Isaac Mostovicz writes...
Over the past decade the financial situation of the diamond industry has badly deteriorated. As I said here, this is because the industry lost all contact with its customers. However, there is hope for revival if the industry will leverage recent developments to its own benefit.
Seven years ago, I participated in an emergency meeting organized by the leaders of the diamond industry. The industry had arrived at a standstill and banks refused to bankroll its operations anymore. This did not surprise me. For ten years preceding this, I had been warning my colleagues that this catastrophe was imminent. At this meeting I was challenged to present a plan to put the industry back on track.
Seven years passed and the industry went from bad to worse. The lack of cash flow is so severe that De Beers saw its first-half 2015 sales plummet by 21%. Worse, customers of De Beers have the right to defer 75% of the goods allocated to them for six months following the sale.
Nevertheless, I see a light at the end of this tunnel. Recently, De Beers has announced a holiday marketing campaign to increase consumer demand for diamond jewelry. Described as a “call to action” advertising campaign, it will target men purchasing diamond jewelry for their partners and is intended to “create a sense of urgency.” De Beers has finally recognized that the natural customer for diamonds is the married couple. Gone is the image it has cultivated over the past century of the young man on one knee, engagement ring in hand, as the ultimate diamond consumer.
For a long time, my partner Randy Pearson and I were aware of this truth. Over the years we have developed a marketing strategy that would fit the needs and wants of the married couple. Recently, we created a boutiqueoperation – Kahro Diamonds – in Raleigh North Carolina that is exclusively tailored to the married couple. We have created a unique toolbox founded on our extensive experience and supported by my academic research, which turns out to be diametrically opposed to the current best practices which are incompatible with the needs of a married couple.
Kahro Diamonds is a boutique operation, currently operating only in Raleigh, North Carolina. We welcome anyone wishing to learn more about serving married couples. Contact us at Raleigh@kahrodiamonds.com or 919- 649-6528. For those who cannot pay us a visit, I will publish some guidelines here to help you turn your business around.
Isaac Mostovicz writes...
It has taken me some time to correctly position the “Kahro Diamonds” brand – a new venture of mine in the Raleigh, North Carolina area of the United States.
It would have been easy to turn Kahro Diamonds into just another local diamond dealer, but it is so much more than that, and I wanted to capture this in how I talk about our work.
Ever since Randy and I began in our careers in the diamond business, we have kept asking ourselves what exactly it is that our diamond customers are actually seeking. As with most purchases, it typically begins with the desire to satisfy some need or to overcome a feeling of unease in their current lives and to move forward in their lives. It has less to do with the product or service itself, but rather the symbolic “attributes” which align with the psychological state of the customer who wishes to improve his or her position, for instance, a person who isn’t satisfied with their current age and wish to buy something which helps them appear older or younger, or a person who believes that they will be happier with a higher level of income or a different occupation. In short, it is for people who feel unhappy or unsettled with where they are at in their lives and who wish to move elsewhere psychologically.
In the marketing world, this is called the “tension differential”, and it leads to actions that would fulfill people’s need for a change. Once marketers identify this tension differential, they can offer products and services that can be used as a solution to try to overcome it.
Most jewelers do not bother to check the psychological reasons behind the will of the customer to purchase a diamond. Instead, they are happy to have a customer who asks for one and then they simply do their best to satisfy his request. However, do they know what the true need behind this request is? Does the customer know how diamonds can answer to such a need?
One of my academic publications addressed this issue and I commented on it several times in my blog. Unfortunately, nothing has changed. The situation within the diamond industry has been going from bad to worse for some years already, and it seems that the more reflective of these jewelers are not visible.
It’s this observation that sits at the heart of the “Kahro Diamonds” brand. The life mission of Kahro Diamonds is to help our customers to clarify their “tension differential”, whether it’s someone who is looking to propose to his girlfriend, or a married couple wishing to bring back the passion into their relationship. We aim to explore with our clients together what it is that is keeping them from their goals. This work has to be done very carefully, and in many ways, the work of Kahro Diamonds is not much different than that of a marriage consultant or therapist. However, Kahro Diamonds asks an additional question: “How have you got to where you are now?” For example, nobody expects or plans his marriage to falter after some years. This is an unwanted result – perhaps due to the stresses of everyday life or the routine of work. And even if we can help get the couple back on track, how can we ensure that they won’t find themselves back in this unwanted situation in a few years’ time?
Here comes Kahro Diamonds with its one-of-a-kind knowledge of diamonds. In the same way that every relationship is unique, so is every diamond. By helping couples to carefully choose the right diamond for them, the couple sets off on a process that helps them understand and capture that same uniqueness and beauty in their relationship. This connection not only brings back the sparkle into their relationship but it will turn it into an eternal flame. After all, diamonds are forever.
Kahro Diamonds currently works locally in Raleigh, North Carolina. But we hope that this initiative can eventually serve to inspire the entire diamond industry to transform itself and reinvest in a diamond’s true value – namely, its ability to lead people to new discoveries.
Isaac Mostovicz writes...
We are irrational. After all, out motivation resides in our subconscious. We have passions and emotions that dictate our behavior and constantly overrule, block and blind our logic. Yes, we are human and that we are ashamed of it is human, too.
In spite of these obvious observations academia keeps on failing by trying to squeeze human behavior into this “logic” box. It tries to explain in logic terms why we behave in one way or another when the real answer is actually illogical and irrational.
I recently read an article by one of my favorite brand experts – Jean Noel Kapferer. Prof. Kapferer in his article addresses the challenge that luxury brands face when growth dilutes their luxury cachet. One key characteristics of luxury is rarity and when it is possible to find a product or brand all over it is not rare any longer, or this should the logic argument be.
I enjoy Prof. Kapferer because he has the knack for brands and luxury. In this article he actually explains what luxury is. I believe that he understands the term subconsciously and I have my doubt whether he paid attention to what he actually said. Here is the quote: “For centuries, luxury was limited to the happy few. It was the exclusive lifestyle of those in power: pharaohs; kings, queens, and their courts; and later merchants and industrialists. It was meant to express refined taste and impress crowds by the magnificence of the palaces, horse carriages, dresses, jewels, and so on.” It is a bit blurred but luxury is about unattainable dream. You can stay at Buckingham Palace but you’ll never turn into the Queen. All you can do is dreaming of it and that overnight staying allows you to dream more accurately. On the other hand, Ralph Lauren’s “value is created by prestigious retail stores made to resemble a mansion, materializing the American dream.” That’s the difference between prestige brands which allow people to materialize their dreams and true luxury which stay as a dream although it allow “excursionists” to experience how those legends live, sometimes on a regular basis and sometimes only for a short period. Luxury has a promise that you can enjoy the product and the brand but you’d never become the true elite – this will stay a dream.
Here is an example to what unfulfilled dreams are. In another publication of his, Strategic Brand Management, Prof. Kapferer points to that luxury brands, especially those named after the founder, Channel, Nina Ricci, YSL and so gain strength after the founder dies. Well, not always. However, Channel is a good example. Coco Channel did not create fashion – she was a fashion icon herself. She sold what she wore. You can buy a Channel outfit but you’ll never become Coco Channel, especially now when she died. That’s luxury.
Going to challenging issue of the above-mentioned article, it is clear that we need a psychological solution. Louis Vuitton, for example, would do best by promoting the legendary Louis who died long time ago. You cannot get his services for any price but you can dream on it. Louis Vuitton, the company would provide you with the closest-to-dream replica, you cannot get closer but you can have a more meaningful dream. If you hammer this message into people psyche you can mass sell your products. Irrational? Maybe but I believe that it will work.
Isaac Mostovicz writes...
It was a pleasant surprise to read a new article about the diamond industry, “Applicability of the high-performance organization framework in the diamond industry value chain” just to find out that the authors extensively used my article, “The diamond industry as a virtual organization: past success and challenging future” when describing the diamond industry. I am really fond of that article which was written by mistake. During my studies at the University of Northampton Business School one of the professors who did not grasp what I am researching insisted that I will write an article about the diamond industry. I had no choice but to do this work, which I considered unnecessary. Upon reading the work my mentor, Professor Nada Kakabadse told me that I have a good basis for an academic article introducing me to the academic publication industry. Well, my work was only the first part of the article and I was asked to add conclusions. These conclusions became longer than the article itself, appeared in a separate article and actually served as the basis for my PhD. Life are full of surprises, don’t you think?
Eight years passed by since I first authored that article about the diamond industry. The industry suffered from severe problems of cash-flow and inability of the banks to finance it any longer. For example, Russell Shor reports in recent GIA article that
“Last year, ABN Amro, the industry’s leading lender, announced it would limit credit to 70% of rough purchases, a break from past policy when they would finance the full amount. In short, diamond manufacturers and rough dealers must put 30% of their own capital up for each purchase, a move the bank feels will limit the speculative buying that has created an extremely volatile rough market during the past four years. In addition, the manufacturers must invest their own funds into rough that is much less profitable to cut in the current environment.”
This policy is similar to that the industry’s lending bank adopted past the economic meltdown back in 2008 when they limited the credit to 60% only causing the wheels of the industry to completely stop for three months.
However, within the same article Russell Shor paints another picture:
“After reasonably successful holiday sales of diamond jewelry in the U.S., De Beers allocated a large sight of about $750 million, with prices of medium quality goods rising 3-5%, higher in some cases. The price increases were apparently based on the assumption that demand for certain goods will increase in the spring when U.S. retailers will need to restock.
As soon as the news of the price increase reached the markets, premiums on existing rough supplies also began to rise, causing concern that a new round of speculative buying – and subsequent price increases unrelated to demand – may be in the offing.”
A large sight, a raise in rough prices and increased premium on goods? Doesn’t all this tell you that business is booming? So, what exactly happens here? Isn’t the industry living in La La Land? Successful holiday sales? Did you see the long lines of customers standing outside the shops trying to snap diamond jewellery off the shelf? Did I miss something?
The past eight years taught me invaluable lessons. Nowadays I know much more about the diamond industry, about its strengths and weaknesses about the mistakes, the wrong assumptions and misconceptions that shaped and continue to shape the industry. After delivering a series of three lectures that only cover the history of diamond marketing in the last eighty –five years I don’t think that another academic article is the right way for expressing my thoughts and broadcasting them. Are you interested in what I have to tell? What would be the most suitable medium to use and why?
Isaac Mostovicz writes...
Recently, a research by Frof. Eli Somer of the University of Haifa and Dr. Ayalla Ruvio of Temple University in Philadelphia PA. argued that the more materialistic people are, the more they will go on a shopping spree when exposed to trauma. I was intrigued by the claiming that materialism can predict how people cope with stress, asking what materialism is and how it is defined just to find out that we all are materialistic. We all acquire and own material goods, or goods that have some monetary worth to achieve life goals and desire states. Put it simply we all spend money unnecessarily not only for satisfying our basic needs but for achieving higher goals. Sounds familiar? Isn’t this an example of luxury behaviour when we overspend needlessly?
Somer and Ruvio conducted their research in Sderot, a southern Israeli town which was exposed to non-stop rocket and missile fire from Gaza terrorists for over eight years. I had an opportunity to host children from Sderot and witness how much those children suffered from this long-term exposure to stress. To alleviate this taxing stress people went on shopping spree time and again. While the less materialistic people coped with the continuous exposure to danger by seeking social support the more materialistic ones were more oriented toward objects than humans.
Did this materialistic consumption help people to cope with their stress? The authors posit that “The results of this study also suggest that the pleasures of shopping cannot attenuate posttraumatic distress, and that maladaptive shopping behaviours increase with the level of traumatic exposure.”
Do you agree with these results? In my opinion, the researchers stopped too early and didn’t ask the “how” and “why” questions. Materialism is part of our life and people need it and use it to satisfy their needs, especially that of enhancing their self-esteem. With continuous exposure to danger it is a never-ending fight and people need to remind themselves of the importance of their self. Some seek professional support and some turn to purchasing objects. However, the purchasing activity, per-se won’t help in extreme situation such as non-stop terroristic aggression over many years. What might subconsciously help in mild situation won’t help in these extreme cases without understanding consciously why we overspend needlessly and how this overspending can help us coping with stress.
I don’t think that materialistic behaviour is counterproductive as the researchers argue. I do agree that the behaviour by itself might even increase the post-traumatic stress symptoms if people do not deeply understand the “why” and “how” of luxury. And from materialistic point of view it is possible that it would be cheaper to let people go on conscious and deeply understood buying spree than sending them to therapy. What do you think?
Isaac Mostovicz writes...
I am happy to announce that Janus Thinking is now offering its first free webinar. The webinar’s title is, “Are you Really Serious when it Comes to Diamonds?” The webinar is an attempt to put together answers to questions I am constantly asked about. You can have flair of those questions when you visit Janus Thinking’s Facebook page. I was mainly asked to comment on three topics, general knowledge about diamonds, value and prices of diamonds and “blood diamonds”. While I might not cover all the questions I was recently asked I believe that the answers and discussion would be interesting and look at those questions from a novel angle.
The webinar will be of interest to all of you, whether diamonds are your topic or not. We will discuss issues such as marketing, luxury and behavior as well. You can send requests and questions prior to the webinar either by commenting here or to firstname.lastname@example.org.
Here are the details. The free webinar will be held on Tuesday, October 22nd, 20:00-21:00 Paris time, 19:00-20:00 London time, 2 PM- 3 PM New York time. Please register even when you cannot attend so I can send you a link to the webinar’s recording via email.
Please, click here for registering to the free webinar. Don’t forget to invite your friends as well.
Christopher Columbus estimated the globe to be smaller. However, even when we live nowadays in a global village we still did not succeed to cover over the time gap. I had to find a compromise between Europe and the US knowing that the gap of time is five hours or more.
I am looking forward to meeting you in two days.
Isaac Mostovicz writes...
Last week a friend of mine, Cristina de Azevedo Rosa, shared with me a very interesting presentation of Harvard professor Clayton M. Christensen named “How will you measure your Life”.
Christensen claims that we all look to succeed in our lives. However, the way we measure this success in life is flawed for three reasons. Firstly, we tend to invest in immediate achievements that in many cases stray from our values as humans. Secondly, this measure is quantitative. Since we cannot grasp data in detail we tend to aggregate it. If we run an organization, for example, we cannot grasp the notion of the individual and we refer to people who work for us as “human resource” – we aggregate the data to render it meaningful and manageable for us. Thirdly, we are comparative creatures. We cannot measure in absolute terms but in relative ones. Having more money than the other or controlling more people are some of the indications for success.
However, how useful are these yardsticks for measuring success in life? Christensen asserts that God does not employ accountants. In other words, when we are going to face God at the end of our lives these measures won’t help us much. Firstly, our short-term achievements will be reviewed for their long-term benefit. Secondly, God does not employ accountants or statisticians for aggregating the data. He is able to address each individual encounter to assess success without losing the overall sight. Last, God measures in the absolute – God is not relative.
Consequently, Christensen suggests us to measure our life along measures that can be used when we will encounter God. Is this going to happen? Using Christensen’s arguments I doubt very much. We tend to cede long-term great goals for short-term perks. Secondly, we are human and cannot grasp large data bases – we need to aggregate them to render them sensible and last, as humans we cannot think in absolute terms – we need to compare and contrast.
Is there another way to live life worth living? How should we measure it? Allow me to suggest two measures, pointing to the trap Christiansen fell into. The first is the pursuing of achievement. The question is whether what we call achievement can be considered as such by Him. Is our myopic, narrow and relativistic view suitable for clearly defining what true achievement means? Jewish sages posit that we will not be measured for what we achieved but for our efforts to get there, regardless to where we arrived to at the end of our life.
The two other flaws that Christiansen point to form my second measure which is a measure of leadership. We tend to measure the degree of leadership using measures of comparing and contrasting. When comparing we check people along their relative hierarchical position. When contrasting, we check people along the type of the issues they deal with. Are they deal with strategies and policies or do they deal with the individual. We tend to see the leader as the one who deal with what we consider important and fundamental issues ceding the mundane ones or delegating them to others. Leadership is grasped as being responsible for other, more important issues.
Fortunately, I was educated differently. My masters who were and are grate leaders never closed their doors to anyone. Many of them created fundamental changes that made the world look differently thereafter but at the same time each individual, being a small child or a public figure found his place by them, got their empathy and care. They did not change the issues they dealt with; they just enlarged their scope of responsibility. We do not need to wait for our meeting with God for finding out how to measure our lives. Having these two measures in mind – investing ceaselessly in progressing toward our goal and being truly responsible can turn our life into something worth living for.
Isaac Mostovicz writes...
Tomorrow evening we will celebrate the Jewish New Year. This is a moment of reflection at what we achieved in the past and what our plans for the future are. Looking back to where I was last year I am happy to see how plans start to take form, how fuzzy ideas start to get shape and I am looking toward the coming year with enthusiasm and with hope in the coming weeks we will be able to start participating more using various means, deepen our understanding of us and the world around us.
I wish you happy New Year. Let’s hope that the coming year would bring to all of us health, wealth, prosperity and enjoyment.
Isaac Mostovicz writes...
I had an interesting experience last week. We are currently working on a webinar that will help people to shake off their intimidation when dealing with diamonds, that would enhance their confidence and help them dealing with diamonds in a joyful manner. This is pretty interesting concept that we were testing in the last few months. When we finalize the technical details I will share it with you, hoping that you will join me on this webinar.
We didn’t have problems with the concept or with the content of what we offer. We tested it on dozens of people in different group setting and they were pleased with what they got. We knew the reason for the intimidation. In a nutshell, the customer’s concern is an equation with three unknowns. He has to find a product which he totally does not understand about and offer it to someone, suiting her taste, while relying on someone who never met the lady who is going to get the diamond ring. Moreover, even when and if the jeweller finds the right diamond, the customer would propose the jeweller’s choice of a diamond, not his. It is always a pleasure to speak to people and to see how their eyes lit even when we only empathise with their problems. And you have to see how happy they are when they start to see how they can solve these issues.
However, publicizing the webinars was a challenge. Advertising is joining an on-going, already existing discussion and introducing something new. My basic assumption was that people who come to us did already some research and went through what the industry calls “diamond education”. After all, it is enough to check on Google “how to buy a diamond” only to get over 346 Million entries. Most of this education is about the 4C’s of the diamond (Colour, Clarity, Cut and Carat). I can share with you that knowing the 4C’s won’t take anyone too far. It is like providing a partial list of ingredients instead a full receipt of a dish. Therefore, people were still intimidated and frustrated because they did not know where next to head. They wanted to expose all the ingredients and to learn how these are put together to make the final dish. My conclusion was that the on-going discussion should be the frustration and the intimidation of the diamond customer.
I was overruled. “You should offer a webinar that explains the 4C’s”, I was told. Of course, during the webinar I could and should go beyond and further explain how to proceed but the on-going discussion of the customer was what the 4C’s were and there where I should start. It sounded strange to me that people would commit to a specific time and pay $25 to listen to an expert when they can get similar information on the internet for free and when they want. However, as I finished the discussion I was asked in one of the forums exactly this: “what are the 4C’s of the diamond?”
Coincidence? I don’t know. Nevertheless, it is clear that in spite of the abundance of information people still go to basics and what the 4C’s are is the on-going discussion. The interesting question is why is it so? Why aren’t they happy with what is available on the Internet? Why isn’t their on-going discussion taking a different shape? I can assume but can you, the potential customer, tell me why did not you move your discussion further?
Isaac Mostovicz writes...
After more than 4 years of manning the US State Department conflict diamond desk, Brad Brooks-Robin stepped down and was interviewed by JCK magazine. Apart from appreciating the very honest answers Brooks-Robin gave, I was left with some questions that I could not find answers to.
Kimberley Process Certification Scheme, established ten years ago, is a structure set up to ensure that diamonds sold internationally do not finance wars or other conflicts. Countries subscribing to the Kimberley Process must put in place regulations requiring diamond dealers to buy diamonds only from known sources. Brooks-Robin considers the scheme to be effective, but believes it does not cover all aspects. Its lack of comprehensiveness was the reason the NGO Global Witness decided to leave the Kimberley Process.
However, the interview fails to address the most fundamental question. Is there any evidence that diamonds finance wars or other conflicts? Was there a raison d’etre for such a huge bureaucratic mechanism to start with? Everyone was mobilized for the scheme – the US government and Senate, the European Union, the Security Council of the UN and even Hollywood. Everyone went forward to protect the market from an evil that never existed.
Well, I would not say that it never existed. When the UNITA wanted to finance its war against the government, they sold diamonds on the open market, but that was a different story. Financing a body the size of UNITA means that they had to sell a lot of diamonds. Actually, the size of the smallest parcel they sold was over $1 million and the goods were openly traded. It would have been quite easy to stop such a trade, had those who were interested been willing to do so; however it seems they were not since they used the money to sell arms, which have the nasty nature of killing and maiming people.
The reasons behind creating this huge scheme were in reality different, but that is another story. Ten years later we now have a mechanism that works smoothly, though aimlessly, and everyone is happy. We have a car with an excellent motor but without a gearbox allowing us to drive it to our destination. We have a set of rules that is followed to the letter of the law, but no one cares whether they achieve anything at all.
The rules on the regulation of the Kimberley Process were doomed to be unsuitable for the needs of the diamond industry to start with. After all, how can rules dictated by someone who does not even know the industry — its strengths and weaknesses, its ethical code and its motivators — dictate rules? Listen to what Brooks-Robin says:
“I don’t understand why KP meetings don’t have a session on the state of the industry. There are too many diplomats and bureaucrats who come into the KP and know zero about the industry. […] There are too many people who come into the industry like me and don’t know anything about it, and KP meetings don’t give you much of an opportunity to learn about it.”
Well, this is hardly news. In early 2000, based on advice from Bain and Co. consulting firm, De Beers decided that the industry needs brands. Nobody really knew what brands meant or how to create them or whether diamonds can be branded at all. Brand was in the air and as De Beers said, we don’t know what this drive means either or how it will revive the industry, but we will learn together with you. According to Varda Shein, the general manager of the Diamond Trading Company – the marketing arm of De beers – about $5 billion in cash went up in smoke without selling one single diamond.
How well did Bain and Co. know the industry? These consulting firms have tools for analyzing corporations, however when dealing with an industry that is exclusively entrepreneurial, one needs different tools and rules, that are not taught in business school. I personally witnessed this when I was in business school, when I realized that I need a very healthy measure of creativity and commitment to apply what I learned to my business. At least if there is a positive lesson to learn from the branding fiasco, it is that the diamond industry is quite flexible and ready to adapt to any trend or move. Well, one cannot expect less from entrepreneurs.
The diamond industry is clinically dead. The mechanism works and its body is supported by life-support machines, but its soul – the personal responsibility for its actions – went away a long time ago. How long will it take before a true leader brings life back to this beautiful industry?