by Freddy Tran Nager, Founder of Atomic Tango + Guy Who Likes Shiny Objects…
People ask me whether marketing truly works. Sure, marketers claim they made Nike and Apple and BMW rich and popular — but didn’t these companies become rich and popular simply because they had great products?
In response, I first explain what marketing really means. It’s not just advertising and sales; indeed, creating “great products” is a large part of the equation.
But theories and definitions are far less persuasive than actual proof. As the cliché goes, “Show, don’t just tell.” So I point out 3 examples of marketing creating massive demand for products that otherwise have little value:
- Bottled water. Yes, water is essential, but how about overpriced water that’s no better than tap water yet transported across the globe in petroleum-based plastic bottles?
- Anything with the word “Trump” in it.
Yes, diamonds. I previously wrote about [intlink id=”4749″ type=”post” target=”_blank”]Australian marketers turning worthless brown industrial diamonds into highly coveted “champagne diamonds.”[/intlink] Then two events made me want to write about diamonds again:
1. I received my settlement in the class action suit against De Beers, the company that cornered the global diamond industry and used its monopoly power to jack up prices worldwide. I had to submit a receipt for some jewelry I bought, and five years later I received a check for (drum roll please)… $46.39! Woohoo! I can now afford to fill my car with gas.
(BTW, I’m not the only one riffing on their settlement – The Consumerist wrote an amusing report on the great American diamond settlement.)
2. Business Insider published an article about diamond valuation by Rohin Dahr, which included these priceless nuggets:
- “… diamonds aren’t actually that rare. Only by carefully restricting the supply has De Beers kept the price of a diamond high.”
- “As soon as you leave the jeweler with a diamond, it loses over 50% of its value.”
- “Until the mid 20th century, diamond engagement rings were a small and dying industry in America.”
- “Many smart and prosperous women didn’t want diamond engagement rings.”
The article is based on a longer exposé on diamonds and De Beers by The Atlantic. As Dahr explains, De Beers hired adman Gerald M. Lauck of the agency N.W. Ayer to create value and demand where little existed. In 1938, Lauck launched a brilliant integrated marketing campaign (back then, it was all just considered advertising) that featured influencers, including the British Royal Family. Did it work?
You know the answer.
In the midst of the Great Depression, diamond sales surged 55%. (And as Dahr notes, not because diamonds are a good investment – they’re quite the opposite.)
Since then, diamonds have become a fixture of American culture…
- Marilyn Monroe sang “Diamonds are a Girl’s Best Friend” and James Bond saved the world and seduced the ladies beneath the title “Diamonds are Forever.”
- American men believe they’re supposed to spend two-months’ salary on an engagement ring (a complete De Beers fabrication).
- And while you might not recognize the name of the classical music piece “Palladio” by Karl Jenkins, you can likely identify it as the theme of De Beers’ admittedly fantastic commercials:
The Many Facets of Human Desire…
Now I’m not knocking shiny rocks — no more than I would knock other high-priced purchases that deliver no value other than sensory pleasure and status. That could be a $400 bottle of Dom Perignon, a Rolls Royce, an original Picasso, a rare comic book, an LV purse, courtside tickets at a Lakers game, or a first-class trip to Tahiti.
The market offers many shiny pretty objects that make us covet and crave, and spend hard-earned bucks just to look at them, taste them, hear them, smell them, and show the world that we own them. The basic desire for objects that delight us goes far back before De Beers and advertising and even humanity. Animals of many species also prize shiny objects.
I just admire the skill of marketers who can turn the ordinary into the extraordinary, and the “Diamonds Are Forever” campaign by N.W. Ayer is a classic example.
Now it’s sad when people who can’t afford such products feel pressured to pursue them. And it’s completely detestable that some of these products lead to human and environmental destruction. Lots of products come with a price not reflected in what we pay.
Just note that diamonds aren’t alone in this department.
Plus, There’s Always An Alternative…
If you find diamonds unaffordable or reprehensible, the market offers many alternatives. I once saw a sign outside a flower shop that read:
“Diamonds are forever…
So buy her something that dies.”
Now that’s marketing.
Update 5/29/2018: De Beers is now selling man-made diamonds.
Freddy, I subscribe to your blog because I enjoy reading it. You cut through all the nonsense, talk straight, and more often than not, you articulate things that I have felt for a long time. I agree that the De Beers campaign was a stroke of genius. I am unable to think of a comparable campaign that did what the DB campaign did for an entire category. By the way, the song was about diamonds but the campaign was about a diamond, the singular being more appropriate for the solitaire diamond engagement ring context.
Nobody ever sold a single thing without tapping into the audience’s emotions, and the campaign hit all the right buttons. The class action suit did the same even though the plaintiff’s case was deeply flawed, and it attracted many participants. Dhar’s emotional rant is flawed in so many ways that there is no way to know where to start, but it tapped into some readers’ emotions and managed to sell an assortment of, to borrow Dhar’s words, bull shit.
None of us mention figures without purpose. Marketers have a habit of mentioning numbers that are statistical or appear statistical without giving adequate information on context. Sometimes, it is out of the desire to simplify the message. Sometimes, it is a deliberate attempt to mislead. You wanted to make a point by mentioning $46.39. However, you did not mention how much your piece of diamond jewellery was. The $130million that was allocated to the indirect consumer class was then distributed with the assumption that diamond jewellery, not loose diamonds, had an average diamond content of 24% by value, which meant that some will inevitably profit or lose by that average calculation. At the same time, because any participant whose distribution was calculated to be less than $10 did not receive anything, which also meant that those who did receive a distribution profited from those moneys that were not distributed to this group. I am not interested in how much you paid for your jewellery, in the same way that I am not interested in how much you received in distribution. Additionally, I am not interested in knowing what your gross distribution was and who deducted what fees from it to arrive at what you actually received. However, I think that the mention of $46.39 was an expression of disappointment, and I just wanted to say that even though it appeals to my emotions, it does fall short of relevant information in order to assess rationally, not that I think the class action was valid, principally because price of diamonds have continued to rise even after the ‘cartel’ was broken up and De Beers currently have less than 40% in market share.
How could one argue that De Beers ripped off consumers for something that supposedly has no intrinsic value and only emotional value? Fair market value?
I note that market is the root for marketing… Or, is that a stem?
I paid close to $3000 for that piece of jewelry. So we’re talking a 1.5% rebate after having to submit forms and receipts and waiting years…
But hey, I actually found the whole thing humorous — I laughed when I saw the check — so I hope I didn’t come across as emotional. If so, I need to work on my writing skills.
If anything, I was more impressed by how De Beers and the ad agency had created something out of nothing. I call it “pulling a Kardashian.”
And I do hope that you noted that I saw nothing wrong with De Beers marketing, or consumers coveting diamonds. As you saw, I compared it to the coveting of other shiny things. I also recently bought a Ford Mustang for a lot of money, largely because it made me happy to look at it. I could have bought a photo of a Ford Mustang for next to nothing, but I really wanted to OWN the real deal. Close to the same thing as a diamond, except my shiny thing burns gasoline.
That said, I do object to any company cornering the market on anything, as De Beers did. I hate monopolies and oligopolies. Every time I get my ISP and cable bills, I curse the lack of competition in the telecom industry. But that’s a rant for a different blogpost.
So anyway, Chikashi, I welcome your point, and I really appreciate your continued readership.
I just think the diamond story is a great case study on how to create value, and a feather in the cap of us marketers. We get a bum rap these days for “wasting money” when “products sell themselves.” To which we can now say, yeah, buddy, how much did you pay for your wife’s engagement ring?
I think 1.5% does not relate to the actual context, but I have a suggestion for an alternative view. I have no doubt in my mind that if De Beers persisted in their defence, they would have prevailed. However, rather than keep going for years and years, they wisely placed a nuisance value on the suit, that is $295 million plus costs. Whilst some claimants may have been disappointed with their share of the pay-out, they should be pleased to know that the lawyers for the plaintiffs earned a tidy sum. It was well worth the paperwork and wait for them. Furthermore, what they got was not just fees, but also the opportunity to milk for many years the fact that they were counsels for the plaintiffs that forced De Beers into a settlement, adding a nice feather in their caps and enabling them to attract future business. In other words, prepaid marketing dollars. As such, I would suggest that the more accurate way to view those settlement cheques is that they were commissions paid out by the plaintiffs’ lawyers to those who co-operated with their initiative to obtain cash plus future marketing collateral. This perspective reflects the reality of who actually benefited from the suit.
Back to the matter at hand, shouldn’t there be a public shrine to Lauck? Or, is there one already?
I agree about the class action suit. I’ve received other settlement checks in the past, and they were all miniscule, while the lawyers made millions. Then again, the same is true of my paychecks while working in the entertainment industry. 🙂
As for Lauck, every married woman wears a shrine honoring his brilliance on her left hand.
True. And many in the western hemisphere have donned a shrine more than once!
[…] The diamond company DeBeers got nailed for their marketing practices (apparently, diamonds are not really rare). On a smaller scale, you can’t legally hoard water or fuel and then profit it on it during a natural disaster (that’s illicit price gouging). So stimulate hoarding only for a product that you uniquely produce, and that lives don’t depend on (you got that, pharmaceutical companies?). […]