[LONDON] What makes a diamond valuable? History shows a slick marketing team and a killer tagline help.
"Diamonds are Forever," voted the best slogan of the 20th century by Advertising Age, helped De Beers convince people for almost 70 years that it's worth parting with two months' salary for a gem. Yet the end of its monopoly a decade ago blunted its role as the industry's marketing edge.
Challenged by Michael Kors handbags, iPads and vintage Bordeaux, gem producers including De Beers, Rio Tinto Group and Russia's OAO Alrosa last month formed the Diamond Producers Association to ensure a new generation views the jewels as the ultimate luxury and expression of romance. At stake is the future of the US$80 billion diamond market as other luxury goods, especially in the US, show faster growth.
"Millennials are no less interested in love than the generation before, but we need to make sure they continue to see diamonds as the expression of that," said Stephen Lussier, head of marketing at De Beers. "We don't want to look back five years from now and say we have a problem."
Demand for diamonds in the US, the biggest market, is under pressure as consumers appetite for other products is growing faster. From 2004 to 2013, the luxury electronics sector registered annual growth of almost 14 per cent, while fine wines and champagnes increased 11 per cent. Demand for luxury jewelery rose just 1.9 per cent, trailing high-end beauty products, tobacco and watches over that period.
The association will target its three-year US$18 million budget at advertising to younger demographic known as millennials or generation Y, said Mr Lussier, who expects the funds to "significantly" increase as more industry players contribute.
De Beers, founded on South Africa's giant Kimberley mine and built up under the imperialist Cecil Rhodes, saw its influence spread across the continent after Ernest Oppenheimer seized control of the company in the 1920s. The company struck secret deals to buy gems from the former Soviet Union and at its zenith controlled about 90 per cent of the world's diamonds.
The company, dubbed the last empire, also assumed responsibility for promoting the gems. While the unit of Anglo American Plc remains the biggest producer, it has switched to branding its own jewels as its market share dropped to 30 per cent.
Diamond marketing has continued since the decline of the monopoly. Producers such as De Beers, Rio and Dominion Diamond Corp have fought for market share by branding their own stones, rather than promoting the established cultural imperative for diamonds built up over three generations. For De Beers the vehicle was "Forevermark."
Still, when De Beers cut its marketing budget by half to about US$100 million a year through the 2000s, that left a void that has threatened to undermine the appeal of diamonds.
"We've got a new generation of consumers, the millennials," said Anish Aggarwal, a partner at the Antwerp- based industry consulting company Gemdax. "The industry cannot take for granted that the millennial consumer will automatically want to choose diamonds." For the biggest diamond miners, that's starting to hit home.
"We want to look at people who aren't in the market yet, but whose attitudes are open to shaping," said Mr Lussier. "You need to grab their attention and make sure they don't spend their money on something else."