The drive to make more money is the engine of capitalism. A momentary blip on the graph cannot bring the entire market economy into question. Of course, plain common sense and decency does demand that, within industry, high salaries be coupled to commensurately high achievements.
British newspapers are screaming blue murder as news leaks out of the extravagant 300.000 pound parties thrown last week by the Royal Bank of Scotland and HBOS for their executives. The celebration of their ‘successes’ over the last year, despite the 32 billion pounds of taxpayer’s money the two institutions together received in a government bailout just last month, is symptomatic of the real gap existing between the front and behind the counter at banks in general.
Coming after the scandalised public reaction to the infamous banker’s bonuses, this story will only strengthen the case for government caps on executive salaries in failing concerns, and high time too. It would be wrong however to perceive these highly paid and spoiled executives as the root of all evil. Indeed one could argue that without them the world would be a poorer place. Literally!
Members of the boards in the diamond bourses and federations are neither overpaid nor unduly extravagant with their organisations’ money; an invitation to participate in the IDMA Shanghai conference even stipulated that I pay my own travel and accommodation. The boards and committees of practically all the diamond bourses consist of unsalaried men who do not get paid at all.
With their own businesses to run, their own agendas and as often as not their own axes to grind, it is hardly surprising really that the interests of the wider market, not to mention the weaker players on the field, do not feature highly on the daily agenda., One wonders whether it is not time to replace these elected bodies, apparently incapable of turning a profit even from the snack bars in their own buildings. At the very least it might be time to swell their ranks with professional executives who have proven skills and track records.
Since De Beers wisely, if reluctantly, relinquished their leadership mantle and set its course for pastures new with their exclusive Forevermark, the diamond industry’s only leadership is these committees and federations, leaving the market unmanaged, rudderless and confused. Even once the need for new leadership is universally recognised within the industry, and the noises being made by De Beers, Alrosa and even Dilip Mehta are encouraging. it will take time and resources before any other organisation develops the ability and the clout to assume the leadership role De Beers used to fulfil.
The AWDC, whose charter dedicates them to supporting the entire diamond industry in Antwerp, do have a professional executive who are currently busy fighting a heroic, if probably doomed, campaign to protect the already stricken large traders from over-zealous policing. They have displayed a certain amount of interest in supporting industry initiatives. However lack of support from their elected (read unpaid) board has meant these projects tend to get shunted into a siding when issues of greater immediate concern to them arise.
De Beers, on the other hand, is a commercial organisation whose executives are patently and acutely aware their continued employment depends upon their turning ever larger profits. They are letting no grass grow under their plan to transfer their accumulated name recognition and goodwill (if you can call it that) from the best part of the 20th century into their new Forevermark brand.
A peek into their newly launched consumer website confirms all my predictions. With their hallmark slick advertising and terse pronouncements they are predictably throwing all their accumulated might into convincing the hapless consumer that a ‘Forevermark diamond’, is superior in every possible way.
With non-Forevermark manufacturer goods effectively demoted to second rate by the very firm that until recently supplied them, the crisis of leadership must be apparent and acute, to all but the schleppers, whistling ‘If I was a rich man,’ while Antwerp burns...
Next issue I will be taking a closer look at the new forevermark strategy, De Beers' continuing leadership role and the effects these might have on the market.
Tuesday 18 November 2008
Friday 4 July 2008
The Mark of Cain
The launch of the De Beers Forevermark as a consumer trademark, slipped by remarkably unremarked within the industry. Notwithstanding the devastating effects the most fundamental change to the De Beers marketing strategy in the past half century could signal to the selling power of those not within the syndicate’s orbit.
Already, a glance at the De Beers literature shows a new and highly exclusive language developing. On the Forevermark website I see that Pluczenik are offering for sale a matching pair of 26 carat brilliant cut stones. They are described as the “largest matching pair of brilliant cut Forevermark diamonds in the world”, insinuating that diamonds branded in this way are in some fundamental way different from all others. What should be more worrying, to those not plugged in to the DTC marketing machine, is the implication that all non-Forevermarked diamonds are somehow inferior for being unbranded.
The use of exclusive branding techniques to sell diamonds is not only desirable in the current market but inevitable. As the supply market fractures into more and smaller pieces, each supplier is going to feel forced to find ways of differentiating his product.
The Forevermark as we now see it, is indeed a top rate branding, completely unlike the artificially nurtured non-brands that so spectacularly misfired following the introduction of the DTC’s SOC program four years ago. Even within the marketing community, where much criticism was levelled at the mark following its B2B launch, a grudging respect is beginning to emerge as details of the new consumer brand emerge.
The surprise announcement last year that even non-sightholders, and stones supplied by other producers, would be eligible for branding, despite the understanding from the beginning that Forevermark would distinguish sightholders from the riff-raff, is clear confirmation that much more lies behind this innocuous mark than at first meets the eye.
Indeed this mark, supported and promoted by the sightholders for years now, might not, in the end, serve to encourage and promote new demand for the sightholders benefit, as they fondly cared to believe up till now. Nor is it really needed to boost consumer confidence. I have seen no significant research indicating that diamond consumers are massively bothered by the moral implications of buying diamonds, before the issue is forced onto them by those manipulating the media for their own nefarious ends. However, Forevermark, if it is a success, will consolidate De Beers' own market share downstream. and it could well help shore up its dominance of the marketplace even as its market-supply share wanes.
True, De Beers first responsibility is towards its own shareholders. One can hardly fault a company for taking advantage of its residual name recognition and influence to solidify a hold on the consumer market. Even when that far outweighs its actual current clout.
Moreover, one must admit that the Forevermark campaign shows flashes of sheer genius, albeit that we are still early days yet and it remains to be seen how the market will react to a marking system that effectively demotes to plonk status all diamonds previously obtained.
The regrettable passivity of the organisations whose job it is to represent the rest of the industry becomes more understandable when you realise that the executive leadership, clearly convinced of the need for an answer to the Forevermark, have the disadvantage of being forced to persuade their traditionally sceptical voting membership to devote the necessary effort and resources to a long term plan. This at a time when the future is uncertain and money is tight. However, doing nothing is the luxury of sinecures.
If the market is to remain independent and fair, it must be led by a body unaffiliated to any government or commercial entity. It is clear that as long as membership to the Forevermark club remains elusive to some, and to be effective it must, it is in the interests of the wider market to have some form of alternative mark or else risk having all stones not entered into the program perceived as second rate, or worse, as suspect.
Marketplaces being what they are, I have no doubt that alternatives will emerge. Human ingenuity being what it is I have confidence that the marketing community will find a ways to counter the threat of a new emerging monopoly. But that process will only start following realisation of what is actually happening. The chorus of silence that greeted the new Forevermark release does not auger well in that respect. Just mark my words.
Already, a glance at the De Beers literature shows a new and highly exclusive language developing. On the Forevermark website I see that Pluczenik are offering for sale a matching pair of 26 carat brilliant cut stones. They are described as the “largest matching pair of brilliant cut Forevermark diamonds in the world”, insinuating that diamonds branded in this way are in some fundamental way different from all others. What should be more worrying, to those not plugged in to the DTC marketing machine, is the implication that all non-Forevermarked diamonds are somehow inferior for being unbranded.
The use of exclusive branding techniques to sell diamonds is not only desirable in the current market but inevitable. As the supply market fractures into more and smaller pieces, each supplier is going to feel forced to find ways of differentiating his product.
The Forevermark as we now see it, is indeed a top rate branding, completely unlike the artificially nurtured non-brands that so spectacularly misfired following the introduction of the DTC’s SOC program four years ago. Even within the marketing community, where much criticism was levelled at the mark following its B2B launch, a grudging respect is beginning to emerge as details of the new consumer brand emerge.
The surprise announcement last year that even non-sightholders, and stones supplied by other producers, would be eligible for branding, despite the understanding from the beginning that Forevermark would distinguish sightholders from the riff-raff, is clear confirmation that much more lies behind this innocuous mark than at first meets the eye.
Indeed this mark, supported and promoted by the sightholders for years now, might not, in the end, serve to encourage and promote new demand for the sightholders benefit, as they fondly cared to believe up till now. Nor is it really needed to boost consumer confidence. I have seen no significant research indicating that diamond consumers are massively bothered by the moral implications of buying diamonds, before the issue is forced onto them by those manipulating the media for their own nefarious ends. However, Forevermark, if it is a success, will consolidate De Beers' own market share downstream. and it could well help shore up its dominance of the marketplace even as its market-supply share wanes.
True, De Beers first responsibility is towards its own shareholders. One can hardly fault a company for taking advantage of its residual name recognition and influence to solidify a hold on the consumer market. Even when that far outweighs its actual current clout.
Moreover, one must admit that the Forevermark campaign shows flashes of sheer genius, albeit that we are still early days yet and it remains to be seen how the market will react to a marking system that effectively demotes to plonk status all diamonds previously obtained.
The regrettable passivity of the organisations whose job it is to represent the rest of the industry becomes more understandable when you realise that the executive leadership, clearly convinced of the need for an answer to the Forevermark, have the disadvantage of being forced to persuade their traditionally sceptical voting membership to devote the necessary effort and resources to a long term plan. This at a time when the future is uncertain and money is tight. However, doing nothing is the luxury of sinecures.
If the market is to remain independent and fair, it must be led by a body unaffiliated to any government or commercial entity. It is clear that as long as membership to the Forevermark club remains elusive to some, and to be effective it must, it is in the interests of the wider market to have some form of alternative mark or else risk having all stones not entered into the program perceived as second rate, or worse, as suspect.
Marketplaces being what they are, I have no doubt that alternatives will emerge. Human ingenuity being what it is I have confidence that the marketing community will find a ways to counter the threat of a new emerging monopoly. But that process will only start following realisation of what is actually happening. The chorus of silence that greeted the new Forevermark release does not auger well in that respect. Just mark my words.
Friday 1 February 2008
Hind Sights
Despite its waning influence on the diamond market the DTC remains the largest, if not the only player on the field able to affect change. It is their victory of sorts, albeit a dubious one, that much of the industry is in a state of limbo and disarray since the 'reorganisation' (to use one of the sanitised euphemisms for the first phase of their pruning operation) threw almost thirty sightholders out into the cold.
The anger, resentment and despair are understandable in some of the rejected. Those who helpfully tell them 'I told you so' are not only lacking in tact but are also missing the point. Despite the grumbling and groaning of many, the truth is that the industry could not forever remain stuck in the colonialist era, with a small club of the elite obtaining goods through special privilege and distributing it at a profit to the hungry masses. The ball that the DTC started rolling a few years ago when they first introduced the SOC program, is now gaining momentum and inevitably the face of the market is changing.
Their strategy for dragging the diamond industry into the twenty-first century was either devilishly clever, naïve and simplistic or a blind knee-jerk reaction. We, of course, can only guess. But some results are beginning to show and its effects can be seen beyond the select group of sightholders. For, not holding a sight, no longer condemns a player to second tier status, any more than having the privilege guarantees success.
Indeed, by dropping their overt drive towards branding and downstream influence as the only acceptable way forward, the DTC have plugged the one really glaring fault in their program. By promising to reward success, attained by whatever method or strategy (and I have reason to believe that is ultimately their new position) they are finally allowing the full arsenal in the market's forces to be unleashed. With a torrent of energy welled up behind some of those now at a crossroads, they have created a climate where imaginations will have to be taxed for the fittest to survive and prosper.
In line with other industries, success in the diamond manufacturing of the future will belong to those who are best able to bring goods to the market consistently, efficiently and cost effectively. And regardless of what the DTC will have their sightholders believe, supply will somehow always be available to those who have their demand lined up.
I once spent a few days under observation in a hospital sleep clinic to see if the insomnia that allows me to get by on 3 to 4 hours of sleep a night is damaging my health. It was a nightmare. The long hours between when the last visitor is forced to leave at midnight and the blessed rude entry of the first nurse at 5am with a determinedly cheerful 'Good morning!’ felt like solitary confinement. I took to roving the corridors in the small hours searching for other signs of life.
There are surprisingly few! Most hospital staff on wake aren't actually awake most of the time, I noticed. They bumble around like glassy-eyed zombies whenever some piece of technology forcibly drags them from the chair they are semi-dosing in and they return to it with alacrity, only staying awake for long enough to stare at me resentfully before their eyelids start hooding and their heads start a graceful bobbing ritual as their brain, from wherever their consciousness is sliding to, convinces them they are really awake.
A doctor in casualty with whom I shared forbidden smokes outside, explained that the long shifts are designed for a purpose. Apparently, medical staff must sometimes work 18 or 20 hours in a row, twice a week, with limited sleep time in between and under horrendously stressful conditions just to see if they are able to operate under duress. Rather than fail the weaker elements in exams, the Darwinian selection procedure is designed to make them crack and leave of their own volition. Soldiers, he assured me, undergo similar procedures in training.
The diamond industry has no head doctors who can force executives to show they are capable. The DTC and its brokers are far too busy placating their golden-egg-laying geese to encourage them to explore pastures new or deviate from their prescribed line, even when toeing it becomes obviously unrealistic. The diamond bourses and other players on an institutional level have little power to affect change on their own and the implementation of mid to long term strategic planning requires much more coercion and resources than they will bring. We marketing advisers meanwhile, tend to be far too busy protecting our own behinds to be able to afford to kick sense into our clients'.
It is comforting to think that the drive to separate the mice from the men, intentionally or otherwise, might provoke some into proving themselves, by succeeding in defiance of the hitherto accepted guidance, for the good of us all.
The anger, resentment and despair are understandable in some of the rejected. Those who helpfully tell them 'I told you so' are not only lacking in tact but are also missing the point. Despite the grumbling and groaning of many, the truth is that the industry could not forever remain stuck in the colonialist era, with a small club of the elite obtaining goods through special privilege and distributing it at a profit to the hungry masses. The ball that the DTC started rolling a few years ago when they first introduced the SOC program, is now gaining momentum and inevitably the face of the market is changing.
Their strategy for dragging the diamond industry into the twenty-first century was either devilishly clever, naïve and simplistic or a blind knee-jerk reaction. We, of course, can only guess. But some results are beginning to show and its effects can be seen beyond the select group of sightholders. For, not holding a sight, no longer condemns a player to second tier status, any more than having the privilege guarantees success.
Indeed, by dropping their overt drive towards branding and downstream influence as the only acceptable way forward, the DTC have plugged the one really glaring fault in their program. By promising to reward success, attained by whatever method or strategy (and I have reason to believe that is ultimately their new position) they are finally allowing the full arsenal in the market's forces to be unleashed. With a torrent of energy welled up behind some of those now at a crossroads, they have created a climate where imaginations will have to be taxed for the fittest to survive and prosper.
In line with other industries, success in the diamond manufacturing of the future will belong to those who are best able to bring goods to the market consistently, efficiently and cost effectively. And regardless of what the DTC will have their sightholders believe, supply will somehow always be available to those who have their demand lined up.
I once spent a few days under observation in a hospital sleep clinic to see if the insomnia that allows me to get by on 3 to 4 hours of sleep a night is damaging my health. It was a nightmare. The long hours between when the last visitor is forced to leave at midnight and the blessed rude entry of the first nurse at 5am with a determinedly cheerful 'Good morning!’ felt like solitary confinement. I took to roving the corridors in the small hours searching for other signs of life.
There are surprisingly few! Most hospital staff on wake aren't actually awake most of the time, I noticed. They bumble around like glassy-eyed zombies whenever some piece of technology forcibly drags them from the chair they are semi-dosing in and they return to it with alacrity, only staying awake for long enough to stare at me resentfully before their eyelids start hooding and their heads start a graceful bobbing ritual as their brain, from wherever their consciousness is sliding to, convinces them they are really awake.
A doctor in casualty with whom I shared forbidden smokes outside, explained that the long shifts are designed for a purpose. Apparently, medical staff must sometimes work 18 or 20 hours in a row, twice a week, with limited sleep time in between and under horrendously stressful conditions just to see if they are able to operate under duress. Rather than fail the weaker elements in exams, the Darwinian selection procedure is designed to make them crack and leave of their own volition. Soldiers, he assured me, undergo similar procedures in training.
The diamond industry has no head doctors who can force executives to show they are capable. The DTC and its brokers are far too busy placating their golden-egg-laying geese to encourage them to explore pastures new or deviate from their prescribed line, even when toeing it becomes obviously unrealistic. The diamond bourses and other players on an institutional level have little power to affect change on their own and the implementation of mid to long term strategic planning requires much more coercion and resources than they will bring. We marketing advisers meanwhile, tend to be far too busy protecting our own behinds to be able to afford to kick sense into our clients'.
It is comforting to think that the drive to separate the mice from the men, intentionally or otherwise, might provoke some into proving themselves, by succeeding in defiance of the hitherto accepted guidance, for the good of us all.
Tuesday 1 January 2008
Well Oiled Campaign
Salman Rushdie, in his satirical novel The Satanic Verses, describes a carpet manufacturer who made wool from the strands of hair picked off the barbed wire at the bottom of farm fences, caught there after lambs stuck their heads through to get at the grass outside. Instead of admitting his was an inferior product made from the cheapest waste product, he advertised his carpets as 'Made from the wool plucked from the throats of baby lambs,' and sold them at a premium to great success.
In marketing psychology our class discussed if this was ethical. One classmate pointed out it is no less so than selling bits of pebble for thousands of Dollars per carat just because they are perceived as rare. This point, greeted by exaggerated groans from half the class is actually difficult to completely discount, but it does rather miss the point. Because modern advertising is about creating an aura and image the consumer can buy into and substance has nothing to do with that. If I can convince the market my product has indefinable properties that make it worth my asking price, the intrinsic cost becomes irrelevant and the market price becomes its new value. That is why it is not unethical to sell a painting by Van Gogh for USD 60 million when the actual canvas and paint are intrinsically worthless.
The diamond industry were pioneers in the field of marketing when De Beers first launched their Engagement ring. It retained its prominence through the years with campaigns like Shadows - by stressing not only the (debatable) rarity of diamonds but more importantly their almost magical properties as symbols of love or, in today's zeitgeist, forever. Yet they have erred in allowing the retail market to be ruled by specs., which are and should remain essentially the tools of the industry. It is remarkable that most consumers can spout lengthy lists of numbers and letters to describe the diamonds they have bought yet very few will know the torque or horsepower of the car they drive.
Mercedes make great cars and everybody knows it. Great for their superior engines, exceptional design, top quality workmanship and outstanding performance, yet in arguably one of their most successful ad campaigns there was no picture of a car but a cricketer in the locker room, with a tag line that asks simply, 'When did you know you were a Mercedes driver?’
The most common counter argument is that diamonds are in essence a commodity and specs. are what differentiate them. I beg to differ. Petrol is a commodity too. There is no real difference between the juice bought at a Texaco or a Shell station. That does not stop both these competing for your custom using any arguments they can discover or invent.
BP have been trying for the last few years to convince us that the two letters of their name stand for Beyond Petroleum. With slick visuals and clever advertising copy they emphasise all they are doing to achieve environmentally friendly energy and have succeeded in convincing many that the massive volume of fuel comfortable transport guzzles need not be all bad. That it can actually be financing the development of greener gasoline for the pumps of the future. Reason enough for many environmentally concious consumers to insist on the BP brand.
In fact, despite its brilliance, marketing analysts point out that the 200 million USD spent on this campaign was roughly equal to their total six-year investment in the development of alternative energy technologies and merely a drop in the ocean when compared to the billions they still invest in developing new fossil fuel sources.
One might well ask why indeed the major oil companies are investing so relatively little in what are likely to be the money spinners of the future. The simple answer is shareholders. Mammoth companies like Shell and BP have difficulty convincing holders of their stock that it is worth forgoing short term benefits in favour of larger profits much further down the line. A problem they share with the diamond industry who, lacking a central figure with a long term strategic vision, are also falling behind in developing the marketing tools that should be driving the industry forward in our globalised and increasingly savvy economy.
Where the diamond market does have the edge over the massive oil companies is in their size, or lack of it. Companies like Shell, with the manoeuvrability of an oil tanker, continue to profile themselves as greener and cleaner but still concentrate on selling tried and tested fossil petroleum despite knowing that it is in their best long-term interest to focus on the renewable resources of the future.
The diamond market on the other hand, with its tiny proprietor run companies, has all the handling a nifty Ferrari and if it wanted could turn on a sixpence. It should be a doddle for those with the right vision to reinvent the diamond's image and allow them to be sold, like all good consumer products, for their own real or imagined magical properties rather than an appendage jewellers stick on their branded jewellery. Or, to stick to our analogy; that they be marketed like a car not the contents of a fuel tank.
In marketing psychology our class discussed if this was ethical. One classmate pointed out it is no less so than selling bits of pebble for thousands of Dollars per carat just because they are perceived as rare. This point, greeted by exaggerated groans from half the class is actually difficult to completely discount, but it does rather miss the point. Because modern advertising is about creating an aura and image the consumer can buy into and substance has nothing to do with that. If I can convince the market my product has indefinable properties that make it worth my asking price, the intrinsic cost becomes irrelevant and the market price becomes its new value. That is why it is not unethical to sell a painting by Van Gogh for USD 60 million when the actual canvas and paint are intrinsically worthless.
The diamond industry were pioneers in the field of marketing when De Beers first launched their Engagement ring. It retained its prominence through the years with campaigns like Shadows - by stressing not only the (debatable) rarity of diamonds but more importantly their almost magical properties as symbols of love or, in today's zeitgeist, forever. Yet they have erred in allowing the retail market to be ruled by specs., which are and should remain essentially the tools of the industry. It is remarkable that most consumers can spout lengthy lists of numbers and letters to describe the diamonds they have bought yet very few will know the torque or horsepower of the car they drive.
Mercedes make great cars and everybody knows it. Great for their superior engines, exceptional design, top quality workmanship and outstanding performance, yet in arguably one of their most successful ad campaigns there was no picture of a car but a cricketer in the locker room, with a tag line that asks simply, 'When did you know you were a Mercedes driver?’
The most common counter argument is that diamonds are in essence a commodity and specs. are what differentiate them. I beg to differ. Petrol is a commodity too. There is no real difference between the juice bought at a Texaco or a Shell station. That does not stop both these competing for your custom using any arguments they can discover or invent.
BP have been trying for the last few years to convince us that the two letters of their name stand for Beyond Petroleum. With slick visuals and clever advertising copy they emphasise all they are doing to achieve environmentally friendly energy and have succeeded in convincing many that the massive volume of fuel comfortable transport guzzles need not be all bad. That it can actually be financing the development of greener gasoline for the pumps of the future. Reason enough for many environmentally concious consumers to insist on the BP brand.
In fact, despite its brilliance, marketing analysts point out that the 200 million USD spent on this campaign was roughly equal to their total six-year investment in the development of alternative energy technologies and merely a drop in the ocean when compared to the billions they still invest in developing new fossil fuel sources.
One might well ask why indeed the major oil companies are investing so relatively little in what are likely to be the money spinners of the future. The simple answer is shareholders. Mammoth companies like Shell and BP have difficulty convincing holders of their stock that it is worth forgoing short term benefits in favour of larger profits much further down the line. A problem they share with the diamond industry who, lacking a central figure with a long term strategic vision, are also falling behind in developing the marketing tools that should be driving the industry forward in our globalised and increasingly savvy economy.
Where the diamond market does have the edge over the massive oil companies is in their size, or lack of it. Companies like Shell, with the manoeuvrability of an oil tanker, continue to profile themselves as greener and cleaner but still concentrate on selling tried and tested fossil petroleum despite knowing that it is in their best long-term interest to focus on the renewable resources of the future.
The diamond market on the other hand, with its tiny proprietor run companies, has all the handling a nifty Ferrari and if it wanted could turn on a sixpence. It should be a doddle for those with the right vision to reinvent the diamond's image and allow them to be sold, like all good consumer products, for their own real or imagined magical properties rather than an appendage jewellers stick on their branded jewellery. Or, to stick to our analogy; that they be marketed like a car not the contents of a fuel tank.
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