Alison sent me an article which contained a pointer a piece called “Have You Ever Tried to Sell a Diamond?” by Edward Jay Epstein in the Atlantic Monthly in 1982 that completely blew me away. It talks about the birth of the modern diamond trade and the moves made by DeBeers to not only control supply, but also to create demand.
If you’re interested at all in competitive strategy and how consumer perception is shaped, it’s a must read. Integrated marketing at it’s finest - product placements in Hollywood & even the British Royal Family, full color advertising, information bulletins to newspapers, you name it, they did it. Did it work? You be the judge:
By 1979, N. W. Ayer had helped De Beers expand its sales of diamonds in the United States to more than $2.1 billion, at the wholesale level, compared with a mere $23 million in 1939. In forty years, the value of its sales had increased nearly a hundredfold. The expenditure on advertisements, which began at a level of only $200,000 a year and gradually increased to $10 million, seemed a brilliant investment.
Essentially, the discovery of massive mines in South Africa in 1870 threatened the collapse of the diamond industry and in response, British financiers combined their holdings to form DeBeers Consolidated Mines Ltd., in 1888. In 1938, Harry Oppenheimer (son of the founder of DeBeers) traveled to retain N. W. Ayer, a leading advertising agency, to “persuade Americans to buy more expensive diamonds.”
Although it could do little about the state of the economy, N. W. Ayer suggested that through a well-orchestrated advertising and public-relations campaign it could have a significant impact on the “social attitudes of the public at large and thereby channel American spending toward larger and more expensive diamonds instead of “competitive luxuries.” Specifically, the Ayer study stressed the need to strengthen the association in the public’s mind of diamonds with romance. Since “young men buy over 90% of all engagement rings” it would be crucial to inculcate in them the idea that diamonds were a gift of love: the larger and finer the diamond, the greater the expression of love. Similarly, young women had to be encouraged to view diamonds as an integral part of any romantic courtship.
They also created a market for diamonds among long-standing married couples:
In America, which remained the most important market for most of De Beer’s diamonds, N. W. Ayer recognized the need to create a new demand for diamonds among long-married couples. “Candies come, flowers come, furs come,” but such ephemeral gifts fail to satisfy a woman’s psychological craving for “a renewal of the romance,” N. W. Ayer said in a report. An advertising campaign could instill the idea that the gift of a second diamond, in the later years of marriage, would be accepted as a sign of “ever-growing love.” In 1962, N. W. Ayer asked for authorization to “begin the long-term process of setting the diamond aside as the only appropriate gift for those later-in-life occasions where sentiment is to be expressed.” De Beers immediately approved the campaign.
Until the mid-sixties, bigger was better in the diamond business, but the emergence of a huge quantity of Soviet supply in the small diamond market forced DeBeers to change this perception.
De Beers ordered N. W. Ayer to reverse one of its themes: women were no longer to be led to equate the status and emotional commitment to an engagement with the sheer size of the diamond. A “strategy for small diamond sales” was outlined, stressing the “importance of quality, color and cut” over size. Pictures of “one quarter carat” rings would replace pictures of “up to 2 carat” rings. Moreover, the advertising agency began in its international campaign to “illustrate gems as small as one-tenth of a carat and give them the same emotional importance as larger stones.” The news releases also made clear that women should think of diamonds, regardless of size, as objects of perfection: a small diamond could be as perfect as a large diamond.
In addition, to driving demand, N. W. Ayer also convinced people to never sell their diamonds. This was a crucial component of maintaining high diamond prices.
The moment a significant portion of the public begins selling diamonds from this inventory, the price of diamonds cannot be sustained. For the diamond invention to survive, the public must be inhibited from ever parting with its diamonds. In developing a strategy for De Beers in 1953, N. W. Ayer said: “In our opinion old diamonds are in ’safe hands’ only when widely dispersed and held by individuals as cherished possessions valued far above their market price.” As far as De Beers and N. W. Ayer were concerned, “safe hands” belonged to those women psychologically conditioned never to sell their diamonds.
What’s amazing to me is that DeBeers & N. W. Ayer didn’t just define what diamonds mean to a generation, they redefined it over and over again. As soon as someone gets engaged, the first question that’s asked concerns the diamond and the ring. These ideas are so deeply programmed into us, that we don’t even stop to ask why.
Seth Godin also has a post up about this notion called What Does Santa Look Like? His point - “We’re told what to believe” - is spot on.
There’s a tendency in technology markets to focus on the mousetrap and not on the psychology and perceptions of the customer. This is limited thinking. You have to understand your customer and make sure you’re satisfying emotional as well as practical needs.
DeBeers & N. W. Ayer understood this and they’ve shaped global thinking on this issue for a century. No matter what you think of the diamond industry, as a business person, you can’t help but be blown away by the long-range thinking and the strategy and it’s execution.
