How Much Should You Spend On An Engagement Ring?
Posted by Mr. Thoughtful on April 2, 2008
If you thought it was only two months salary, you are behind the times. It used to be only two-months salary, but DeBeers upped it to three. Can you imagine the maker of any other product putting out the word that you should spend a certain percentage of your income to buy their product? I can’t imagine it would be successful if, say, GM were to advertise that “You should spend nine months salary on a new car.”
I recently read an article in “The Atlantic” magazine on how this impressive marketing strategy became successful. Reduced to its essentials, it is this:
The South African diamond producers realized they were mining a lot of diamonds. Knowing the law of supply and demand, they realized that a huge supply of diamonds on the market would reduce the price they were able to get. So they formed a cartel, a big company that controlled the supply of diamonds pretty much worldwide. It helped that almost all the diamonds in the world were found in South Africa.
In the late 1930s DeBeers went to an excellent advertising agency in NYC and paid them to undertake a decades-long campaign to boost diamond sales in the US. The country was in the midst of the Great Depression and few people could afford to buy diamonds. Even when they did buy diamond eng. rings, they were inexp. little diamonds of poor quality. So DeBeers wasn’t making much money. Yet.
The agency told DeBeers that times were hard and they would have to convince guys to spend quite a bit of money on diamonds, which meant they couldn’t spend as much on food, clothing, and shelter, you know, necessities.
The agency developed the strategy of selling the idea that only a diamond meant love and commitment. Among many other techniques, they sent speakers to public schools making this kind of presentation, convincing a generation of young girls that they needed to get a diamond ring before giving it up (the speakers weren’t this direct, of course, but that was the effect).
Years later the agency figured out a way to increase their already-vast sales: convince women that they needed another ring, ten years or so after the marriage. And now this too is seen as necessary. So instead of putting $10K in college fund for the couple’s children, or a 401(k) so they won’t be poor in retirement, the couple spends it on another diamond ring.
What a remarkable advertising campaign. Expensive for guys though.
April 2, 2008 at 9:13 pm
I read a blog recently, written by a woman I have a high opinion of, that also mentioned the “three months” salary rule. The thing is, she of course agreed with it. What she was saying to her male readers was, “Hey, that ring is a reflection of you. Do you want her friends to know how cheap you are?”
I HATE that. It is almost like high school. Everyone following “the system” like sheep. Another reason I’ll probably never get married.
April 3, 2008 at 3:39 pm
The argument your friend was making (that the ring is a reflection of you and do you want her friends to think you are cheap) is a classic signalling idea. You signal your love, generosity, and commitment to your fiancee by giving her an expensive ring.
But signalling is costly. Maybe you should demonstrate your commitment to your fiancee by putting most of the money you were going to spend on the ring into an IRA for your retirement together. Let’s say you put ten thousand dollars into an account. If you get engaged when you’re thirty or thirty-five, that ten thousand dollars will, through the miracle of compound interest, grow to over $50,000 by the time you retire.
You could spend the remainder of the amount you would have spent on less expensive engagement ring.