Diamond Marketing Takes Time
De Beers' Diamond Trading Co. has urged its clients to commit resources to marketing to create more "noise" for diamonds. The noise is growing, though it's not yet deafening
Diamond brands such as Lazare Kaplan, Rand Diamond, EightStar and Royal Asscher may resonate with a handful of U.S. connoisseurs who value and trust the promise of a named product. But marketing efforts have a way to go before branded diamonds become household names.
Most consumers arent convinced they should shell out more for a branded diamond than for an equal or similar-looking generic one. And many jewelers still have doubts and a little confusion about the branding issue.
De Beers says anyone with a stake in diamonds should know the prevailing method of selling them (still often based on price) must change if business is to thrive. So in 2000, De Beers Diamond Trading Co. announced a Supplier of Choice program requiring its clients to help foot the bill for diamond marketing. Other luxury items such as cars, watches and fine cosmetics were used as examples of growing a market through branding and advertising. Diamonds had the skimpiest advertising budget of all luxury products, DTC said. The company wanted a market stimulated by competition to create enough noise to elevate the category.
De Beers did its part by announcing a joint venture with French luxury conglomerate LVMH Möet Hennessy Louis Vuitton. The joint venture created its own diamond brand with the well-known De Beers name. The first store selling De Beers branded diamonds is now scheduled to open this October in a prime London location on Bond and Picadilly streets, says DTC.
Top of the Supply Chain
Two years after these announcements, the diamond industry has inched toward its goal. DTC clients and manufacturers were among the first to start the noise the company demanded.
Half of me says we [as an industry] need to be a bit more aggressive about marketing, while the other half reminds me there is quite a lot we all must still learn and quickly, says Stephen Lussier, DTC director of consumer marketing. He points to the caution with which companies spent money after the terrorist attacks of Sept. 11. In weighing everything, there is ample evidence branding is taking hold. We see a move from basic product differentiation toward fresh marketing ideas with emotional messages.
DTC makes no secret love should always be the guide in diamond marketing. Love notwithstanding; the past two years have been hellish for most DTC clients as they adjusted to the new realities. We were asked to put at least 10% of our sales into advertising spend and brand creation, says one. Not fair at a time when the market is shrinking due to the economic situation and 9/11.
Still, DTC says quality advertising exceeded expectations. We saw a $30 million increase in quality marketing spending in 2000, and it was much higher in the fourth quarter of last year, Lussier says. The cautionary side is we dont have many players with deep pockets. This is going to have to grow slowly but surely over time. Lussier says he expects three to six years of accumulated consistent market expenditures are needed before real changes will be noticed at the consumer level.
Branding and the Big Guys
Major retailers and manufacturers know they need those deep pockets for any branding efforts to be meaningful, even at a local level. Many have formed strategic alliances to enhance and stretch marketing value.
Sheryl Silberg, senior partner and director of market initiatives for the Diamond Promotion Service, points to new branding initiatives at the highest levels, such as the recently launched Kwiat diamond brand, which ties its message of integrity and beauty to that of its customers individual retailers. But Silberg says branding is affecting all levels of manufacturing and retailing including a Wal-Mart/Keepsake initiative. Through its alliance with Keepsake, Wal-Marts nearly 2,700 stores will double or triple the average price tag of their diamond jewelry sales. Most of our fine jewelry was at or below the $300 mark, says Rob Phillips, a Wal-Mart spokesperson. That mark now rises to nearly $1,000, broadens our assortment and provides our custo- mers with great- er selection and value.
M. Fabrikant & Sons of New York City, found the branding effort for its upscale Royal Asscher-cut diamond easier because the name and cut have been known for close to a century. The Royal Asscher has brand recognition because of its long history, says Susan Fortgang, president of Royal Asscher Diamond Co. Its unrealistic for people to assume other diamonds will become well known in eight to nine months without spending $100 million, she says.
Other brand-savvy manufacturers, such as DTC client Rand Diamond Cutting Works of South Africa, work through Americas top independent retailers. New York Citys Codiam Inc. markets the Rand Diamond with a provenance report. The report warrants the diamonds origin, which is important to consumers who demand a guarantee that diamonds are free of conflict or treatment. It depicts the diamonds journey from rough through the exacting cutting process. The objective, says Sean Cohen, president of Rand Diamond, is to resonate with consumers through the provenance report so they understand the care and extra effort it took to craft their diamond and also understand the value.
For Rand diamonds, retailers are the most important link. Last fall, Rand Diamond introduced the Partnership Marketing Support Program to help retailers succeed. We provide extensive training from the manager through the entire store, often working the sales floor, making repeat visits and providing extensive marketing materials, says Cohen. We manage our product to ensure retailer exclusivity in each area, producing strength behind the product and avoiding discounting.
We are seeing a 50% annual growth in sales. We had a great Christmas and our current sales are better than all our financial models predicted.
Branding and Retailers
Many independent retailers remain skeptical about various aspects of diamond branding. Critics say branding a diamond is like branding a component of a piece of jewelry and is impractical. Others point to an example from the computer industry, chip-maker Intel as in Intel Inside found on PCs.
You cant brand differences you cant see, says Al Molina, a jeweler in Phoenix, AZ, about the endless quantity of new round brilliant diamond brands. To a consumer, a round diamond looks basically like another round diamond, and we cant expect them to walk around with a microscope to show their friends the diamond name etched into the girdle.
Molina and some other jewelers prefer making their stores the brand customers will remember. We are branding the experience a customer has buying a diamond at Molinas, he says.
I think the jeweler and the consumer are being over-branded, says Curt Parker of Curt Parker Jewelers, St. Louis, MO. When it comes to diamonds, customers want a brand they can trust. This is where De Beers will have the upper hand in sales. If the market is saturated with hundreds of diamond brands, their significance will be diluted, making De Beers the brand leader. In fact, he wonders whether De Beers is preparing U.S. jewelers for the marketing of De Beers-branded diamonds. We still dont know if they plan to market exclusively the De Beers name in De Beers stores or if they will give jewelers the opportunity to sell it alongside other brands. (De Beers ability to directly sell diamonds in the U.S. is hampered by longstanding antitrust cases.)
Other jewelers are banding together to develop brands at the retail level, a strategy endorsed by DTCs Supplier of Choice program. W.B. David, a diamond supplier in New York City, is gathering a group of exclusive U.S. jewelers called the Leading Jewelers of the World, where the pooling of resources will lead to big marketing budgets. The Leading Jewelers of the World brand is not based on yet another diamond cut, says George Walton of George Walton Gold & Diamonds, Anchorage, AK, a charter member of the group. We are based on the star rating we have of customer service.
Despite a rocky start because of economic challenges, branding is gaining ground. Diane Warga-Arias, designer of DPS educational programs and a consultant to Leading Jewelers of the World, says its important the step has been taken. Brands are not built overnight, though we now hear more diamond noise, she says. Branding requires a long-term strategy that can take three to five years before hard results can be seen.
For retailers and manufacturers thinking of entering the branding arena, DPS has a consulting arm called Marketing Transformation Group. For more information about the program, call (212) 210-7717.
by Robert Weldon, G.G.