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Selling the Diamond Dream
Jul 16, 1999 2:58 PM
By Martin Rapaport
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By Martin Rapaport
Steven Lussier, worldwide director of De Beers consumer marketing division is a surprisingly young (41-year-old) American. He is a primary moving force within De Beers, who not only oversees the new De Beers branding initiative and the Millenium program but is also in charge of the $170 million De Beers spends annually on advertising. Martin Rapaport interviewed Lussier in his London office last week.
Martin Rapaport: How does De Beers organize its consumer marketing activities?
Stephen Lussier: Our consumer marketing division is London-based with a satellite office in Hong Kong. In total we have about 40 people. The core of our organization are the marketing directors who oversee our marketing activities in each country we operate in. We run a very tight unit. The focus of our approach is to share ideas very rapidly across countries. When we have a new idea we can roll it out across many countries as quickly as possible. We can also protect the image of the diamond in our communication because we are a small group. Obviously, we think internationally and make sure that ideas are shared, but we also make sure our people understand each culture and market and execute our marketing programs to meet local needs.
Rather than build De Beers’ offices all over the world, we use our agency networks. Over the years they have been consolidated into one advertising agency — J. Walter Thompson. In its offices all over the world you will find the diamond-marketing group which provides traditional advertising agency services such as media services, creative people to think up ads, and research people to understand the local consumers. You will also find two other groups of people who are unique to the way De Beers operates.
The Diamond Information Center is the consumer publicity arm of De Beers. Its job is to create publicity for diamonds in whatever market it is in. It works hand in hand with the advertising people, but its focus is editorial.
The Diamond Promotion Service is our trade marketing arm. It works with the local industry, jewelry manufacturers, retailers and whomever we might need in order to achieve a successful marketing strategy.
So we have three groups whose skills are all brought together in each country through the local Thompson agency. The head of each local team reports to the marketing director in London, while the actual execution of our marketing programs are done through the local team.
MR: Where do the conceptual ideas come from? London or the local markets?
SL: We try to engage the creativity in each local market. And we have had several local campaigns, which are now global campaigns. Our job is twofold — to spot a good idea when we see it and then rapidly transfer it around the world. Alternatively, we think up our own ideas but we have to feed them into the local markets, which then tell us to accept them or not depending on how good the idea is. Something like the millennium — the idea to capitalize on it — came from the center in London and from there it went to the local markets.
MR: What do you do?
SL: I allocate the resources available and execute them in such a way as to create as much demand for diamond jewelry around the world as is possible. Our time horizon is three to five years when looking out to the future. We also run programs that are more immediate, but it helps to plan for the horizon to let people measure the impact of their efforts.
MR: What are you trying to sell? Diamonds? Jewelry? Certain types of diamonds?
SL: Here is how we see our approach to marketing. What I am selling primarily is an idea. I do not actually sell a physical thing. I sell the idea of buying a diamond to the consumer. Just the idea. Not the product.
For the most part it is just a diamond. It can be a five-point diamond or a fifty-carat diamond. We sell the basic idea. The idea of owning a diamond.
To me the sale of jewelry is a secondary tactic. Jewelry is very important and I don’t want to minimize it but it is a tactic. It is not my goal. My goal is to sell the idea of a diamond.
We sell the diamond dream. The diamond dream is about glamour and style. When you see a famous movie star absolutely covered in diamonds this communicates that diamonds are glamorous and in style. When you open a newspaper and see a famous movie star wearing diamonds it makes me very happy, because I know that often as not, we put those diamonds on the woman the night before. Publicity is a big part of the diamond dream. To sell the diamond we must first have people believe in it. We accomplish this through advertising and publicity.
The dream is a complicated thing. It is part glamour and part symbolism. Here is a great story from our research department. We had a group of single men, in their thirties, many of them married before. We were doing research on what it is like to give diamonds. One man said, "I am thinking of giving my girlfriend diamond earrings for Christmas." All the other guys spoke up "You can’t do that, if you give her diamond earrings, six months later you will have to give her an engagement ring. There is no way out."
Now what are we getting at? You can give her a watch of the same value but if you give diamonds it is a public symbol of commitment. Our product is different than any other expensive luxury product. You can give expensive things and they mean — "I’m quite keen on you — here is an expensive watch." But if you give diamonds, even if it is not an engagement ring, you are making a public statement of commitment. The symbolism is all powerful and that is a big part of the diamond dream.
The diamond has the ability to publicly speak the language of commitment to people who see and hear about the gift. She says, "Jack gave me this diamond gift for Christmas" and people say, "Oh Jack must really be committed to you." If Jack gave her an expensive watch they would say, "does Jack have a lot of money." The diamond symbolizes commitment which is a basic human need in all countries. The commitment is the basic need. To have it recognized publicly is another important need.
Diamonds are a very complex thing. You have the emotional part of the dream which is more powerful in western societies. And you have the glamour, excitement and magic of the product itself. We differentiate the glamour of diamonds from the glamour of other luxury products by our promise that the diamond’s the glamour will be eternal. Sure, she can buy an equally glamorous dress, but she knows that in four years she is not going to wear that dress. The promise of diamonds is that forty years from now the diamond will be just as glamorous as it is now. Diamonds are a timeless luxury, with timeless glamour and beauty, and we promise that.
These two promises, the promise of commitment and the promise of eternal glamour take on different meanings to different women at different points in their lives. They are the two core premises of the diamond dream.
MR: How important is the notion that diamonds are a store of value?
JS: I think it is very important that people believe that diamonds are a long term store of value. The store of value argument justifies the expensive purchase of diamonds and makes it much easier for men to pay $10,000.
MR: How long will you keep running the Shadows campaign. Isn’t it dated?
SL: As long as it is still a powerful communication tool, we’ll carry on with it. Our goal is to have really effective advertising. Effective is defined by our ability to cut through the clutter of big advertisers and get through to the consumer. If a campaign doesn’t reach our target market then it’s gone.
This is how we review our advertising campaigns. One, we measure our ability to get through to the consumer. Two, we measure the liking scores of the group that has most seen our advertising. The liking score measures boredom and irritation on the negative side and motivation on the positive side. Three, we correlate awareness of the campaigns with propensity to buy, and follow-up to see if in the end they do buy?
MR: How successful is your advertising?
SL: I think we are very successful in America. Everything I see coming back to me about our current program in America suggests that the advertising is still extremely powerful and that it is still motivating consumers to believe in the diamond dream and to buy the product. Some of the more recent focuses on things like diamond solitaires are showing that demand is increasing. America looks really powerful. In Europe, I think the advertising is great, but we don’t have quite as much money to spend as in America.
MR: If it works in America why aren’t you doing more advertising elsewhere?
SL: Because there are only so many dollars. We will spend about 4 percent of sales on advertising this year and we went over 5 percent last year. I think we would obviously like to spend more on advertising, but the challenge is to relate our ad budget to the economics of how the industry currently functions. The fact is that there are significant diamond producers who don’t contribute towards advertising.
I think the big issue is that advertising alone is not the solution. When there is a demand problem people say "what is De Beers going to do?" If we were in another industry, people would be saying, "what are we going to do?" People have to do more of their own marketing instead of relying on De Beers. Other industries are very focused on the consumer and they’re very good at using retail marketing techniques to compete for the consumer. Outside of America I don’t see that in the jewelry industry.
MR: Isn’t it only natural that the trade should expect De Beers to do more? After all, you are charging the diamond producers for advertising and promotion. You are getting the industries’ advertising budget. Why shouldn’t the industry ask you for solutions to its problems?
SL: I think everybody is right to push us, but the challenge is greater than people realize. It is not really about how much De Beers spends on advertising. It is about the ability of our industry to compete against other industries that sell to our customers. Is our industry as competitive in marketing as the industries we are competing against? Are we aggressive enough? Are we taking enough risks with new ways of marketing?
What is going on in the mind of a diamond manufacturer? Is he thinking "How am I going to get another American to buy a diamond from me today? Or is he thinking, "How can I shift this stone I’ve got for another 2 percent to someone else and make it his problem? Are we an industry that is really focused on the consumer? Are we as competitive as we could be, or should be, when it comes to marketing?
I’ll give you a great example. Taiwan has gone through a complete change in its retail environment. Five years ago, diamonds were the only luxury product in town and the jewelry business was based in its old-fashioned diamond district which looks like something out of the Middle Ages. Within a period of 5 years, all the foreign luxury brands came to Taiwan. Fashion houses like Prada and Gucci. Powerful watch brands promoting watches. These days a woman goes down the nicest street in Taipei to visit the really glamorous stores that she wants to go into because it looks exciting and she feels like part of the new modern world. Where are the diamonds?
MR: Are you saying that diamonds are not keeping up with other luxury products?
SL: We are being beaten in some of these markets. This is the challenge. How can we be as competitive as all of these other shops? What skills do we need that we’re not employing now?
MR: So you’re saying that the retailers looking to De Beers for help should really be doing exciting innovative things themselves to market their diamonds.
SL: Yes. I think we should be prepared to help them and they should be prepared to help us. But our industry has a problem. If we really want to raise demand, the entire industry has to step up to the plate. We at De Beers have to get better, but the industry also has to get better. The trade must become more consumer focused and acquire new marketing skills.
MR: Some retailers say that they can’t spend more on marketing because strong price competition reduces profit margins. There is even strong price competition for some branded items like Rolex watches.
SL: This is the difference between branding and retailing. Branding actually adds value in the consumer’s minds. It is not just a quality guarantee. Consumers actually feel better and are prepared to pay more. They’re buying fashionability, they’re buying into being in the “in club.”
The brand is what sells all of the added value while the product has its functional value. All the big names are increasing sales. This proves that brand value can be generated in our business as in every other business. From De Beers point of view, it’s probably extremely beneficial that people are developing their own brands. The Tiffany brand, the Cartier brand and other brands are all good for us. The more brands the better.
MR: What is branding?
SL: Branding is not a laser inscription. It is never one thing. Branding is a collection of images, perceptions, and ideas that a consumer thinks about when they hear a name. Obviously, it’s usually in relation to a product. If you say, "What’s in a Coca-Cola brand?" It’s not the drink. The Coca-Cola brand is the idea that it’s “the real thing.” It is the original. Everything else is a copy.
The De Beers brand is about the consumer. It is about trust and confidence. The De Beers brand communicates, "I really know it’s a good one.” We apply our brand message to a product, which in this instance is a relatively good diamond but we could apply that trust and confidence in different ways.
MR: What different ways?
SL: Look at the limited edition Millennium brand. It’s a little different. This brand is more about people thinking “I have this opportunity to buy something special” and “De Beers are the ones that can really do that for me.” De Beers can say “Of all the diamonds we have we are going to make something special and you can have it.” It is a little bit less about trust and more about De Beers being a prestigious selector. The message is that De Beers is in a unique position in the diamond world to have selected these diamonds. People really have to believe De Beers leadership position in the industry and the fact that this is really something special being done by the leader for a special client.
MR: Does the De Beers brand have a history?
SL: It doesn’t, but you could say the sight box is a De Beers’ brand article. If a De Beers box is trading at a premium it is because people are reflecting De Beers ability to select rough with continuity, consistency and a sensible value of the market.
MR: How did the branding project start?
SL: We started with synthetics. Idea one was to put ourselves in a position to differentiate products so as to defend diamonds from synthetics. We were concerned that in the long term there might be a synthetic technology that we could not detect. The concern about synthetics pushed us to invent new technology and a method of branding.
Another thing that made us think branding was worthwhile is that our name was perceived by the industry to have value as a way to help sell diamonds. This came from experiences we had in the consumer marketing group. We were trying to limit people’s ability to use our name in some instances, and in others to use our name as part of a promotional program.
We noticed that retailers wanted our name because they felt it added credit ability to their message. Our name had to have a certain magic with the consumer. I think that they felt that it underlined the importance of their shop and that the consumer was fascinated by the mystery of De Beers. Retailers felt that they could use our name to increase their diamond business.
We were also looking at the problem of declining margins. Wouldn’t the industry be better off if there was more nonprice competition? One of the things we can do with branding is add value. Branding creates a sense of differentiation and a potential for added margin.
MR: What are the other benefits of branding?
SL: I worry about competition from luxury goods. I worry about the power of Gucci and other names that sell $2000 dresses and $1000 bags. I worry about that competition because the average jeweler is in reality a small business that will never have as glamorous or as exciting a brand. The De Beers brand can be a real competitive tool to help the jeweler compete against other luxury-branded goods. He can benefit from the glamour and excitement generated by our brand. Not many people have the capability to establish a brand in a way that can compete against the Gucci’s and Prada’s of this world.
MR: How much money are you going to spend on branding?
SL: I don’t know the answer to that.
MR: What have you learned from the sale of De Beers’ branded diamonds in England?
SL: They sold at a higher margin with a faster turn. They were very easy to sell but people didn’t come in saying, "I want a De Beers diamond or nothing.” People come in because they knew the kind of diamond, jewelry or design they wanted. Then when they saw the De Beers branded diamonds it justified the higher margin.
You know what happens when you show them the De Beers mark, they say "wow.” Whenever you show the brandmark you get an actual "wow". It is an unbelievable accomplishment to get a “wow” out of an Englishman. They are excited to see that mark. That’s the difference I think between our market and laser inscription. It is a more exciting product.
MR: Tell us about the "Wow" effect.
SL: It’s an added extra. The technology provokes the "wow" effect but it reflects on the whole brand idea together with the De Beers endorsement.
MR: What are the limits of the brand?
The cost of the branding technology limits its application to only select sizes and price categories of diamonds. Even if we find a way to bring branding to the next stage, it will only cover a minority of our stones.
We are looking at different market case histories, particularly of industry leaders that have carried out marketing for brands that expanded the industry. I’ll give you a great and simple example. Marlboro cigarettes. They have a dominant market share and advertise nothing but Marlboro. Their brand promotes a masculine image of smoking — ruggedness, coolness. It sells a lot of cigarettes beyond Marlboro.
De Beers position is that there are an infinitesimal number of ways that the concept of a De Beers brand can be used to sell more diamonds. Not just diamonds that are stamped. But all diamonds that can be associated with a De Beers’ brand.
MR: Where do we go from here?
SL: We have set a period of time for ourselves until the end of August to make a first evaluation on Boodle & Dunthorne sales in England and really understand what happened there. We will also draw what conclusions we can from the Millennium limited edition program and the value we created. We will assess how much potential value the branding idea has. From that we’ll decide a host of different things. It might be that there’s no value in the brand. It might be that there is very useful value. But big questions that need to be answered.
There are two very good real questions I got from the industry. One, how can we be confident that the brand will not devalue diamonds that do not have the mark. That is a very serious and real question. If the brand hurts nonbranded diamonds, I don’t want to do it either. I must be absolutely confident that we are adding value to the ones with the mark rather than detracting value from the ones without the mark. We must think of ways to give us as much confidence as possible, that my initial opinion that branding is going to add value is actually true.
The second good question that people ask is "What about me? Can I get it?” We must think how the distribution will work and how the trade will get the branded diamonds.
Our goal, if we go ahead with branding, will be to generate extra profit margin and extra excitement much like the limited edition is doing. The limited edition is classic. It has done more for getting the trade to think about marketing in the industry than anything else we have done. They’re not just waiting for De Beers to do it. A handful of diamonds have engaged the industry and focused them on the marketing potential of diamonds.
MR: How is the time capsule doing?
SL: We have to see what happens. The basic idea behind the time capsule is very simple. We wanted a good millennium opportunity to get grandparents to buy diamonds for their granddaughters, it’s just a natural thing. " What are you going to give your granddaughter for the millennium?" A diamond is perfect because it will last and last.
The idea was to put the diamonds into something other than a jewelry box. Something that she will want to keep and will relate to the millennium. So we got the idea of the $32 time capsule. We showed it at the CSO sights to see if anyone was interested and it absolutely caught their imagination.
We will have a lot more capsules than limited edition diamonds. It is not the sale of the capsule itself that interests us. The key is that the capsule gets the trade thinking “what am I going to do to grow the market?”
MR: What have you learned from the branding initiative?
SL: It shows me that there is an opportunity to focus our industry onto consumer marketing. The branding idea generates action, excitement and demand focus. In effect, maybe that’s what branding will become. It will become that thing that makes the trade think about the consumer. To think about what the consumer wants, not what I want. Because that is the only way we can compete against the other luxury goods sellers. You can also be sure of where they are looking. It’s how to position themselves against the consumer to add value.
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Tags:
Consumers, De Beers, Hong Kong, Jewelry, Luxury Products, Sights, Tiffany
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