the trade refers to as “the illusion of diamonds” is not really an illusion. It is the real added value that diamonds acquire due to the investment of advertising and promotion funds to maintain the symbolic value of diamonds.
Undoubtedly, the image of diamonds in the mind of the consumer is a very complicated matter. The “forever” concept communicates to consumers that they can trust diamonds as a symbol of love because they are rock solid. A critical implicit element of the marketing campaign is that consumers can trust diamonds.
Emotional Investment
It is important for the trade to recognize that the added value attributed to diamonds is derived from the consumer’s emotional investment in the diamond. Consumers get emotionally attached to the diamonds they buy. If consumers buy a diamond only to find out later that the quality of the stone was misrepresented or the stone was laser treated, they are going to be much more upset than if they bought something else that had a quality problem. It’s a lot easier to return a stained sofa than an engagement ring that isn’t what it is supposed to be. The trade needs to recognize that the emotional investment by the consumer in the diamond increases our responsibility to the consumer. We are not just dealing with products; we are dealing with people’s feelings.
What abut diamond prices? Can the symbolic value of diamonds be destroyed if the monetary value of diamonds decline? Are diamond prices also “forever?”
Some people, particularly at De Beers, believe that price stability and the resultant consumer confidence is a critical element in the maintenance of the symbolic value of diamonds. If diamond prices become too volatile, consumers may no longer have the confidence to buy diamonds. Furthermore, decreasing diamond prices goes against the basic consumer marketing message that diamonds are “forever.”
Other people, including this writer, believe that diamond prices should be allowed to fluctuate in a free marketplace. We cannot support consumer confidence by creating artificial markets.
Furthermore, volatile foreign currency rates assure price volatility in foreign markets in spite of De Beers efforts to control prices.
Consumer confidence in diamonds as a stable store of value is another important factor supporting diamond demand. In some instances, diamonds are not a luxury product, but rather a form of insurance. Undoubtedly, there are many people who buy diamonds not merely for the luxury of owning them, but also because they know that they can sell them in troubled times.
Diamonds Forever -The Flip Side
Now that we have discussed the marketing aspect of “A Diamond is Forever,” let’s take a look at the flip side of the “forever” concept. Ironically, the greatest challenge to De Beers marketing of diamonds and maintenance of its monopoly over the long-term is the simple fact that “A Diamond is Forever.”
A diamond is forever implies that contrary to other products, a diamond is durable, it does not get used up, outdated or devalued over time. The problem for De Beers is that this means that every diamond ever sold is still out there waiting to be resold at some time in the future. Billions of dollars of diamonds not getting used up, not depreciating, and eventually will be offered for resale.
Considering the demographics of the U.S., which has a relatively large number of elderly diamond owners, it is reasonable to assume that the resale market for diamonds will expand significantly over the next ten years and keep expanding. If one follows the trend, it is reasonable to assume that at some stage in the future Florida will probably be a larger exporter of diamonds than South Africa.
Savvy Retailers Benefit
Now none of this is news to savvy retailers who have been active in the estate jewelry markets for many years. In fact, the development of the resale market for diamonds is not a problem at all, but rather a great opportunity to buy diamonds at great prices and significantly increase retailer profit margins. The continued development and expansion of the secondary market for diamonds is probably the best thing that ever happened to retailers that are sophisticated and knowledgeable enough to buy diamonds “off the street.” Frankly, in the future, retailers that do not buy diamonds from consumers will have a severe competitive disadvantage.
While the situation in the U.S. is slowly developing, recent events in the Far East have brought the issue of the secondary diamond markets to the forefront. Severe financial turmoil in a number of Pacific Rim countries and the collapse of their foreign currencies have brought about a situation whereby many consumers in the Pacific Rim wish to sell their diamonds. There has been a steadily developing expansion in the global resale market for polished diamonds.
Initially, a number of savvy international traders moved into these markets and bought diamonds at incredibly low prices. Needless to say, it did not take too long for the consumers to realize they were being underpaid and protests to the various consumer unions ensued. Furthermore, the diamonds found their way back into the distribution channels at prices that were significantly lower than the cost of manufacturing these stones from rough. Of course, this did not make the diamond manufacturers or De Beers very happy.
Some people in the diamond industry believe that the needs of the resellers should be ignored. They are concerned that the resale of large quantities of diamonds from Korea and other Pacific Rim countries might destabilize the markets. A number of firms when contacted by Far East sellers simply said, “we sell diamonds – we don’t buy them.”
Markets are competitive groups of dealers, some of whom have shown up on the scene with the idea that the best way to handle the situation is to buy as much as possible, as cheap as possible, as fast as possible and then dump everything into the cutting centers. This worked out for awhile until the sellers perceived they were getting a rough deal and stopped selling.
Over the past few weeks, we at Rapaport have been holding tenders of polished diamonds from Korea. Our approach has been to take in diamonds on consignment from consumers in Korea and offer them for sale to the highest bidder in the U.S. market. Our intention is to get the best possible market price for the Korean consumers and offer cash buyers in the U.S. market an opportunity to buy diamonds at very attractive prices. While our tenders have been selling out at reasonably high cash prices, some in the trade feel that it is wrong for us to disturb the markets by bringing in Korean polished.
Fair Opportunity
Frankly, our industry needs to do what it can to develop responsible, effective and efficient resale markets for diamonds. It doesn’t matter if the diamonds come from Korea or Florida. We must recognize that consumers need to be given a fair opportunity to sell their diamonds.
If consumers are not given a fair chance to sell their diamonds when they need cash, then the price our industry will pay in terms of lost consumer confidence will be extremely high. Today Korea is a large net seller of diamonds, but in the future when its economy turns around Korea will once again be a major buyer.
How we treat the Koreans and other sellers in their time of need, will directly impact on future demand from these markets. If we do not take care of the markets that need to sell today, these markets will not buy from us in the future. All the advertising in the world will not help us if consumers remember that our industry was not there for them when they needed to cash out.
On the other hand, if we take care of the markets that are in trouble today, they will be there for us in the future. If we give consumers fair deals through free trade, then they will remember us when times improve. The true test of our industry is not how well we do when times are great, but rather how well we take care of our customers and our markets when times are difficult.
Are diamonds forever? Will diamonds always be the ultimate gift for lovers? Will Far East consumers continue to “believe” in diamonds even after these difficult times? Well, it depends on how we in the trade treat our customers. If we recognize, honor and respect the great trust and emotional investment that consumers put in our product, and our trade, and if we take care of our customers’ need to sell in difficult times as well as their need to buy in good times, then sure, diamonds are forever.
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Tags:
Consumers, De Beers, Economy, Jewelry, Manufacturing, Martin Rapaport, South Africa, Tenders
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