How the story behind an engagement ring plays a role in its value
Anne Bowers, an associate professor of strategy at the University of Toronto’s Rotman School of Management, recently published a fascinating study in Advances in Strategic Management looking at how consumers value an engagement ring of a divorced couple. (Spoiler: Not very highly.) In our latest Diamond Dialogue, she discusses her research and what it says about how people perceive diamonds.
JCK: Why did you do this study?
Anne Bowers: I was interested in how we figure out the value of the objects that we sell. There are a number of products out there that are very connected to us socially, like engagement rings. If you want to look at how someone socially values something, what does the story I tell you about why that ring is for sale have to do with what you pay for it?
I looked at a year’s worth of diamond sales data from eBay. I took into account the cut, the color, the clarity. First off, most rings listed on eBay don’t sell. There are about 1.5 million listings. Very few of them sold. But we found if you mentioned divorce, you are less likely to sell the ring, and the rings generally sold for less money.
So I ran experiments on this with an Amazon subject pool. I showed them three advertisements. I made the text identical except for one thing. One said: I’m selling this because I got divorced. Another said: I’m selling this because I work with my hands. The third said: I’m a ring store and we have excess inventory.
On average, with the ring from the store, people were willing to pay about $820. The one with the “hands” got $780. The ring from the divorce got $557. That’s a huge discrepancy. But interestingly, people were more likely to rate the ring associated with the divorce as “authentic” than the other two listings. So they thought it was real, they just didn’t want to pay very much for it.
JCK: Why did they want to pay less for the “divorced” ring?
Bowers: Some thought it was socially inappropriate, or they wouldn’t want a ring like this, or that this ring is tainted, and you don’t buy tainted rings. If you go to wedding chat boards, that is one that comes up quite frequently: Is it appropriate to accept someone’s used rings? The general consensus is that a ring from a divorce was not. Someone said, “I’d rather have tin foil than a tainted ring.” People are very clear that this is something wrong.
JCK: Is it mostly superstition?
Bowers: People were just really uncomfortable with the idea. Whereas I might be excited if I got stereo equipment because of a divorce.
It’s called sympathetic magic. We assume being near a disgusting thing will transfer to us. It’s not unlike the lucky charm or rabbit’s foot. If there were a sweater that was worn by a murderer we wouldn’t want to wear it even though you can’t catch anything. People also don’t want to live in a house where people have been killed even though you can’t catch anything from the house. It can be positive, too. If a famous person touched something, you are not going to become famous.
It also could just be social norms about what’s an appropriate gift, sort of you like you don’t hand someone money if you are coming over for dinner, but you might bring wine. We have distinct norms about getting engaged. The tainted ring is a clear violation of those norms.
JCK: Do you think it would be the same with a wedding ring?
Bowers: I haven’t done any research on that, but my guess is that people would feel the same way. But then that is made from a single metal that can be melted down. It’s a little different with a diamond.
JCK: What do you think this means from a business standpoint?
Bowers: This is very clear that this emotional component is an important part of the value of the ring, accounting for some of the cost. So, one way to think about it is: If people discount a ring from a failed relationship, can you turn that around? Will people pay a premium for a ring from the right circumstance?
JCK: So the story is important.
Bowers: It is very important and meaningful to buyers. That is why some people believe they can’t resell a ring. It is our social belief about appropriateness and value. People think they won’t get anything for them. People assume that no one wants to buy your ring if you tell everyone it’s from a divorce.
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