Is there a way to increase the revenue stream from diamonds? Is there a way to diversify revenue streams while supporting the sustainability and longevity of the diamond industry? The answer to these questions is a clear yes.
In the current article series, I have detailed what I think is needed to achieving such a goal: creating a market for the diamond as a widely-accepted asset for wealth preservation. I have shown that diamonds are rare, and that with the right tools they have fungibility – two underlying requirements for creating a commodity market. For a market to operate, everything about the trade and the commodity must be transparent. Another requirement is that the market be widely accepted, which is why it must reach a critical mass of supporters. To reach a critical mass, we need to educate people on diamonds. Finally, we need an actual market – specifically, a spot market.
There is one additional component that I would like to add – marketing. Marketing requires two different approaches, working in parallel: ongoing promotional activity for diamonds in general, and promotion of the idea of diamonds for wealth preservation purposes in particular.
The case for diamonds - marketing
For decades, the "a diamond is forever" by diamond mining giant De Beers was the generic diamond marketing campaign. Not only was it the leading and most important marketing campaign for diamonds, it was the only generic marketing campaign. Generations grew up on it, and learned that diamonds are beautiful, durable, natural, and a symbol of enduring love. Over the years, hundreds of millions of dollars were poured into this campaign, mainly in the US, but also in Japan, Europe, the Arab Gulf states, and other places.
De Beers had several other initiatives that promoted specific diamond jewelry designs, brands, or occasions. Among the jewelry designs were the Three Diamond Ring, Journey, and Everlon, for brands including Nakshatra, Sangini, and several others. During holiday seasons, De Beers launched diamond promotion initiatives in the Gulf, Japan, and, of course, in the United States.
Although it provided the overwhelming majority of diamond marketing, De Beers was not alone. Other mining companies also promoted diamonds. BHP Billiton introduced a Canadian diamond brand, "CanadaMark," and Rio Tinto Diamonds introduced the brand Nazraana, a brand that celebrates life milestones, in the Indian market.
But these efforts have dwindled. De Beers retired the "a diamond is forever" campaign in 2009. BHP Billiton is no longer in the diamond industry (although the brand lives on), and what we have today is a series of independent efforts that support specific brands. The sole exception is the "real is rare" campaign, launched by a group of six diamond mining companies. It launched late in 2016, and had a very small initial budget of $6 million. This group of diamond miners, Diamond Promotion Association (DPA) plans to increase investment in generic marketing in 2017, a crucial initiative that focuses on millennials, and an important age group that was hardly exposed to generic diamond marketing efforts in the past.
Collectively, these marketing efforts are aimed at creating awareness among consumers, and in generating consumer demand. Consumer demand has fueled the diamond industry from the 1930s to today. It is, in fact, the near-exclusive engine of the diamond industry. Prior to the 1930s, most demand was from nobility and very wealthy people, who were aware of the rarity and beauty of diamonds, and purchased them as a status symbol, as well as a future heirloom.
I envision a diversification in the revenue sources for diamonds: demand driven by consumers, as we have today, plus demand from what can be broadly be called a financial market: the traditional financial markets with their institutions and investors, as well as private people, who want to buy a diamond with an understanding of its economic importance. This last group, I hope, will not consider diamonds an expense, but rather an asset.
To bring people to this point, we need all the components mentioned above put in place, but then we will also need to promote the market and bring it to everybody’s attention. That is the role of marketing aimed at promoting this specific business activity. Marketing addresses four components, known as the Four Ps: Product, Price, Place and Promotion.
Our first ‘P’, Product, is already defined: polished diamonds as a wealth preservation asset. The next ‘P’, Price, will be determined by buyers and sellers on spot markets. Because we are talking about a commodity, the third ‘P’, Place, will include both spot markets (which are defined by immediate delivery), as well as financial institutions that choose to participate in such a trade, and specialized brokers who will provide diamonds to any place the buyer chooses to have the goods delivered – their home, a safe deposit, etc.
This leaves us with the fourth ‘P’ – the development and implementation of a promotional strategy. Marketing, as any marketing expert will tell you, is thinking about customer needs, and showing them that your product fulfills these needs. Marketing is not selling, which according to Harvard Business School professor of marketing Theodore C. Levitt, is the practice “getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And it does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer needs". In other words, selling focuses on the needs of the seller, while marketing on the needs of the buyer. And that is what we need to do when promoting diamonds as a possible asset.
So what are the needs that diamonds as a potential wealth preservation asset can satisfy? I’ll address that in our next article.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.