Even though the value of a diamond is determined by its quality, as certified by a grading laboratory, big players in the diamond industry, pushing for value creation through branding, have sounded the death knell for the majority of small players who do not join the brand wagon or invest to promote diamonds.
Stephen Lussier, CEO – Forevermark, a De Beers brand cautions that “increased competition from other luxury products means the diamond industry must capitalise on opportunities in online marketing and branding, if it is to maximise its potential.”
Concerned with the fall of the diamond lower down the luxury consumer’s ‘must have’ list, the industry’s search for a more cohesive diamond marketing strategy, led to a two pronged approach as the answer – the generic marketing of diamonds to increase primary demand and attract new customers as well as encouraging product branding for capturing market share.
“The industry is spending less on marketing, which is a cause for concern. Every player needs to invest in diamond marketing to create value. There are going to be no more free lunches,” says Lussier.
In the last six decades, since the ‘Diamonds Are Forever’ campaign, De Beers has apparently spent billions of dollars in marketing alone, through advertising, buying paintings or even lending diamonds to movie stars, to create the emotional quotient for diamonds and captured huge markets by promoting diamonds as a category. The entire industry reaped the benefit. Later, to counteract the negative baggage of conflict diamonds, and protect bottomlines, De Beers, after more than 100 years of being in the business, created its own brand ‘Forevermark’. Now De beers wants the entire industry to invest in marketing and brand creation.
“Branding achieves all our goals. It creates trust and competes with other luxury goods. It creates category desire and differentiation. It allows higher margins to retailers,” says Lussier. De Beers hence presses its sight holders to build their individual brands backed by a transparent corporate structure and business processes.
However, De Beers’ ad spend plummeted from an estimated high of USD 300 million a year to only around USD 70 million in 2008. Its current annual ad spend is estimated to be around USD 100 million. Ad spend by an average luxury brand is 5-15% of sales revenue and increases to 25% when other communications like PR, events, sponsorships etc. are included. In contrast, the diamond industry reportedly spends around only 1-2% of revenue on overall marketing.
Anoop Mehta, president of the Bharat Diamond Bourse (BDB), had in last year’s World Diamond Congress, held in Mumbai, juxtaposed the marketing investments being done by Apple and Microsoft in comparison to those done to promote diamonds.
The recent McKinsey report on the Diamond Industry also predicts that ‘new money’ and emerging market consumers will increasingly prefer branded diamond jewellery as it reduces the risk of making a wrong purchasing choice. The branded diamond segment is expected to account for 30-40% of the total market in 2020. Currently, less than 20% of the jewellery market is driven by brands.
However, currently, small manufacturers are questioning the efficacy of branding for the diamond industry. A manufacturer says that, “customers are reluctant to pay the premium on a branded product primarily because any difference between a branded and unbranded diamond cannot be perceived by the naked eye but lies in the evaluation of its 4Cs as personified in the grading certification. Also, there are hundreds of competing diamond brands, but only a handful, which cause immediate name recognition.”
Successful brands have succeeded in providing something tangibly extra – be it an inscription of brand logo, a special cut or a fancy colour, lifelong jewellery servicing, or buy back deals besides having invested significantly in sustained marketing to make a mark in the market. This is the future, according to the big players.
Creation of brands needs to be backed by marketing as there is an established link between advertising and consumer spend. Without reminding consumers the ‘emotional reasons’ to buy diamonds, the message will be lost over time. The big players want the costs of marketing to be shared across the industry.
To achieve this funding, the World Diamond Mark (WDM), a new global partnership initiative, was launched by World Federation of diamond Bourses (WFDB), the largest diamond organisation, representing more than 95 per cent of the diamond industry. The WDM seeks to unite players along the entire diamond pipeline, starting with manufacturers and essentially retailers, who are the first point of contact for the customer, to invest in a strategic partnership for the generic promotion of diamonds. It promises an annual ad spend of $100 million by 2017, according to Alex Popov, Chairman – WFDB.