The World Diamond Mark

Sergei Goryainov

The World Diamond Mark (WDM) program introduced at the 35th World Diamond Congress in Mumbai was to start in July 2013. WDM is a project of the World Federation of Diamond Bourses (WFDB) and from the point of view of this organization “represents the largest-ever diamond marketing program.

The generic marketing has become a painful problem for the industry since the time when De Beers refused from the single-channel system of market regulation and stopped funding the associated programs, focusing on promoting their own brands. Since then, the share of diamond goods in the overall balance of the luxury market has been steadily decreasing and, unfortunately, this process is still going on. The attempt of the major diamond miners to overcome this negative trend launching an initiative known as the International Diamond Board (IDB) was not successful. The reason for the failure was obvious: Rio Tinto, BHP and ALROSA did not have their own diamond brands and for them to invest in generic marketing meant doing something which would implicitly strengthen the competitive advantages of De Beers. After Rio Tinto started to promote its own brand Nazraana and ALROSA remained indifferent to moving along the path of vertical diversification, the hopes pinned on coordinated action of miners in generic marketing evaporated entirely. To what extent is the World Diamond Mark able to mend the situation?

Apologists for WDM often refer to the experience of Platinum Guild International (PGI), an organization established to promote the platinum jewelry market, which has really done the task with a spectacular success. PGI was established in 1975 by South African companies producing platinum (Anglo American Platinum, Impala Platinum, Lonmin) with a coordinating center in London and offices in the United States, Japan, China, India, Italy and Germany. The advertising companies run by PGI in the countries that are most important to the jewelry market do not excel in particular fads or creative discoveries. In fact, they are using one and the same cliché frivolously adapted to national environments. However, this strategy has produced impressive results: if consumption of platinum by the jewelry industry at the start of PGI did not exceed 5% of its production, today it is just a wee bit under 50%. This success was achieved mainly due to the powerful financing – according to various estimates, PGI’s advertising budget ranges from $ 0.3 to $ 0.5 billion a year making efficient even homespun advertising messages fueled by such “injections.”

The companies which established PGI and are financing its marketing operations do not have their own jewelry brands and retail networks. They promote only platinum itself as a jewelry metal. In fact, PGI is a replication of similar projects pursued by De Beers 30-40 years ago, which is not surprising considering its affiliation with Anglo American. It is not difficult to assume that if one of the companies standing at the base of PGI would have created and promoted its own platinum jewelry brand, the whole structure would cease to exist.

The analogy drawn between the WDM and PGI concepts appears artificial to say the least, since a WDM-driven breakthrough in the generic marketing, as it is conceived by WDM’s authors, should be achieved by combining financial and organizational capacities of companies operating in the downstream segment of the diamond pipeline – those engaged in diamond manufacturing and retail. Of course, the WDM authors are used to make declarations about the need to attract major diamond mining companies to this project, but more than likely they are aware of the practical inconsistency of this kind of declarations for the above reasons. It remains to address manufacturers, dealers and retailers, many of which are utterly interested in generic marketing and are not opposed in principle to be levied a small “tax” for the sake of a noble cause.

This kind of solution of an urgent problem for the industry is very ingenious and looks very promising at first glance. But there is a couple of “stumbling blocks” that will be hard to ignore. First of all, it’s money. In better times, De Beers spent more than $ 0.2 billion a year on generic marketing. Taking into account inflation, today that figure should be multiplied by at least three times. Will WDM be able to collect such a hefty tribute from diamond manufacturers and retailers? The authors of the concept predict that within five years the number of participants in the WDM program will be about 60,000 and they will virtually represent all the countries important for the industry. By that time WDM’s budget should reach $ 0.1 billion. Looking back on the experience of De Beers and the practice of PGI, this level of funding should be considered insufficient. However, marketing is a creative process and generally the dependence of success on investments is not linear; it happens that some fortuitous catch may turn much more instrumental to product promotion than billions invested in “bald-headed” advertising.

But there is a more serious obstacle than insufficient financing. Marketing can be a failure – history is replete with such examples. If a marketing program is funded and managed from a single focal point, negative consequences can be cut short quickly enough and inexpensively. However, if the program involves 60,000 “minority shareholders” and run by people for whom personal consequences of a failure are relatively unimportant, the industry may face an unpleasant aftermath. Or a more elaborate scenario: let us assume that WDM’s efforts will nevertheless trigger a general rise in consumer demand for diamonds. But who can guarantee that this demand is distributed proportionally to the contribution of each of the 60,000 participants in the program? And what if this demand will unfold to embrace one or several brands or, on the contrary, non-branded goods? There is no such a risk entirely for participants in the model used by PGI – platinum producers are developing the consumption market for this metal and it makes virtually no difference for them which jewelry brand will be more successful and vice versa, because the only thing they are after is higher consumption of platinum on the whole. There are very few contributors to PGI’s budget and everyone’s opinion is of certain importance, so if something goes wrong, the error can be quickly eliminated. In the model proposed by WDM this risk is almost absolute since there are 60,000 participants, each with its own view of the generic marketing and its own strategy to use it as a “carrier wave” for promoting its own goods. In such circumstances, redistribution of the market both in case of successful generic marketing and in case of disastrous generic marketing appears almost inevitable; therefore, a conflict of interest is easily predicted.

It is clear that WDM is a gesture of despair, a reaction to the failure of diamond miners at least to defend, let alone develop, the position of the diamond in the luxury market won in its time by De Beers. Paying tribute to the ingenuity of this approach, it is hard to recognize this concept consistent. And the slogan “When the world loves, we are here” is far from coming near “A diamond is forever”, and the vague hint at sexual deviation is unlikely to replace the best advertising slogan of the twentieth century.

Strange as it may seem, but it looks like the only way to a breakthrough in the field of generic diamond marketing is to deny it. Major diamond miners acquire their own brands establishing retail networks and the “cumulative effect” of this process (especially given the amount of advertising budgets) can essentially warm up the overall consumer interest towards diamonds much stronger than the controversial program of WDM. If ALROSA would have ceased to demonstrate suicidal indifference to the problem and joined the trend followed by De Beers and lately by Rio Tinto, the debate about the possibility of winning a delicious “piece of cake” by diamonds at the luxury fair could develop in a more constructive direction.

Source Rough&Polished