One of a series of case studies about companies over the last century that have transformed impossibilities into “repossibilities” .They attained greater success because of – not despite – the crisis they faced.
A Diamond (buried) in the Rough:
This case study examines the lessons learned by a ‘commodity marketer’ who fundamentally changed the value that customers placed on its commodity offering and made it an essential part of customers’ lives. Specifically, it offers the reader useful lessons in:
- How end-users and buyers have different motivations, and choosing whom to sell to is critical
- Why customers appreciate a brand even in a commodity market
- How emotional connect is critical to building brands, even at the worst of times
In Search of Salvation
One day in September, 1938, Harry Oppenheimer, Jr. could already make out the distinct façade of the N.W. Ayer & Son building a short distance to the northwest, as he walked through the square. Though he was seeing it for the first time, there was no question that this was the right place. Home to the first advertising company in the United States, the ten year old building was already considered a fine example of Art Deco architecture.
Although only in passing, Oppenheimer thought to himself that it seemed like a somewhat ironic relic of the not-too-distant past as it had only been completed a year before the Crash of ’29, when everything took a nosedive as the Depression set-in. He also couldn’t help feeling a little hopeful; perhaps the awe he felt looking at the grand building as he approached it was an auspicious sign. He hadn’t travelled all the way to Philadelphia from South Africa, however, to reflect on modern architecture. He had come to enlist the services of what was considered the most experienced advertising agency in America in order to save his family’s jewels – the DeBeers diamond company.
Hard Times for Hard Rocks
Like so many other luxury product firms, since the onset of the Depression, DeBeers had fallen on very hard times. Diamonds were simply not a viable commodity in such a climate. Demand was so low that the company had to reduce production from over 2 million carats before 1930 to only 14 thousand carats by 1933 – less than one percent of the prior volume! Despite having cut production to a trickle, there was a stockpile of unsold diamonds by 1937 – people simply weren’t buying!
As a wholesaler, DeBeers primarily focused its attention on selling its products to large manufacturers, who then worked with the jewelers, who in turn worked with individual shops. The diamonds would eventually end up on the tennis bracelets of sporty young wives, or the cuff links of debonair entrepreneurs, but it was the companies in the supply chain who did the actually buying from DeBeers. And they simply weren’t buying. Why would they? If business men weren’t inclined to splurge on jewelry for themselves or their wives, what reason would there be to stock-up in bulk?
Earlier in the decade, his father had attempted to reinvigorate the market by shutting down their major mines to promote scarcity and cut back on costs. Since diamond prices in Europe had collapsed, he believed that an artificial scarcity would make them more valuable and get the company better prices.
While the move cut costs, sales simply didn’t pick up after this move. Many European countries such as Germany and Italy had no tradition of diamond rings being gifted at an engagement or any other event. In other countries such as the U.K, diamonds were seen as super-expensive objects meant for a small aristocracy. And now, with a major war brewing in Europe, luxury items like diamonds would be even less in demand. The company was in trouble – serious trouble. They were barely afloat as it was. Oppenheimer decided that he would need to place all his eggs in the American basket. Not just that, the new market would have to be dealt with very differently.
Make them beg for more!
Despite the failure of his father’s plan, Oppenheimer still felt that it had been a step in the right direction. It hadn’t gone far enough, though. While the plan had focused on making the diamond rarer (and therefore something to be coveted), it hadn’t done anything to stir demand among the people who would ultimately buy it. Oppenheimer felt absolutely certain that the end-customer was where they needed to focus their energies. If consumers wanted to buy diamonds, retailers would soon be begging DeBeers to give them more stock!
And that’s precisely why he was now passing through those huge bronze doors as he entered 210 West Washington Square. Oppenheimer, Jr. was going to remake DeBeers from a mining company that sold wholesale gems to manufacturers, into a company that sold diamonds to consumers.
Getting the truth from the horse’s mouth
Over the next several days Oppenheimer and a top team of N.W. Ayer’s ad execs and copywriters began working on this task. As they sat at a desk in the firm’s office overlooking the square they probed the relationship between the end-customer and diamonds. If they were going to talk to customers directly and get them to buy more, they needed to know what buttons to press. What, for instance, was so significant about diamonds? Why did people buy them? Who wore them and why? How did they make the recipient feel? In those days, consumer research wasn’t common, but Oppenheimer felt these answers to these questions would give them the breakthrough they needed. He offered to pay for the cost of the research.
As the team worked together, they thought about the current mood around the world and where diamonds fit into that picture. With the dark clouds of the war brewing on the American and Asian horizons, and Europe already under the heavy hand of totalitarianism and bloody conflict, people the world over were thinking of their loved ones, caressing their treasured keepsakes as they prayed for their safety and better days to come.
DeBeers research suggested that in over 90% of cases, it was young men who bought engagement rings. This implied that there was already a relationship between diamonds and romance. The retailer may be the one to buy the diamond from DeBeers directly, but it was that young wife who saw her husband as she glanced at the delicate bracelet around her wrist. A diamond wasn’t a rare gem – it was a symbol of love and family. Now they had to work on making that association even stronger. With war all around, DeBeers had to convey that diamonds were more essential than ever.
They set about this task by strongly associating diamonds with the courtship process. Movie stars were roped in to wear diamonds and fashion magazines talked about the diamonds that celebrities had been gifted as ‘a symbol of love’. DeBeers also introduced subtle cues to highlight that the larger and finer the diamond, the better it reflected a man’s love for his woman. This allowed the company to move the American market towards better quality (and higher priced) diamonds.
A (Repositioned) Diamond is Forever
Over the next several years, DeBeers began to regain its former success as people came to view diamonds as the ultimate symbol of love. By 1941, the downward trend in retail sales had been entirely reversed, and in just three years, sales of diamonds in the United States rose 55%.
In the early 40s, the company acted to further strengthen the positioning it had adopted. Diamonds were now seen as a symbol of love, but to get even more people to buy one, they also had to convince them that diamonds were good value in themselves. It was a campaign in 1948, that did this and forever changed DeBeers and the diamond industry as a whole. It was in that year that Frances Gerety, a copywriter for N.W. Ayers, struggling to capture this new meaning, scrawled the message “a diamond is forever” on the bottom of a picture of two honeymooning lovers.
The company had already created a solid-foundation for themselves by establishing a relationship with the end-customer. Now, Gerety developed a slogan that suggested that diamonds were immortal. Not only could the wearer take pleasure in them, she could also pass it on to her children as a family heirloom and an everlasting symbol of love. It was simple, to the point, and a powerful message that appealed directly to the buyer – it was the ultimate tagline. Interestingly, the DeBeers name or logo did not feature in this campaign. The company reasoned that since it controlled the bulk of diamond mining, any growth in the market would automatically be to its advantage.
Diamonds for Lasting Success
With this campaign and other initiatives supporting the same message, Oppenheimer Jr. and N.W. Ayer’s went on to successfully oversee one of the greatest company resurrections in business history. DeBeers not only remade public understanding of the meaning of what a diamond represented, but they also spearheaded the birth of a new tradition – the diamond engagement ring.
While diamond rings had been exchanged in the past, it was after Gerety penned her famous line that no bride-to-be was to be found without a sparkling diamond gleaming on her finger. It was also DeBeers that set the standard of two months salary on these rings, which so many young men eagerly work towards setting aside. By 1960, the company found that many young people, who could not afford a diamond ring at the wedding, would still save up to buy one a little later. They repeated the American success in other countries around the world.
Today, sixty years later, the company continues to thrive and controls about 40% of the world diamond market. This is actually a come down from the days when DeBeers controlled 80% of the world diamond trade. In the 1990s, however, as many other companies entered the market, DeBeers continued to take its demand-led approach further and started focusing on quality diamonds from its own mines rather than surfeit quantity due to representing numerous others.
Since 2000, the company has launched “Forevermark”, a global diamond brand promising quality and integrity (ethical mining and trading practices) in an attempt to gain a premium for its own diamonds. In 2008, DeBeers made gross profits of $1.2 billion, a slight increase over the previous year in difficult circumstances. Its long-term association with romance and love still makes it a preferred supplier for retailers and it enjoys better profitability than when it dominated trade and had to constantly work on creating scarcity. Today, DeBeers continues focusing on maintaining and strengthening the meaning of diamonds and translating it to newer, fast-growing markets such as India and China.
Lessons for your Business
- Sometimes, demand is a latent fire that needs to be ignited. Rather than remaining a passive purveyor of diamonds, DeBeers had the creativity to re-imagine its role in the market as a demand generator – not just fulfiller. Even amidst the direst of economic climates – including the Depression and the Second World War – DeBeers managed to stimulate demand by creating an emotional association between the product and customer that played directly off the international mood. DeBeers didn’t fight prevailing trends, it reinterpreted them.
- A brand is a powerful tool – even for “commodities”. It’s hard to imagine how radical it was for an African mining company to engage an American ad agency over a half-century ago. Brands can play an important role in any market.
- Be prepared to rethink your customer set. By redirecting the marketing from its wholesale “near” customers to the consumer “next customer”, DeBeers identified an audience that had never been directly addressed. Ultimately, what end customers wanted was what wholesalers and retailers wanted. DeBeers became successful – and distinctive – with its near customers by making them successful with their customers – a win/win!
- Turbulent, dramatic times call for dramatic measures. The seismic shift of the last year and continued volatility are clear and permanent. But it’s not the first time companies have had to deal with dramatic change. The combination of the Great Depression and World War Two for a luxury goods manufacturer is more severe than what most companies are facing at this point. Yet DeBeers shows that it’s not only possible to survive, but to thrive.
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From Failing Wholesaler |
To Consumer Cultural Icon
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How to Get There
What does it take to achieve gains like these?
We introduced this case with a bold claim that companies can actually become exceptionally successful by learning how to transform impossibilities into “repossibilities”. But the opportunity to do this is not the same as actually doing it. There needs to be a process and a catalyst to actually make this happen. Of course, a challenge does not need to be life-threatening for a company to become remarkably more successful from overcoming it.
Based on learning from this and other companies, we have created a 90-day process for identifying and implementing the kind of change that is right for your company. We call this Repossibility™ Planning:
- Repossibility Assessment: This one-day overview of your company’s marketscape helps your leadership team think about its existing challenges in new ways, finding several areas for exploration into new ways to grow revenue.
- ProspectScan: Our creative exploratory research with both your “near” customers and “next” prospects identifies revenue opportunities by finding new ways of connecting with them. We distill and communicate this in Prospect Personas powered by the Key Buying Insight.
- Repossibility Workshop: We bring intelligence from your customers and their customers to identify directions that will enable your company to exploit the opportunities turned up by the downturn. The workshop infuses your team with opportunistic energy and vision, building momentum to take action.
- Direction Selection: Based on your target’s reactions to your potential directions, we refine and select with you the strongest single direction for re-engaging direct and end customers so you drive a greater share of your industry value chain.
- Market Activation Plan (M.A.P.): Using our unique web-powered CollaborAction™ process, the MAP engages employees in your company to embrace an exciting new way of engaging direct and end customers in a way that overcomes fear, builds buy-in, generates energy, and taps employee passion that overcomes the traditional barriers to implementing success.
Of course, a company can accomplish all these changes on its own. In fact, no amount or quality of consultants can change a company. But an outside catalyst can accelerate and enhance the adoption of a new revenue-generating customer strategy. These five characteristics are indicators that working with an independent, focused, and experienced partner would help:
- You believe that what worked for your company in the past is not necessarily the best path for you now. Many companies continue to do what worked in the past, even though those strategies have little chance of success in the current environment, simply because inertia makes a change too risky for internal employees to recommend.
- You believe the infusion of fresh, independent, outside perspective could have a catalytic impact on your entire company.
- You believe the smart, experienced employees already in place are the best to help form and implement the vision that will take your company from where it is to where it needs to go.
- But you are busy running your company as it is. You don’t have internal people sitting around who can take your management team through a proven process.
- You want to get started in the right direction now, before more of your resources, time, and energy are depleted and give yourself the most time to reap the benefit of your turnaround effort.