December 28, 2010
It’s all about the emotional appeal, and DeBeers has done it better than anyone in history. It’s been well publicized that DeBeers is one of the most successful cartels in history. There’s much to be learned from their success though. What’s interesting is that the ad agency that they contracted with back in the 1930s essentially created the concept of a diamond being a gift of love.
These days ad campaigns are brief and try to attack textbook emotions, but DeBeers managed to transcend that. Not only did they craft the demand side, but they’ve managed the supply side nearly perfectly. They know exactly how much to seed to contain prices and manage to adapt quickly to market situations, such as Russia’s massive deposit of smaller diamonds.
On top of that, they’ve destroyed the concept of reselling diamonds or buying them as an investment while selling people on the concept of a diamond being an investment. I can’t count the number of times my salesman told me a better diamond is an “investment” when I was shopping for my wife’s engagement ring (yes, I fell for the ploy!).
The Atlantic covered this in 1982, but it seems as though even to this day women don’t want lab created diamonds that are chemically exactly the same as a diamond from the ground. Not only that, but they are completely flawless – as a matter of fact, it’s the only way to tell that it’s lab created, because it’s too perfect.
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.
Except for those few stones that have been destroyed, every diamond that has been found and cut into a jewel still exists today and is literally in the public’s hands. Some hundred million women wear diamonds, while millions of others keep them in safe-deposit boxes or strongboxes as family heirlooms. It is conservatively estimated that the public holds more than 500 million carats of gem diamonds, which is more than fifty times the number of gem diamonds produced by the diamond cartel in any given year. Since the quantity of diamonds needed for engagement rings and other jewelry each year is satisfied by the production from the world’s mines, this half-billion-carat supply of diamonds must be prevented from ever being put on the market. 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.