Marketing Diamonds
Diamonds have inspired many a lover. Their sheer beauty and brilliance lends them a mystique that always seduces. Indeed there is something magical about them. They have captured the imagination of people for thousands of years.
How much of this mystique is a marketing ruse is a hotly debated topic in the industry.
According to De Beers, the South African company that control the world diamond trade, women truly desire diamonds and the warm, sparkly feeling that accompanies the act of wearing a diamond. The task of marketing is merely helping women recognize and achieve their desire to own the precious stone.
By buying up most of the world's uncut diamonds De Beers regulates the supply to select dealers, increasing it in good years and reducing it in bad to keep prices high. They distribute the diamonds around the world for cutting and polishing. It is a cartel that has been built on the claim that diamonds have a unique appeal to women.
Adding 4cs material here:
Global demand for diamonds
Many believe the explosive economic growth in China and India will lead to a class of insatiable consumers who will drive demand for luxury goods like diamonds.
According to De Beers' trading arm, the Diamond Trading Co., the most impressive sales growth for 2003 and 2004 — the latest figures available (I’ll check and update with 2005-2006 figures) — came from the Middle East and Asia. The Indian market rose 19 percent in 2004 from 2003; the Chinese market increased 11 percent in the same period. Comparatively, sales growth in Europe was generally flat, while the U.S. rose 8 percent.
SIDEBAR: DeBeers (SHORTENED)
DeBeers, the world’s largest diamond mining company, has largely controlled the international market for diamonds through the Diamond Trading Company (DTC) which sorts and sells rough diamonds to 93 select clients or “sightholders” at non-negotiable prices. The clients buy rough stones and then cut and polish the stone before selling them to retailers.
For decades, DeBeers was able to run a near monopoly of the diamond industry - controlling over 80 percent of the world’s rough diamonds – the cartel was able to regulate the supply of stones on the market and dictate their costs at will.
That complete dominance of the market has dissipated somewhat. In 1994 the U.S. Justice Department charged DeBeers with antitrust violations for conspiring to fix prices for industrial diamonds. In 2004, DeBeers plead guilty to the charges and agreed to pay a $10 million dollar fine, ending years of outright market fixing.
The development of new diamond mines in Russia and Australia – out of the reach of the South African company - has also changed the market for rough diamonds (although DeBeers is investing heavily in Canadian mines). Lev Leviev, an Israeli entrepreneur, the world’s largest cutter and polisher of diamonds, is also cutting into DeBeers supply of rough diamonds by securing his own mines in Russia and Angola.
SIDEBAR? Different marketing campaigns (Source: World Diamond Council 2006 report)
The diamond industry always looks for new ways to drive sales. This is done either by introducing new jewelry or by emphasizing gift-giving occasions.
In 2005, Three-Stone Diamond Jewelry continued to be a key driver for overall sales growth. The Three-Stone category, which is any piece of diamond jewelry that consists of three diamonds representing a couple’s past, present and future, had double digit sales growth of 11 percent. Since its launch five years ago, the average annual sales growth of the Three-Stone category is an astounding 27 percent.
In 2006, the launch of Journey Diamond Jewelry, (defined as a graduated piece of diamond jewelry), promises continuing category growth of emotionally resonant diamond jewelry purchases. A symbol of how a couple’s love grows over time, Journey Diamond Jewelry is expected to impact the market as significantly as Three Stone Diamond Jewelry did 5 years ago.
The Diamond Right Hand Ring launched in 2003 continues to be popular. Last year, it grew the non-bridal fashion diamond ring category by 15 percent, making it the second year of double digit growth.
In 2005, the Christmas occasion was valued at $4.9 billion and grew by 6 percent over 2004. The fourth quarter has always been essential for sustained growth of the U.S. diamond jewelry sales. The Diamond Trading Company’s “What Will You Do For Love This Christmas” integrated marketing campaign resonated well with consumers during the crucial November and December months, allowing for continued growth by reaching consumers in new and innovative ways through internet and radio.
In 2005, diamond engagement rings reached their highest average price at $2750. The total retail value for the diamond engagement ring category is now $4.8 billion, a growth of 7 percent over 2004. For centuries, the diamond engagement ring has been a must for brides-to-be.
Side bar: Buyers Guide to conflict-free diamonds
Amnesty International and Global Witness created a Buyer’s Guide for consumers to make sure that the diamonds they are purchasing are conflict-free. When buying diamonds, there are a number of questions a consumer can ask their salesperson to make sure that the diamonds they are buying have been verified by the Kimberley Process. Do you know where the diamonds you sell come from? Can I see a copy of your company’s policy on conflict diamonds? Can you show me a written guarantee from your diamond supplier stating that your diamonds are conflict-free?
Sources: Amnesty International, Global Witness, Kimberley Process.com, U.N., DiamondFacts.com, U.S.GAO
http://www.amnestyusa.org/diamonds/BuyersGuide.pdf http://www.globalwitness.org/buyconflictfree/
http://www.kimberleyprocess.com http://www.un.org/peace/africa/Diamond.html
http://www.diamondfacts.org/
Sidebar: Antwerp's diamond trade: What changed
Competition from abroad, the emergence of greater demand in China and India, and tighter government regulation by the Belgian government to promote financial transparency have transformed these Antwerp businesses.
Antwerp diamond companies are outsourcing diamond-cutting activity to India and Asia, away from Europe's high labor costs, leaving the firms to focus instead on global marketing and sales.
The global expansion of the diamond trade has led to cutting and polishing centers emerging in Dubai, Shanghai, and Africa and new companies extracting from mines in Australia, Russia and Canada.
The emergence of more competitors to De Beers is a mixed blessing for Antwerp's diamond dealers, who once relied nearly completely on the mammoth supplier.
SIDEBAR: DeBeers “A Diamond is Forever” SIDEBAR
DeBeers, the world’s largest diamond mining company, most lasting imprint on the diamond industry may be its marketing of the gem as an eternal symbol of love and devotion, while at the same time promulgating the myth that the commodity is incredibly scarce.
With one of the most successful marketing slogans of the 20th century, “A Diamond is forever,” advertising campaign launched in 1948 helped institutionalize the modern tradition of giving a diamond ring as part of a wedding engagement and also helped limit the secondary market for used diamonds.
N.W. Ayer, the advertising agency that created the campaign, touted the slogan as revolutionary because it was promoting not a particular brand, but simply the idea of the “eternal emotional value surrounding the diamond." The campaign reached all levels of society – from pushing diamonds as a symbol of love in popular films to pushing newspaper and magazine articles that emphasized the romantic value of diamonds.
Once a consumer buys a diamond, it may mean “forever” and the end of a long, winding road for a gem that may have been under ground for millions of years and then passed through many hands on numerous continents – from Africa, to India, to Europe and beyond.
In fact, an estimated 65 percent of the roughly 130 million carats mined annually across the world originate from Africa. Diamonds mined from South Africa, Namibia, Botswana, the Democratic Republic of Congo, Angola, Tanzania, and Sierra Leone have an estimated worth of approximately $8.4 billion annually.
Africa’s diamond mining industry dates back to 1867, when diamonds were discovered near Kimberley, South Africa. Both gem quality and industrial quality diamonds are mined across sub-Saharan Africa today, employing thousands of people.
The actual stones are millions of years old – created from carbon 90 miles below the earth’s surface or more – and under extreme heat and pressure. The diamond rocks are brought to the earth’s surface through volcanic eruptions of molten rock. These diamond-bearing “volcanic pipes” make up primary deposits called kimberlite. Secondary deposits, or alluvial deposits, are the result of the erosion of material from primary deposits and usually are found in rivers, streams, and along shorelines.
Sidebar:
Synthetic Diamonds: Mother Earth no longer has a monopoly on diamonds
Source: Romancing the Stone: http://www.msnbc.msn.com/id/6920717/site/newsweek/
Newsweek International: Feb 14, 2006. (Possible sidebar link)
In modern times, diamonds have become the passion of future brides and scientists alike.
The science of diamond making has become so ingenious that even experienced dealers can't tell the difference between man-made and natural diamonds without the most sophisticated technology. For diamond makers this means that the only real difference is in the mind.
Scientists have come up with technologies for making diamonds in a laboratory that are virtually indistinguishable from the natural crystals mined from the earth. Apollo Diamond, a Boston firm, has developed a method of growing perfect diamonds in a pressurized chamber. Gemesis, a firm in Sarasota, Florida, has perfected a technology that uses high pressures and temperatures to mimic the way diamonds form naturally in the earth. Gemesis is now selling colored gemstones, including rare yellow and blue diamonds, for up to 75 percent less than the market rate for natural diamonds that are by most measures identical.
One team of Russian scientists is trying to grow diamonds in conditions closer to those in the Earth's mantle. Much of this technology is secret, but because they are using a carbonate rather than a metal solvent and lower temperatures, the diamonds have pure octahedral form of natural diamonds.
Cubic zirconia and moissanite are two popular diamond fakes.
Obviously, this is making the diamond industry very nervous.
Diamonds, says George E. Harlow, author of "The Nature of Diamonds" and gem curator at the American Museum of Natural History, seem as if "they are created by God." Now that scientists can re-create God's brilliance in the lab, will we still prize them so highly?
In the future, it’s the consumer who will decide.
Additional info: I know we didn’t have a segment for this, but it seemed interesting to me and could lend itself to a nice graphic showing the structural difference.
What makes a diamond?
Diamond is made out of pure carbon, but then so is graphite, the material we make pencils from. It's hard to imagine that the two are similar in anyway.
It’s the structure of the carbon atoms that makes them different.
Graphite has a dense layered structure, but the bonding between the layers and the carbon atoms is very weak.
By contrast, diamond, the hardest material known, has three-dimensional linkage in which every carbon atom is surrounded by 4 neighbors and it forms a complete three-dimensional structure like a trestle bridge — an incredibly strong structure. You see the beautiful three-dimensional symmetry when you look in one direction and as you rotate the structure slightly you get a glimpse of that four-dimensional symmetry and it's the interaction of these symmetry elements that gives diamonds its strength. You know a structure can only be as strong as its weakest direction and in diamonds there are no weak directions. Every bond is extremely strong.