CounterPoint

With all the discussion about branding, it’s worth considering how jewelry is marketed. A key question is: Who should make the investment in developing a brand? Is it the manufacturer – as is the case with virtually every other consumer product – or the retailer?

What makes this industry unique is the nature of the products. There’s gem material, metal, design, labor, and facilities to produce and market the product. Determining the value of these components requires expertise. Consumers are ill-equipped to make these judgments. They can evaluate design and to some extent workmanship. But consumers can’t de- termine the karatage of gold, the purity of platinum or silver, or the value of gemstones. Even with a laboratory certificate, consumers don’t have the expertise or resources to judge what the product is and what it is worth.

Imagine you’re a consumer who has just purchased a piece of jewelry from HSN, QVC, or some Internet provider. If it’s a $100 item, you likely don’t care too much about its true value as long as it looks good. But what if the price is higher? The answer depends on how significant the outlay was relative to your budget.

What will influence your attitude about such a purchase? Is it the name of the retailer? Or the manufacturer? Can you think of a jewelry manufacturer that has made a significant effort in developing a brand name? The only names that come to mind are watch brands. The watch industry is the only jewelry-related sector that has consistently invested in consumer advertising. Although De Beers isn’t a manufacturer, it’s obviously adept at marketing. It is now developing a diamond brand that’s causing consternation in the trade.

Before Lenox sold the Keepsake brand of diamond engagement rings, corporate management did a consumer study of jewelry brand names. The known names on an unaided basis were Tiffany, Zale, and De Beers. On an aided basis, consumers recognized Keepsake, ArtCarved, and Orange Blossom. Isn’t it significant that two of the three names consumers recognized unaided were retailers and not manufacturers?

Retailers that operate on gross margins of 45% to 50% have the resources to promote their names effectively to the consumer. Manufacturers operate on margins of 25% to 30%. They simply do not have the margin dollars to invest in consumer advertising and create a brand. Those few jewelry manufacturers that can afford to do so may have a unique design component or other special feature that allows them to command a premium price and thus enables them to advertise.

Manufacturers that advertise in consumer publications two or three times a year in an attempt to build consumer recognition are wasting their money. Consumers will never recognize your name unless you’re willing to invest what’s necessary over time to create a brand image like Tiffany or De Beers.

The bottom line for manufacturers: The jewelry business is a distribution business. You build sales volume when you invest your promotion dollars in a way that helps the retailers who purchase your product. The bottom line for retailers: Focus on building your brand name locally and training your sales staff in both product knowledge and people knowledge. It may be ego gratification to see your name in a consumer publication twice a year. But is it effective in driving your local brand strategy?