Engagement rings: making billions while making guys poorer

“Making billions by making you guys poorer” should be the slogan of DeBeers, the international diamond cartel. 

 

It’s astounding how much money a lot of us spend on diamond engagement rings.  A friend of mine spent $20K on the ring he bought three years ago. Another friend of mine spent $6K, and he only makes about $30k/year.  Even that is less than the three-months salary that DeBeers (and most of the bridal business) recommends that the guy spend on a diamond engagement ring. 

 

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 ten months salary on a new car.”

 

I read an article last night 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 adv. 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.

 

To show how successful the DeBeers ad campaigns have been, I have an example, a friend of mine named Alan.  Alan is a great guy, but he is one of the, let’s say, thriftiest fellows I know.  He squeezes a penny so hard that Abe Lincoln screams. He drove a little old pickup truck for years, even though it didn’t have air-conditioning, and this was in Texas and South Florida.  He brought leftovers for lunch every day (and undoubtedly still does).  He gets his haircuts at home, by his wife using a Ronco Supercut machine.  He gets up at 5AM to take his car to Walmart rather than the 10-minute oil change place to save $5 on the oil change.  He buys his clothes either on clearance sales or at the Thrift Store, second-hand.  I could go on and on, but you get the point: Alan loves to save a buck.  But even he spent thousands on a diamond engagement ring.  And I’m guessing he’ll soon be spending thousands more on the now-obligatory diamond anniversary ring (if he hasn’t already).