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Applied Marketing 101: The incipient attack of the yellow, green and purple diamonds

George Prout by George Prout
January 2, 2014
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Reading Time: 10 minutes

There is a fundamental marketing concept called “Share of Voice,” which can be defined as follows: the ratio of the portion of advertising activities for one company or brand compared with the total advertising activities for an entire sector or product type. Take, for example, the auto insurance industry. If you watch TV, you’re almost certainly familiar with ads from Geiko, Progressive, Nationwide, State Farm, Esurance, and Farmers. Each of these companies possesses a “Share of Voice” that is roughly equivalent to the ratio between their respective advertising budget and the total advertising budget for the car insurance industry. Depending on the effectiveness of their advertising, each drives a portion of the overall demand for automotive insurance products. But since they’re all basically selling the same product, the real impact of their advertising doesn’t go much farther than encouraging consumers to purchase their respective generic offering instead of one of their competitor’s. And their advertising efforts are all aimed towards slicing up a pie that is fixed in overall size, because everyone who has a car is compelled by state regulations to purchase auto insurance.

In the jewelry business, things are a bit different, aren’t they? No one is compelled to purchase jewelry (unless one considers the cultural imperative of wearing an engagement ring as a “necessary” compliance with societal norms). But Share of Voice does have an extremely important impact in our business, if one examines the historical record.

DeBeers in particular has occasionally had immense impact on purchasing behavior, as witnessed by the waves of consumer demand that accompanied advertising initiatives like Three Stone and Journey. And when one considers the various downstream effects, including the impact when Early Adopters and Heavy Users jump on a new item or category and then become walking billboards, encouraging the Early and Late Majorities (the much larger groups of consumers who share a psychological tendency to participate in trends only after it’s clear that the trend is firmly in place) to start buying, it’s incredibly important to watch what the advertisers with significant Share of Voice are saying today if you want to understand what your customers will be buying tomorrow.

As a result, I watch the majors very closely to see what’s likely to become important in Gems One’s customers’ stores. As one objective measure of the value of this approach, consider the fact that during the past four years, we’ve had at least nine of the top fifteen selling SKUs in December in the 300 plus stores that report their sales data into the Edge Retail Academy (ERA) database. I assign a different degree of importance to each of the various national and regional advertisers in our industry, depending on my inferred value for their Share of Voice. So when a company with a large Share of Voice launches something new, I pay very close attention.

 Which brings me to some extremely interesting advertising that launched in mid-November, from our industry’s leader in Share of Voice: Sterling. In order to understand what they appear to be doing, and to help chart a course for changes that should now occur in your merchandising, here’s some background.

The malls have been selling black diamond jewelry for five years now (and this was why I chose to feature 1 ctw black diamond studs three years ago, when, to most of our customers’ amazement, they immediately became the number one selling sku in the ERA stores). The move to black diamonds occurred as a reaction to two realities: first, due to the reduction in consumer budgets that occurred at the outset of the recession, where the enhanced affordability of black diamond jewelry better fit consumers’ new consumption swing planes; and second, due to massive increases in the price of white melee after the Indian sightholders laid off half a million cutters, creating a subsequent temporary labor shortage when demand rebounded.

Black, brown, and blue diamonds have dominated low price point fashion in the malls for the past several years, and with brown now trending downwards, and blue trending upwards dramatically, black has retained a pretty stable share of the colored diamond business. But last Spring, Sterling chose to brand their black diamond jewelry under the name “Artistry.” I noted this change initially with only modest interest, because this move was predictable based on former CEO Terry Burman’s policy statement that “(W)e will no longer sell undifferentiated commodity products.” So Kay’s had simply chosen to brand their generic black diamond jewelry. And on Nov 1, when I picked up Kay’s first Christmas flyer, I saw nothing new. The Artistry page was there, featuring the same black and white diamond SKUs that I’ve been seeing all year.

But during the third week of November, Sterling suddenly blanketed the airwaves with TV spots launching a new element in the Artistry brand: blue, yellow, green and purple diamonds. And when I stopped by the mall to see what the product actually looks like and picked up the late November version of their Christmas flyer (yes, they print several during the season), there was a two page spread of new SKUs featuring the new colored diamonds. How interesting!

So, what appears to have happened is that Sterling’s buyers engaged in a stealthy launch of a new category of diamond jewelry, and their number one position in Share of Voice will allow them to create demand that will suck consumers out of the other mall stores and into theirs, in the same way that the Jane Seymour hearts initially did eight years ago, and LeVian chocolate diamonds did three years ago. It pays to have the number one ranking in Share of Voice, and Sterling has once again used it to maximum advantage. So what will this mean for you?

As I write this on Thanksgiving Day (the deadlines for SJN/MAJN articles fall one month prior to publication), I’m guessing that the colored diamond ads haven’t produced much demand in your stores yet. After all, they weren’t designed to. Remember that Sterling hosts a massive Customer Appreciation Event the weekend prior to Thanksgiving, so they knew that their stores would have at least a quarter of a million brand loyal shoppers from Nov 23 to Nov 25. I’ll speculate that their actual intention was to create an initial wave of demand  with their Customer Appreciation Event participants, a portion of whom would purchase the new colored diamonds, so they could get some of this new product out into the marketplace, where “walking billboards” in December will strengthen the impact of subsequent  December TV ads. What a brilliant strategy, but of course, it’s easy to engage in brilliant marketing strategies when you occupy the number one Share of Voice position!

This means that by about December 10, you may have started to see a trickle of “clueless males” asking for purples and greens, and by Christmas Eve this trickle may have built into a measurable stream of sales lost.

But the more profound impact will occur in February, when a higher percentage of folks on your customer list may be asked by their Valentine for a gift of the new colored diamonds. And by late Spring, Zales, Gordon’s, Helzberg, Fred Meyer, and the department stores can predictably be relied upon to follow suit, and a more significant consumption wave may occur during Christmas 2014.

Will you choose to react in time for Valentine’s Day, and stock some green, yellow, and purple items in popular price points? Or will you wait for later in the Spring to do so? Or will you finally get in the game next Fall, in time for the much larger demand for this new category (but regrettably late enough so that everyone else will have it too)? Or, will you resist the trend altogether, because “fad” items don’t work in your store?

When I consider the fact that many of you seem consistently to miss these kinds of trends, it makes me wonder if you once got talked into something that was a bust (after all, every salesman who walks in your door seems to think they have the greatest thing since sliced bread), and you felt so badly burned that you just swore off trying to participate in trends.

If this is the case, allow me to offer some potentially powerful advice. Continue to listen to vendor salespeople, because in a very real sense the best of them represent valuable eyes and ears in the marketplace. But I encourage you to listen even more closely to the companies in our industry with substantial Shares of Voice.

Because the jewelry salesperson you’re talking to may or may not know “What’s next.” But Sterling probably does.

Class Dismissed!


George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at info@gemsone.com, or at Gems One’s New York office at 800-436-7787.

 

George Prout

George Prout

George Prout is about to celebrate his 50th year in the jewelry business, having sold his first engagement ring as a 17 year-old sales associate working at Kay Jewelers in 1974. In each of the past 4 decades, he has worked for companies that rose to top three status nationally in sales volume to Independent Jewelry stores. Currently he is President of JB Bhanderi, the world's largest CVD grower and maker of the Surreal Diamond brand. He can be reached at george@surrealdiamond.com.

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