What is your offer?

Isaac Mostovicz writes...

You are at a restaurant studying the menu. Several dishes catch your eyes. You can choose between a steak, a fish or chicken. You like them all but you decide to go for the fish. You didn’t have a problem to decide which dish to pick up. You acted intuitively. That’s how we purchase – intuitively. Marketers use to say that we purchase emotionally and post purchase, we justify our decision logically. If you want to discover the emotional motive behind purchase try to complete the following sentence: “my customer’s need is to…” I can guarantee you that two elements would be missing from the answer – the product and its feature. So, why do you try to promote your product? Remember the restaurant. You decided by your taste buds which were activated when reading the menu that told you which dish to order. Do you know how to activate the taste buds of your client?


Bookmark and Share

Marketing – for Dummies?

Isaac Mostovicz writes...

How frustrated can you be when trying to budget a new marketing drive all you get from your marketing specialist is, “Half the money you’ll spend on advertising is wasted; the trouble is I don’t know which half.”

Isn’t it intimidating to try to assess the budget of something that has unknown value?

Don’t you feel trapped when you have no idea what effect the increasing or decreasing of your marketing budget will have on your sales?

Looking at your marketing plan, can you tell what it promises and on which basis?

Can you decide with certainty, when you don’t know how long it is going to take before the campaign is going to impact your sales and deliver value? Also isn’t it difficult, trying to decide when you can’t foresee when the campaign will create the desired audience effect?

Most importantly, we decide because we trust that the promise would be delivered. Looking at your marketing plan, can you tell what it promises and on which basis?

Your concerns are real. You should be able to take sound financial decisions with each marketing drive. A strategic marketing approach will help to translate your marketing activities into financial terms and will provide you with the necessary freedom and confidence to accurately decide on any marketing drive.

What is strategic marketing approach?

All marketing initiatives are investments like any other ones. You should be able to estimate their ROI, risks and duration. And, you should be able to control their success using preset financial parameters.

Marketing presents a challenge. On the one hand, our purchase decisions are emotional and irrational. On the other hand, a business uses logic and rational tools for making a sound decision. There is a clear gap between marketing, which is informed by psychology, and business that is based on economic rules.

The role of strategic marketing is to close the gap between these, seemingly unbridged disciplines of management and marketing

The role of strategic marketing is to close the gap between these, seemingly unbridged disciplines. I close this gap, that is what I do! Closing the gap enables you to freely, and confidently decide.

Since we deal with closing the gap between the offer and the client, all we need to know is that clients with needs exist! This strategic marketing approach is adaptable to all kind of interactions, B2B, B2C, mass marketing or one-on-one type. This approach succeeded in marketing luxury items to fertilizers, using all types of offers. Currently, I work with charities helping them raise donations.

I also work with startups. While they don’t have an offer yet, we can identify the needs that our future offer will satisfy. The identified need will then influence the development of what we offer.

Let’s examine the three steps strategic marketing follows and see how these can be financially measured.

  • Step 1, identifying your clients’ needs – who, what and why
  • Step 2, determining how to communicate with the clients
  • Step 3, monitoring the success of the strategy

Your clients’ needs – who, what and why

The first question is, who is your client? We are not looking for a socio-demographic description but for a psychological profile. We want to sell, and nobody will purchase if they are not motivated. Motivation results from existing, unfulfilled, need that we need to discover first.

This motivation creates tension. “I don’t want to stay in my current situation” but this doesn’t mean that the clients know where they want to be. They are looking for us for help. Sometimes, they declare what they want to purchase, they tell us about their idea of a solution but, most of the time this “solution” is only a disguise of their tension.

Therefore we cannot ask “What do you want to purchase”, because we risk not getting the right answer. If we follow the clients’ “solution” they might stay unsatisfied. Only by understanding the true needs of the client we are able to offer a true solution.

The market is segmented, and different clients will have different needs and different motives.

But even when we identify the right solution, why would the client select you when others are happy to provide a similar solution? Failing to answer this question will result in competition you won’t be able to compete with.

Moreover, there will not be one solution that fits all. The market is segmented, and different clients will have different needs and different motives. You cannot start marketing your offer before understanding your market and your clients’ needs. You will need to know your strengths and weaknesses, as well.

This market research is relatively simple and short. In many cases, it will only require 50 to 100 work hours. About half of the hours will be spent on face-to-face interviews. In any case, you will have a fair idea of the scope of such a project.

Communicating with the client

You now know who your clients are. You will also know their needs and even know why they chose you. Now it’s time to communicate with your client and tell them about your offer.

The question is, how will you communicate the offer? The answer is, it depends. It depends on the type of offer. Will you interact on a one-on-one basis, or by mass marketing? It also depends on where your customer will learn about your offer, on or off line. The answers to these questions will help determine how you spend your money on advertisement and promotion.

Recently, a major accounting firm asked for my opinion on their forthcoming campaign. They wanted to get more customers and their marketing specialist proposed using social media and beefing up their website with good SEO. They also recommended advertising on Facebook and Google, to name a few ideas. When asked, I wondered which of their customers will ever pick them up by g Googling then select the first firm at the top. Also, whether their potential customers will relate serious accounting service with a Facebook ad.

From the entire, and fancy offer, l suggested they redo their website only. We discovered that their marketing people, while talking to the clients, have them look at the website for business purposes. “All you need is a clean, appealing, and simple website. I told them, this kind of website would allow the client to focus on the conversation rather than the website.

The firm missed out! They didn’t identify the needs at all and didn’t segment the market. They firm jumped ahead, communicating with the potential customer in wrong places. The right customers were not present and the firm missed the right opportunities to find them. Even without conducting full research, I suggested better ideas that were far more productive, and much cheaper, than what their marketing specialist offered.

As for you, it should be relatively easy to decide on the means of communication that you’d like to use. You can prioritize and correctly allocate your budget. You will feel secure and confident that you know how to invest your money.

Monitoring success

The first two steps are about planning. As you are well aware, of not all plans are successfully realized. While strategic marketing approach focuses on satisfying the clients’ needs it also uses your financial performance as a parameter for measuring success.

Two ways exist for increasing earnings, selling more and/or selling at a higher margin. Luxury items, for example, commands higher prices and enables better margins. The reason is that luxury items satisfy the deepest personal need; it enhances one’s self-esteem. The deeper the need we satisfy, the higher margins we can get. That’s why Starbucks manages to sell its coffee at higher prices. I dealt with luxury item marketing for almost forty years. It follows a set of well-defined rules that can increase margins of any offer.

The deeper the need we satisfy, the higher margins we can get.

Selling more results from identifying more clients. Correctly done research will help you identify the psychological profile of your customers. By doing so, you will properly identify your potential customer as well as where and how to reach them.

Using your financial reports as an acid test, you can check your marketing drive and be able to monitor, refine and maximize your profit potential.

Competition and die-hard fans

You might ask how you can raise prices when the competition is breathing down your neck. You are worried that your clients will compare prices and look for the cheapest offer. You are wrong!

One of the myths in business is that competition is based on logic and/or economic parameters. This myth claims if we are able to compete well, beat our adversaries, and provide a better offer then we will win. I know this is what we want to believe. Economists try to persuade us that price competition helps our economy. Being price competitive could be the most imminent danger to a company.

When a price war is launched, some will have to close their operation while others will barely survive. Ultimately, nobody will benefit. Just look at the boxing ring. The loser is knocked out and the winner is not far from it, ending in the hospital with brain damage as well.

Nobody, including you or even the most fanatical economist buys on price.

Let me say it loud and clear, Price doesn’t matter! Let me repeat it again, nobody, including you or even the most fanatical economist buys on price. If you like an offer and you can pay for it, you will buy it. Do discounted meals cheap auto repairs make the car run better or discounted dresses look better?

Remember what I said earlier, a discount is a pain, a problem disguised in a “solution”. The customer needs something and it is not a cheaper price. Do you really know what your customer really wants? For over 35 years I worked in one of the most competitive environments, the diamond industry both in B2B and B2C environments. I met many clients who bargained with all their might to get my diamonds at a cheaper price. Somehow, I always managed to sell them at prices well above the current market price using honest marketing tools. I just answered to their true, inner needs. You can do this, too.

Since nobody likes to compete on price, companies try to propose a unique offer. This is going to fail as well. If one wants to stand out, wearing a red hat, the other will do the same wearing a red one and so will the third one, wearing a yellow hat. They’ll all be uniformly unique and nobody will improve his position.

So, let’s try to find out a way not to compete. This idea is the basis of “Blue Ocean Strategy”. Metaphorically, instead of swimming in the red ocean where fish fight with each other let’s find the blue ocean where nobody disturbs us. While I like the book, and use many of the ideas presented there suggesting avoiding competition is wrong. Our cognitive process is based on comparison and contrasting. When we have a unique, incomparable offer we are lost. We can’t correctly value it.

If your stomach is constantly in knots because you’re asking yourself how much longer your company will last let’s talk. Contact me at help@Imos.to.

There is no need for having a unique, outstanding offer. We need to compare. Comparison enhances our basic need of choosing. However, as marketers we can decide on what to compare our offer to and how to influence the choice. When done successfully, people start to “own” the offer and see it as part of them. For example, this is what happened to Harley Davidson fans. If the clients consistently choose our offer they will create a bond with it and become die-hard fans.

Strategic marketing is very structured and easy to follow, step-by-step. Once you correctly invest you’ll strengthen your brand, create higher profit margins, render your competition irrelevant and open new opportunities for growth. You’ll transform your loyal customer base into “die-hard” fans.

So, If you’re staying up late at night worried about your business crashing, your stomach is constantly in knots because you’re asking yourself how much longer your company will last – and the crazy thing is, you know if you can change your money flow by just 20% to the positive, everything would be fine, let’s talk. Contact me at help@Imos.to. I might help you stopping the money hemorrhage and help you treating your marketing budget as an investment.


Bookmark and Share

Proper marketing in a nutshell.

Isaac Mostovicz writes...

some of my LinkedIn connections invited me, among others to offer 10 tips over ten days about a topic that is important to me. I chose to post on marketing. another good friend, Rodrigo Martinez, a Chilean serial entrepreneur who help entrepreneurs sell their startups for millions decided to publish these tips on his website www.fyi.to. you can read my tips on Rodrigo’s website at the following address https://10tips10days.fyi.to/10tips10days-isaac-mostovicz.

enjoy the reading.


Bookmark and Share

8 Remarkably Powerful Ways to Get the Most Out of Your Sales and Marketing Efforts

Isaac Mostovicz writes...

This is an article published yesterday by Peter Economy at Inc.com. Enjoy.

8 Remarkably Powerful Ways to Get the Most Out of Your Sales and Marketing Efforts

According to Isaac Mostovicz, you can’t leave your sales and marketing efforts to chance if you want to succeed in the long run.

In 1960, Harvard marketing professor Theodore Levitt published “Marketing Myopia,” one of the most popular Harvard Business Review articles ever. Almost sixty years later, Levitt’s ideas have stayed fresh and convincing despite the fact that most companies don’t follow them.

Levitt claimed that businesses are preoccupied with own growth, focusing on their products instead of carefully gauging the needs and wants of their customers. Levitt believed this myopic view would cause businesses to fail. And that turned out to be the case when Kodak went into bankruptcy in 2012 as it failed to identify the shift to digital cameras, and when Nokia had to be sold to Microsoft as it failed to identify the shift to smartphones.

Isaac Mostovicz is founder of Janus Thinking, a think tank focusing on the psychology of luxury, marketing, management, and leadership. He is also actively involved in the diamond industry, devising and executing creative marketing programs in the U.S. and Asia.

According to Isaac, if you follow these 8 tips, you’ll get the most out of your sales and marketing efforts — leading to long-term success for your business.

1. Don’t sell a solution — try to find out what the problem is.

Your product is a solution to the needs and wants of your customers. But, do you actually know how your solution satisfies the needs of your customers? Beware of that one solution that might satisfy several needs — you’ll end up not solving anyone’s needs. Each product or service you offer must provide a solution to a specific need. If you want to offer a solution you will first need to discover the customers’ wants.

2. Identify your competition.

Your competition is not only those companies that offer similar solutions or products as your own. Your competition includes all those companies that can satisfy the needs of your customers. Airlines don’t compete only with one another. They compete with all other means of transportation — and when no physical presence is really necessary, they compete with inexpensive or even free online video conference tools as well.

3. Identify your markets.

A market is the agglomeration of all products and services that answer one particular need. Since your customers have various needs, you act in a set of markets and each has its own set of competitors. If you don’t map your markets in detail, you are playing the casino or lottery without knowing what the odds really are.

4. Price war.

This is the cardinal sin of companies. The ultimate role of a company is to survive profitably, and how can you survive if you are cutting your margins too thin? It’s simple: You can’t. If people buy your competitors’ products over the ones you offer, it means that their solution is more appealing. Go and find out why.

5. There is no “best price” — Part 1.

Contrary to what many think, Henry Ford sold his legendary Model T at just $500 because he calculated that this price would allow millions to purchase his car. The rest — the assembly line and mass production came as a result, not vice versa. When pricing, find out first what the price should be by asking your customers and then focus on modifying your costs accordingly.

6. There is no “best price” — Part 2.

Your product costs you the same regardless to whom you sell it to. However, people pay differently according to the needs that your product satisfies. You might have the same product on the same shelf — but with two different price points — because they aim to two different markets. All you need is to clearly identify which product is aimed to which market.

We interpret by comparison and contrasting. That’s why we tend to think that something that’s more expensive is better. Even when you are still unaware of the various needs of your customers, try to offer two price points. Justify the higher price by saying, “My customers find this offer better.” You’ll be surprised at the success of this tactic.

7. There is no “best price” — Part 3.

Managers think in absolute terms. However, how do you know when the offer is cheap or expensive? You don’t! The only way is to compare offers. $10 might be cheap when the alternative costs $15 and expensive when the other offer is $5. However, it is your job to decide what you are compared to. If the alternative to a First Class airline ticket is a video conference, any price you charge for the video service is cheap.

8. Marketing and not selling.

Selling focuses on the seller. Many coaches teach tricks to sell, promising to teach you how to sell refrigerators to Eskimos. Marketing focuses on the customer’s needs. What happens when they don’t need? Don’t try to push and convince. Instead, ask them what you should do. What is wrong with your offer? Who might buy such an offer and why? Don’t stop at a “no.” They might not buy from you but will give you valuable information on the way you should go.

As Theodore Levitt said, “Experience comes from what we have done. Wisdom comes from what we have done badly.” And wisdom is not that bad.

Bookmark and Share

Look inside yourself

Isaac Mostovicz writes...

Do you want to innovate?

Do you feel that your business needs a change?


You are wrong because you seek solutions outside. You are unhappy with what you have and search for the Holy Grail. You believe that the neighbor’s grass is greener.

I was recently asked to consult a company that struggled with its sales and profits. They expected me to come with a program that would create a paradigm shift and that will transform the entire company into something totally new.

All I did was putting together some ideas from various areas of my expertise and presenting them to the marketing managers. “What can you do with this?” I asked and the ideas started to flow backed by data that the company already had. Within an hour we had a basic plan on how to progress. The entire team was mobilized enthusiastically knowing that they can do it.

Never look for external solutions. Look inside you! You know best what the solution is.

Bookmark and Share

Think Beyond the Commodity Mindset; Turn your Offer into Luxury

Isaac Mostovicz writes...

TEVA is trapped in a mountain of debt exceeding $40 billion.

Fourteen-thousand employees which made up 25% of TEVA’s workforce will be laid off. It needs to think beyond traditional restructuring.

This is hardly news. That’s the nature of the business landscape that exists in an unfortunate vicious cycle: grow, borrow, expand beyond capacity, and restructure to start all over again. Not every company fully experiences this entire cycle. Many companies will fall victim to their debt and become prey to their hungry competitors.

According to McKinsey, 95% of companies don’t understand their value proposition, and consequently, trade on price. Alternatively, we can say that these companies show one fundamental symptom: They have the commodity mindset. This mindset is our own creation. We need to first understand how we create this mindset, what it entails and how can companies cure it.

The creation of the commodity mindset

The commodity mindset is a set of beliefs and assumptions that put together lead to a business trap. As the old saying goes: “We buy with our hearts, and then justify it with our heads”. Organizational behavior is no different, and companies are creative enough to explain their success. They won’t look further. They won’t check whether the explanation to this success is valid at all or whether they can explain their success in a different way. Their mindset becomes “one solution fits all”. They will rely on surveys and reports because they support their logic. Their offers are solutions to hypothetical problems. Hypothetical, because these companies never checked with their customers what their real problem is.

However, even when companies have successful solutions, the solutions are always easily copied by competitors and leads to price war. The only way to win is to slash prices and to reduce profit margins. Not one company would survive this way. It would either come out with their money, or will end with a loss.

When it is impossible to make even one dollar of profit the way of growing is by becoming bigger. Companies try to take over their competition as a means of survival. This defensive behavior may save the company from losses, but will not help it grow.

This mindset doesn’t allow companies to raise prices and blocks their growth. The only way to grow is by becoming larger and more potent. Regrettably, with no profit and no cash these company need to borrow.

Hoping to curb the competition is a false hope and wishful thinking. Competition will always exist and will put so much pressure over the profit margins that the borrowing company will not be able to pay its debt unless it divest serious portion of itself and raise the necessary funds. The only way to continue is restructuring.

Hence, the commodity mindset is set because of two reasons. Firstly, we were educated to appreciate the superiority of logic over emotion. The easily copied “one solution fits all” is a tribute to our rational thinking. Secondly, we perceive the principle of the “survival of the fittest” in its primitive, animal-world format. Companies prefer emotionally to defend their offer through price war where even the winner will be left licking its wounds. Consequently, companies following this commodity mindset committed one cardinal sin – they never talked to the customer.

Talking to the customer

Can we rely on reports and surveys? Not really. That’s how Blockbuster lost its market to Netflix. Reed Hastings, Netflix co-founder and CEO explained how he met with Blockbuster and tried to convince them that their business model is outdated. Managers of Blockbuster explained from one their reports that “our customers like to come in, to check the DVD boxes and to read the reviews on their back”. However, Netflix’s Hastings visited Blockbuster’s outlets and actually talked to the customers to hear a different story. The rest is history. Blockbuster went bust, and Netflix took over the market.

You’d think that marketers are immune and know their way. After all they should know who the customer is and they should talk to him. Unfortunately, this is not the case. The marketing buzz is that video use in social media will spike up in 2018. I asked a friend and he quoted 42 marketing statistical researches supporting this argument. Those statistics have one similar flaw – none of them checked the customer’s view. Marketers are now busy producing videos, justifying it with statistics which is totally unsubstantial. LinkedIn users know very well that the text-only posts are the most read and most viral. They know this from experience, not from statistics.

The alternative marketing approach

When talking to customers you will discover two important points. Firstly, the belief in “one solution fits all” is wrong. Each customer has his own particular needs to satisfy and all are using the same product as a means only to their particular goal – satisfying their particular needs. These individual needs are a challenge to the marketer who needs to synthesize them into larger segments.

Secondly, and contrary to the logic approach of the commodity mindset, customers are motivated by emotion and not by logic. Luxury is doing exactly this. It uses the bare product, the commodity as a platform for delivering the added value – answering to the emotional needs of the customer and cashing on it. Luxury is expensive because it is laden with emotional added-value.

In 1988, Mazda introduced its 626 model to the UK market, and it was compared to the Mercedes-Benz and BMW models that were sold for $49.000 or more. Mazda asked in its advertisements why customers pay extra money when they can get a similar car for less. Mazda missed the point. Though the 626, Mercedes-Benz, and BMW all offered a similar product, people would rather pay for the added value that the Mercedes-Benz and BMW offered that couldn’t be found in the 626.

Hence, the alternative marketing approach is luxury marketing or marketing based on principles of luxury. There is a fundamental difference between the commodity and the marketing approaches. The commodity approach is based on removing any chance for choice – one solution exists and it should satisfy all. On the other hand, the luxury approach is a tribute to the underlying quality of man – his ability to choose. Therefore, any luxury-type marketing offer is based on several good options to choose from.

For developing these options we start with careful market research that would reveal the subconscious, emotional needs of the customer. It follows with segmentation practice that will synthesize these various needs into large enough segments to market.

As a result, the company will have several products, each fitting a different segment’s emotional needs. Because of the emotional added-value of each offer the company will be able to raise its profit margins. The more laden with emotional added-value the offer is, the higher the margins will be.

It is impossible to stop competition, and all the company can strive for is to dictate the rules of competition only. The way to compete is to have a direct dialogue with the customer and to authentically answer his emotional needs. The competition will have to do exactly the same – find its own authentic voice, create an intimate dialogue and answering the customer subconscious needs in its own way.

However, this approach is based not only on identifying the particular needs of each customer but also on segmentation – synthesizing these particular needs into coherent segments. There are no rules here and each company would be able to define its particular marketing approach. There will never be one winner takes all.

The case of TEVA

Not only I am not familiar with the pharmaceutical industry, any professional advice needs to be supported by prior sound research that I never conducted. Nevertheless, we can examine few of the challenges that TEVA might face.

Elementary to luxury marketing is that the customer will have a choice that reflects his particular emotional needs. This is usually not the case when the patient accepts the decision of the physician that doesn’t take the patient’s emotional welfare into account. How can we allow the end-customer the ability to choose between equally good solutions?

Next, we need to understand the physician’s motivation. Faithful to our approach this group – the physicians is segmented as well. Finally, the health insurance companies, which finance the treatment are also not all cut from the same fabric. They all have their motivations that need to be satisfied. In my research on boards I could clearly identify patterns of behavior that need to be satisfy. It is not enough to say that these companies like to act in a thrifty way. The question is why they act so and the answer varied and reflects the decision makers’ worldviews.

However, as the problem becomes more complex it may allow TEVA to develop its unique answer that will satisfy the true needs of all stakeholders at once. A solid answer will position TEVA as resilient to competition and allow the company growing with better profit margins.

Bookmark and Share

When will they ever learn?

Isaac Mostovicz writes...

Back in 2013 I visited the JCK show in Las Vegas. The JCK show is one of the largest diamond and jewelry shows in the world and almost everyone in the diamond industry attended either as a presenter or as a visitor. One of the highlights of the show is Martin Rapaport’s review of the diamond industry. Rapaport’s speech recalled for me the immortal Pete Seger song, “Where Have All the Flowers Gone?” because it seems that the industry has not changed its practice despite reality continuing to slap it in the face.

Let’s start with a bit of history. Before the big discoveries in 1882 there was not a diamond industry to speak of. Upon the discovery of the large mines in South Africa, Ernest Oppenheimer and Sir Cecil Rhodes established De Beers. Their major fear was that there might be a surge in diamond supply that the world wouldn’t be able to absorb. So they offered to buy the entire world supply, and act as a buffer, releasing diamonds according to need. Of course, De Beers wanted to profit from their position but they never withheld diamonds just to create artificial demand in a typical monopolistic manner. Following the Great Depression in 1932, De Beers risked becoming insolvent when it could not sell a single diamond while, on the other hand, could not raise enough money to honour its obligation to purchase the diamond production any further.

Fortunately De Beers survived and realized that its responsibility was to create a diamond market, or to create the consumer demand for diamonds.  In 1938 Harry Oppenheimer, Ernest’s son, hired N.W. Ayer to help De Beers market diamonds. This move proved to be a tremendous success and the “A Diamond is Forever” slogan was coined, which is arguably considered one of the best marketing slogans ever.  De Beers grew based on its ability to control the diamond rough market and to sell the production according to the real demand, taking care not to clog the industry’s arteries. In the 1950’s when the Russians started to sell their diamond production to De Beers, it presented a problem since the Russian production was of much smaller diamonds. Nevertheless, De Beers successfully started to market the anniversary ring as a means for marketing these small diamonds. Prices went up gradually, but in a sensitive way that reflected real consumer demand.

Things started to change in the late 1970’s. There were many factors involved. The introduction of grading reports (or “certificates” as they are known in the industry) increased the categories diamonds were divided into tenfold. Instead of ten categories the industry now had a hundred, and each had to be priced differently just to justify the grade. In no time, prices increased dramatically, but this time the reason was different. The increase in price was no longer geared by true demand but by internal market forces. People started to speculate and with the help of the bankers the industry bought rough with the hope of selling it later at higher prices. De Beers did not want to see a diamond stockpile grow outside their control and in August 1980 they managed to cut this speculative trend abruptly. As a result, the market came to a halt and started to build itself back slowly. Manufacturing of rough, on the other hand, did not stop and De Beers found itself in a position where it had to buy diamonds without clients to sell to.

Into this scene, Nicky Oppenheimer, the third generation, entered. Unfortunately, Nicky did not have the view of his ancestors who knew that the success of De Beers depended on the success of its market of true consumers in which they had invested money and energy to develop. Instead of building a healthy consumption that would eventually benefit De Beers, Nicky Oppenheimer was concerned with his company’s success – he wanted to make money. Looking at his stockpile, Nicky realized that the lion’s share of the value of it came from a very thin sliver of the goods – the better quality. Well, De Beers could survive by creaming its stockpile and hoping for better times to sell the rest.  De Beers embarked on faulty market research that created the infamous 4C’s, promoting larger and more expensive diamonds.

Shortly before the 1980 crash, the Indian polishing centre started to grow. The Indians found ways to polish diamonds which only a few years earlier were considered unpalatable. However, De Beers effectively stopped looking for solutions for the diamonds polished from its rough. No marketing idea was introduced to promote the cheap Indian polished diamonds. This revealed the lack of basic marketing thinking in the diamond industry, which is about understanding the unique link between the consumer and its supplier. Local or international, the consumer needs to see what unique offer he gets at the retailer. However, by writing off the consumer, the focus switched to the retailer, and suppliers wondered how they could build loyalty.

Especially with the cheap Indian goods it was difficult to differentiate between supplying offers: they all looked the same and there was an exit barrier and no loyalty. These diamonds were approached as commodities where the cheaper offers won. To offset this problem, programs were created with the aim of tying up the retailer long-term, forcing them to buy goods that reflected the production needs of the supplier, but which were not relevant to the market situation. Instead of appealing to customers’ emotional needs, retailers followed typical push tactics by offering discounts and promoting sales similar to other retail sectors. With the help of De Beers, the suppliers helped those retailers promote these programs. As a result, the bigger the retail account, the more support they got as they had the ability to push more goods down the supply chain, at least theoretically.

Over time and especially when the Internet became an integral part of the business, sellers of larger and more expensive goods followed suit, turning the entire diamond market from luxury into commodity. People started to trade “paper” or “certificates” and nobody bothered to use a loupe and tweezers, the tools of the industry. To counter the price erosion, more and more programs were created. Suppliers were ready to act as bankers and extended lavish credits without knowing what they were doing, with the hope that they would manage to tie up their retail customers who would eventually sell their goods and send the money upstream. Instead of focusing on the diamond consumer, the industry looked the other way, trying to please its bankers.

Toward the beginning of the 1990’s I started to gain interest in the diamond consumer market, realizing that the reasons behind people purchasing diamonds are totally different from what the industry that trades and sells their production believes. I could not find answers to why people really buy diamonds within the industry. Nobody knew or even cared to know. The diamond industry totally lost contact with the diamond consumer.

Meanwhile, De Beers went into strategic review and came up with two results. Firstly, its $5 billion unsellable stockpile was worth nothing and secondly, it officially ceased to be the custodian for the industry. The industry which fully relied on De Beers to create its consumer market found that the captain had abdicated the ship.

Nobody seemed to care. As early as 1998 I warned whoever wanted to listen that the industry was heading toward insolvency but nobody really listened. Without much understanding of what they were doing and with the encouragement of De Beers, the industry went into branding itself just to see how $5 billion in cash and bank money, or a third of the industry capitalization, can evaporate within three years without selling one extra diamond to make up for the loss.

Meanwhile, De Beers tried to push its dead stockpile down the industry’s throat. Abdicating its role as the industry marketer, De Beers’ relationship with the market took a new turn. Companies were put into competition based on who could better please De Beers’ bottom line. Which customer had the financial muscles to purchase more diamonds long-term? Companies were not required to show that they could sell but that they could buy from De Beers on a steady basis. Most of the goods were the cheap Indian type and with bank generosity, Indians bought the entire stockpile, polishing it and creating a new unsold stockpile, this time of polished diamonds. The industry was operating completely in reverse — instead of focusing on the end of the supply chain, it was trying to please the beginning.

The industry was now at the mercy both of its bankers and De Beers, totally disregarding the diamond consumer and his needs. With the financial meltdown in 2008, banks were at a very shaky point and needed to justify the credit they extended to the diamond industry, which they could not do, and the industry started to panic and called for an emergency meeting which I attended. I must admit that I was wrong as eventually the industry survived, again with the help of its bankers.

However, five years later things haven’t changed. The industry owes $15 billion to the banks, or more than the annual cost of rough. From another perspective it owes 65% of its polished diamonds’ value to the banks and still it hasn’t realized that there is only one way to do business – by satisfying the consumer’s needs. Visiting the JCK show tells the story. On one part of the show floor you find the manufacturers, dealers and distributors – the diamond industry insiders who keep on dealing among themselves and complaining that they do not make any profit, as if living in a bubble and totally disregarding the retailers. The retailers are found on the other side of the floor, checking new packaging, software and other materials for their stores. These two parts of the supply chain do not meet.

And as for marketing, in his last slide, Rapaport had two important lines. The first was “We need marketing,” and the last one was “He who owns the customer owns the industry.” Well, Mr. Rapaport and my dear colleagues in the diamond industry, you have no marketing and it seems that you don’t care about it at all. Consequently, you do not own the customer and, according to Rapaport you don’t own your own industry.

You say of this article...

Bookmark and Share

How to profit from likes

Isaac Mostovicz writes...

Gary Gilmore was executed on January 17, 1977, at 8:07 a.m. by firing squad at Utah State Prison in Draper, Utah. His last words were “Let’s do it!”

These words inspired Dan Wieden to coin Nike’s slogan “Just Do It.” It is considered one of the best taglines of the 20th century. Nike’s campaign based on this tagline propelled Nike’s American market share of sport-shoes from 18% to 43% within ten years.

Jerome Conlon, then Nike’s Director of Marketing Insights & Planning illustrates the challenge. America faced increasing obesity, a recession and reduced funding for school sports. Nike was popular among male athletes, but it was losing the female market share to Reebok’s aerobic shoe line. To win in the game of business, Nike needed to become popular with women, youth and baby boomers.

Nike’s aim wasn’t the one million professional athletes; it wanted to unleash the athlete within 150 million Americans. It appealed to the dreams of people, and their inner yearning for healthier life. All they needed was to put on a pair of runners and start jogging. All Nike wanted them was to purchase a pair of shoes and “Just Do It.”

Did this campaign help the US to combat obesity and procrastination? Not at all. Wearing Nike’s sneakers became a statement. Not an athletic statement, as one might think but a “me, too” statement. One million professional runners used the shoes to compete, and the rest were just clicking a mental like every time they saw a Nike ad. Eventually, these likes turned into purchases.

Every time people wore their Swoosh labeled shoes, they sent out a share, and their friends got a mental notification.

Eventually, these likes turned into purchases.

How can you financially benefit from the likes to your posts?

You say of this article...

Bookmark and Share

One Question

Isaac Mostovicz writes...

Any call for creativity or innovation intrigues me. So, when I got a call to join a brainstorming event with tens of thousands of participants I expected to get some stimulating ideas, some exciting questions to bite in.

I managed to find this post which claimed that the 100 questions on its list inspired 454,000 ideas. The call for action was to add more to this long list of ideas. Well, I stopped at the first question wandering what I am missing, what went wrong with me and why I couldn’t be triggered by any one of those questions?

Here is the first question on the list. How might we increase the productivity of Singapore?

Well, I cannot answer this one but at least I have a few questions:

1. Why is it so important to increase the productivity?

2. What might happen if we didn’t increase productivity?

3. What are the hindrances that blocked productivity?

4. How do you know that these hindrances are what block productivity?

5. Why were these hindrances created /imposed on in the first place?

6. Why weren’t they removed until today?

7. What are the untapped or underdeveloped capabilities of Singapore that might help us increasing productivity?

8. Why were they left untapped until today?

I can go on and on but one question nagged me, and it can be developed further: Why do you consider this type of question “innovative” or “out of the box”?

Moreover, checking the above list of questions you can apply them to most of the 100 questions presented.

This leaves me with one question?

What can be the one tough question that will really force us to think out of the box, to delve deep inside and to let our creative juices run? Maybe we won’t find a remedy for Singapore but a good question will broaden our horizons and allow us to think differently. Isn’t this what this group about?

You say of this article...

Bookmark and Share

Transform yourself

Isaac Mostovicz writes...

I am so happy to move forward with the new initiative of Janus Thinking. We are creating a new community for all those who are interested in my ideas about luxury, marketing, management, leadership and diamonds. Looking at what I discussed in the past it is clear that the call is for you to transform yourself. But, how can you do it?

The first lesson is here – a video that will introduce you to how to think about transformation. Above appears the trailer to this video and to get the full video please go to
www.janusthinking.com/video .

Join our community for more ideas and insights.



You say of this article...

Bookmark and Share