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Jeremy Pudney - Creator of De Beers Global Marketing
May 19, 1997 2:19 PM
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Jeremy P. Pudney, executive board director of De Beers' responsible
for consumer and marketing, answered some questions for RDR on De
Beers global marketing strategy. Prior to joining De Beers in 1962,
Mr. Pudney began his career in advertising with the S H Benson
advertising agency, at the time one of London's leading agencies.
When he joined De Beers, Mr. Pudney was given the role of setting up a
new department to handle the expanding advertising activities of the
CSO. Based in London, he is currently responsible for all research,
development and implementation of gem marketing campaigns for diamond
jewelry. The campaigns have expanded to 29 countries globally with a
multimillion dollar budget. During the years he has been with De
Beers he has gained important experience sorting rough diamonds,
working in the sales department and on secondment to South Africa
within the financial and administration divisions. Mr. Pudney is a
competitive sailor, especially in International 14s, a competitive
dinghy class in which for which he has won most major trophies.
RDR: What is the annual budget for advertising worldwide and how
is the money distributed regionally?
JPP: The De Beers 1997 consumer marketing budget, including market
research, is almost exactly $200 million. it is split regionally
according to a combination of factors including: Current market
maturity of each individual country; future growth potential; nature
and complexity of the program/s required; numbers of potential
consumers in the target audience for each campaign; media cost of
reaching that audience, and other costs of doing business in each
country.
The regional split is therefore, not necessarily precisely in line
with the existing share by region of the diamond value at polished
wholesale prices: The Americas 37 percent; Europe 16 percent; Asia-
Pacific 20 percent; Japan 21 percent and Asia-Arabia 6 percent.
RDR: What is the overall advertising/marketing strategy for De
Beers?
JPP: To date the objective remains unchanged since 1939, namely to
encourage global consumer demand to grow roughly in line with
global supply, in such a way as to allow for gradual increases in
polished prices - ideally marginally ahead of inflation. Our strategy
is to maintain the "Diamond Dream" ( ie, the ongoing association of
the diamond's intrinsic values and beauty, mystique and magic with its
appropriateness as the ultimate gift of love, affection or
self- esteem.) We aim to achieve this via a variety of campaigns:
the Image campaign; "rites of passage" campaigns - linking the diamond
to key gifting occasions throughout a couple's life together - for the
Diamond Engagement Rings; the Diamond Wedding Ring (in East Asia); the
Diamond Anniversary Band (often for the 10th anniversary); the 25th
Anniversary Diamond Necklace, etc. And self purchase campaigns
targeting young, independent -often working- women, especially with
new design trend ideas.
RDR: What changes have you seen in De Beers marketing since you began?
JPP: Geographically, since I joined De Beers in 1962 to set up an
advertising department, we have seen an expansion from a single
market, the U.S.A., to 34 countries worldwide. In staff terms, an
expansion from myself, an assistant and a secretary, to a team of 46
people, of whom six are based in Hong Kong, and who plan and co-
ordinate the efforts of over 390 staff in our J. Walter Thompson
network worldwide.
I think the sophistication and skills of our team have evolved with
the times, as they have had to, in line with the explosive growth in
the variety of cultures, countries, campaigns and languages in which
we now have to operate to achieve the goal of growing global consumer
demand for diamonds.
RDR: What gave you the idea to start the Diamond Information Center
(DIC)? What is its mission and what countries is it in?
JPP: Since diamonds are intrinsically interesting to the public at
large, and consequently to the media, I wanted to set up a
professional team to channel
interesting news, stories and pictures, in a structured, organized way
to the media to that positive diamond coverage would be more regular
and frequent than before. The DIC's mission is basically to help sell
more diamonds by providing a service to the edia which upholds key
publicity pillars or themes, namely that: diamonds are always "in,"
diamonds are the ultimate and diamonds are a considered purchase.
One of the many activities of the DIC is to run national and
international design contest to help keep diamond design trends fresh,
interesting and newsworthy. The Diamonds-International Awards (see
sidebar) has become the most prestigious jewelry design contest in the
world and is often referred to today as the "Oscars of the jewelry
industry." We have Diamond Information Center managers covering all
34 countries in which we run marketing/advertising programs. They are
probably a unique network of professional public relations people,
who last year helped generate $100 million worth of free PR for
diamonds, at advertising card rate value equivalent.
This is, however, one of two key operations beyond the media and
advertising which I set up in the early sixties. The other is the
Diamond Promotion Service - also operating across all markets. Its
mission is to provide a service to the diamond jewelry manufacturing
industry and retail trade worldwide to help them sell more diamonds.
They do this by providing information on how the trade and industry
can capitalize on De Beers' marketing programs, and by providing sales
aids - often linked to the generic theme advertising - as well as
training courses for sales staff. They are in contact via direct
mail, trade press advertising, trade conferences or personal visits
with nearly 200,000 manufacturing or retail jewelers worldwide. We
continue to believe that it is essential for us all to work together
if their and our diamond sales are to be maximized.
RDR: What new markets is De Beers trying to penetrate? What
strategies is De Beers using to break into new markets? What
specific products is De Beers using to entice consumers into a diamond
buying habit in these markets?
JPP: In recent years we have launched programs in a number of new
markets such as : India, the six Arabian Gulf Co-operation Council
States - Saudi Arabia, United Arab Emirates, Kuwait, Oman, Bahrain and
Qatar; Pakistan and Turkey.
Last year we launched a small scale "below-the-line" campaign in
Colombia, Chile and Argentina, run out of our Mexico Diamond Promotion
Service and Diamond Information Center Offices. This year we are also
launching a DPS and DIC in Vietnam. The selection of new markets is
clearly based on a number of ideal criteria which, in various
combinations, will provide an opportunity to expand global consumer
demand for diamond jewelry.
Not all of the above markets fulfill all of the following criteria,
but all fulfill sufficient to make them viable. These are: A large
population; a good economic growth track record and/or good prospects
for future growth; a strong, existing gold jewelry culture; low
marketing costs, which means a relatively high return on investment.
And low industry and trade margins (because they operate a
competitive, high volume business) which means that the diamond
content at polished wholesale prices is a much higher percentage of
the retail value than in the mature markets. NB $1,000 retail price
buys a piece of jewelry containing $600 to $700 worth of diamonds at
pwp in India compared with $150 in northern Europe, due to margins and
taxes.
The type of product featured in these markets varies somewhat (apart
from the basic generic solitaire in image, wedding ring etc.
campaigns) according to our analysis of what is culturally desirable
in each market. For example, complete sets consisting of a necklace,
ring, earrings and bangle, with a mixture of larger and smaller
diamonds have been growing in popularity in the Middle East.
RDR: Does De Beers believe that any markets are saturated, if so which
ones and how much growth can be expected from mature markets? How
does the marketing strategy differ in mature markets from new
markets?
JPP: No, we do not believe that markets become saturated. In general
we have seen that there is a positive correlation between ownership
and purchase rate. This is in line with the old adage - coined by a
market research executive in the U.S.A. - that "diamonds are
addictive, not satiating." What he meant by that was (and it still
applies today) that the more pieces of diamond jewelry a woman owns,
the more likely she will be to acquire again. As a demonstration of
this, in the U.S.A. only 5 percent of non-owners acquire each year.
At the other end of the scale 28 percent of women who own 10 or more
pieces will buy again this year!
Clearly the main difference in strategy between mature and new markets
is that, in the new markets we have to build awareness of the
intrinsic values and symbolism (the "diamond dream") which exists
already elsewhere. In practical terms we want the heavy buyers of
gold jewelry to ad a diamond to some of the many gold pieces they
already buy. The culture of most new markets is such that the wedding
occasion dominates gold jewelry expenditures, but not just from groom
to bride. The bulk of the investment is made by the bride's and/or
groom's parents and other family members, so we have to be flexible in
our approach to take account of these cultural differences.
RDR: The Japanese market has been losing ground, what marketing
strategies is De Beers using to help maintain that market?
JPP: Obviously factors like the exchange rate we can't hope to
influence. Some years we gain, some years we lose! However, in yen
terms, 100 percent of the value drop in the total market last year was
due to a fall in the acquisition rate of diamond engagement rings to
64 percent (from a high of 76 percent in 1994), even thought the DER
only accounts for about one-sixth of total market value. This is a
concern for us as we have been used to seeing continued growth in both
acquisition rates of DER's and average price paid - in U.S. dollars at
least - even through the recession of the early nineties in Japan.
We have a number of consumer research studies in the field at the
moment to help us understand why this has happened and whether it is a
temporary set-back or something we can and should address through
marketing communications or other activity. We take some comfort from
the fact that the total number of pieces of diamond jewelry purchased
in Japan last year was at an all-time high, so the desire to own a
piece remains as solid as ever, but we must await the results of our
research before deciding upon the most appropriate strategy for the
future.
RDR: How do De Beers marketing efforts tie into what is being produced
in the mines? Is the strategy tied into what De Beers needs
to sell based on what is mined?
JPP: As I said earlier, it is important to attempt to match supply
and demand, although we have to accept that the effect of most of our
effort is longer term. Having said that, there have been a number of
instances of fairly rapid response to a change in the product criteria
in some of our product campaigns. For example, the fancy-cuts
promotion in Japan and the "half carat plus" campaign in Germany. The
former has seen a great increase in fancy-cut consumption - including
pear-shapes which were traditionally very hard to sell in Japan - and
the latter has brought about the desired increase in demand for stones
of 0.02 carats plus within a short period.
Incidentally, we have always known that consumers -unlike some members
of the trade and industry- do not take literally the size of diamond
that we feature in our generic advertising. They buy into the
"diamond dream" at a level the can afford. For example, although
small diamonds of less than 6 points polished have traditionally been
supported by a minority of the budget, more or less in line with their
value to the CSO in rough terms, they showed the fastest growth rate
both in absolute carats and share of carats consumed between 1984 and
1995.
Our current focus on goods of 0.20 carats plus is to help redress the
balance of demand and help that segment of the market which generates
the overwhelming share of rough value. We know that this will help
sell all the diamonds.
RDR: As part of a marketing strategy, what is De Beers doing to
counter concerns about Argyle flooding the market with Australian
diamonds?
JPP: We have not made any significant changes beyond feeling freer to
exercise our belief that we do not need to specifically support
smalls, especially cheap smalls, beyond their rough value equivalent
since all sizes benefit from the generic advertising - an argument
which Argyle found difficult to accept, despite the clear evidence
which demonstrates that as a fact.
Obviously we will continue to focus our efforts on the goods which
both provide the "halo" effect and account for the bulk of the rough
value to us and our partner producers.
RDR: How does fashion and styles of the times influence marketing and
advertising?
JPP: We never want to make diamonds a fashion accessory, because
"Fashions come and fashions go, while a diamond is forever."
Nevertheless, we have to be aware of trends in clothes fashion and
consumer attitudes so that we can use appropriate designs - or
encourage their development if they do not yet exist) so that
"diamonds are always in" - one of the pillars of our product publicity
by the DIC that I mentioned earlier. It is also vital that our
advertising uses sentiments and language relevant to the mood of the
times. I think you would agree that our campaigns have changed
dramatically in tonality since the 1980s.
RDR: How important is developing new diamond jewelry designs to
stimulating consumer interest in owning diamond jewelry?
JPP: We see it as critical - especially in mature markets where
multipiece ownership is already quite high- to show new designs to
existing owners to give them that nudge to buy again. It is also
important among the developing East Asian markets where what is
considered "in" is seen as a "must have." Interestingly, we have been
very encouraged to see the way we seem to have bee able to stimulate a
revival of the "solitaire" - whether in ring, earstud, or pendant
form- around the world over the last year or so, to the point where it
is virtually seen as "new" by the consumer. This shows that we must
never be afraid of trying something just because it has been done
before. Timing is everything! The diamond solitaire trend looks as
if it might become a global success. Certainly with the trade's
enthusiastic support, it should be much like the tennis bracelet
phenomenon.
RDR: How much competition is there against diamonds and where does
this competition come from, colored gemstones, pearls etc.?
JPP: We believe that we are in direct competition with colored stones
and pearls, as their inclusion in a piece of jewelry is likely to
reduce the diamond content as a percentage of the overall price of the
piece. Fortunately for us, there is no, or very little, generic
promotion of these goods (outside of Japan for pearls). We do not
regard platinum or even gold as direct competition, since diamonds are
invariably sold mounted in one or the other.
The biggest competition is for the consumers disposable dollar, and
this comes form other expensive goods such as long-haul travel
holidays, home computers, luxury cars, etc. In other words, items of
major outlay which may cause a couple already planning to buy a price
of diamond jewelry to postpone it until next year or later.
It has to be said that there are many examples around the world that
demonstrate the growth in demand achieved solely because of the De
Beers' programs over the years. It is another clear demonstration of
the enormous benefit to the whole industry, that comes out of the
single channel marketing supported by the consumer marketing programs.
We are hopeful that future new producers will appreciate this fact.
RDR: From the marketing point-of-view how is De Beers dealing with
concerns about Russia?
JPP: This has had no impact on our strategy or product criteria
whatsoever at this moment in time.
DESIGNER DIAMONDS
In 1953 in an effort to stimulate, what was at that time, a
staid marketplace, De Beers founded and sponsored its first jewelry
design competition the Diamonds-International Awards (D-IA). Since
that time it has become one of the world's best known and most
prestigious jewelry design competitions. Held every two years, thirty
designers from around the world are honored for their innovative and
influential designs in diamond jewelry. By sponsoring the D-IA, De
Beers helped to spark interest in modern jewelry design amongst the
trade, related industries and the general public. In addition, the
competition ensured a constant flow of creativity in diamond jewelry
design from both established designers and new talent.
As the competition became more and more renowned, the designs
began to reflect a link between fashion and lifestyle changes
throughout the years. Designers began to take creative risks,
stretching beyond the usual mediums used to showcase diamonds. Not
only did the form and function of the jewelry change, but so did the
elements that were mixed with the diamonds. Leather, steel, plastic,
silk, glass and chagrin joined platinum and gold as materials chosen
to showcase the sparkling jewels.
These dynamic design innovations have contributed to the changing
attitude towards diamond jewelry as being for formal use only. The
new creations showed that diamond jewelry is appropriate for everyday
and more casual occasions as well. One of the greatest achievements
of the competition is that it has helped to create a diverse
selection of fine diamond jewelry that is more readily available to
consumers.
During its four decades in existence, the D-IA has honored 697
winners from 39 countries.
Diamonds Today
The Diamonds Today design competition, originally known as the
Diamonds USA Awards, was first introduced in the mid-Fifties to
encourage creativity within the diamond design field regionally. The
competition which is held every other year, so as not to compete with
D-IA, is themed around different subjects.
Besides the United States, De Beers sponsors design competitions
in other countries as well. The newest competitions are in India and
Turkey and are aimed at encouraging and developing jewelry styles that
will act as a design trend base for exporters and manufacturers in
those countries. The competitions are also a catalyst to encourage
production of diamond jewelry to back specific marketing strategies in
the home country.
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Tags:
Argyle, Consumers, De Beers, Hong Kong, India, Japan, Jewelry, Manufacturing, Production, Russia, South Africa, United States
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