Super-blogger Shanu Singh Guliani questions whether DPS is hurting jewelers, because its advertising spotlights specific products (like Journey), rather than advertising diamonds for occasions. Well, Shanu, if that bothers you, hang on, because the DTC’s advertising is probably going to get even more product-oriented in the future, and it won’t be for products everyone has access to. Here is a quote from De Beers’ CFO Stuart Brown at a conference yesterday (webcast here):

[De Beers’] marketing spend in the past year reached $220m, primarily focused on the generic market.  This has proved to be a very successful strategy for both De Beers and the diamond industry as a whole; however, we are hoping to increase the proportion of marketing budget dedicated to our proprietary diamonds in the future.

It is not clear what “proprietary diamonds” he is talking about – are they Forevermarked-stones (a concept that, in my opinion, De Beers has way too much faith in), sightholder brands, or some new possibility yet to be sprung on us (you never know these days.) I have an email query into De Beers and will let you know as soon as they respond.

Regardless, De Beers has said this kind of thing before. Here is what De Beers’ Stephen Lussier told me two years ago:

If you go to other markets [than the U.S.], we more directly involve our sightholders in our advertising. That’s where our long-term future lies. It’s only right and fair. We are not a charity.

For example, in Japan, De Beers advertises the “Trinity” brand rather than “three-stone” jewelry. In fact, the only reason the DTC doesn’t do this in the U.S., Lussier said, is because it “operates under a different legal structure” here – and, as we all know, its legal status here is changing.

So is generic advertising on the way out? On the one hand, Lussier has a point: why should a company, that now only sells 40% of the world’s diamonds, promote the other 60%? On the other hand, as Brown notes, generic advertising has been successful in the U.S. – and diamond branding, for the most part, has not. Maybe it’s because the U.S. is a “mature,” and costly to advertise, market – or maybe it wasn’t an appropriate idea to begin with. (I have an upcoming article where people argue both.) But the fact is, in 2001, if you asked people to name successful U.S. brands, they might say Heats on Fire, the Leo, and maybe one or two others. Six years later, that list has not changed all that much. (And HoF has been around a decade, while the Leo is backed by Sterling.)

Now, it probably would not take that much effort to change an ad that touts “Journey,” the concept, to an ad for “Journey,” the brand – but there would also be other, not insubstantial, costs involved with starting a brand, such as collateral materials, packaging, controlling distribution, enforcing trademarks, etc. All for something easily knocked off.

So my point is: Yes, cutting down generic advertising may be “right and fair,” from the DTC’s point of view. But is it the right way to go business-wise?

Rob Bates

JCK News Director