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The Right Hands: An Interview with Stephen Lussier

Jul 27, 2000 5:11 PM   By Martin Rapaport
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Martin Rapaport’s interview with Stephen Lussier (London 07/13/00) is essential reading for anyone that wants to understand the new De Beers and the diamond industry as it moves into the next century. Lussier, De Beers Director of Consumer Marketing, lays it on the line in a frank interview that explains De Beers’ new marketing moves.

Martin Rapaport: So tell me, how important is the new De Beer’s initiative?

Stephen Lussier: Well obviously it’s a big initiative and it’s going to be revolutionary as it clearly holds out the possibility for a long-term transformation of our business. Our goals are relatively straightforward. We want to make sure that our industry, particularly our sightholders and their downstream clients, have all the skills needed to be able to compete with the best in the luxury goods sector. When one looks at the luxury goods sector, it’s one that is consolidating. There are three main firms that are buying up most of the main brands. They are aggressive and skillful marketers and they are growing at a faster rate than diamond jewelry. Despite the fact that we have what we think is the ultimate luxury product, we are not capitalizing to the degree that we can on the luxury boom. What this initiative is really about is the long-term effort we need to make sure that our industry has all the skills necessary to compete with the best.

MR: Who are these three firms buying up luxury brands?

SL: They are LVMH, the PPR Gucci Group, and Vendome Richemont. The jewelry industry knows a little about these firms because Richemont owns Cartier and Van Cleef. These firms are buying into the watch industry now. They own most of the fashion brands and they are marketing specialists. That’s the skill that they bring to the market. They spend big budgets on advertising and they dominate women’s fashion magazines and the minds of women. If we can’t stand right up there with them, we won’t get our share of the consumer’s wallet.

MR: Do you think any of these big three might want to buy De Beers?

SL: I think that’s interesting. They have identified the jewelry sector as a target in their annual reports. They’ve moved strongly into watches and they are looking at jewelry. They see jewelry as the next sector to go into. But jewelry is not easy for them because they expand through acquisition, and although Gucci recently bought Boucheron, there aren’t many jewelry brands to buy. While they might help by introducing new brands, my main concern about these firms is that on the whole they are the competition. If we allow them to define what luxury is for women, and if this definition does not include diamond jewelry, then we are going to grow more slowly. So our task is to make sure that throughout our industry we have people focused on the consumer, on marketing, on adding excitement to diamond jewelry. Then we can keep our market share.

MR: What is the role of the sightholder in the new program? What does De Beers want sightholders to do?

SL: The initial task for sightholders is relatively straightforward. We want them to think beyond "How am I going to transform rough into polished," or "Who in Tel-Aviv am I going to sell this rough to?" We want them to actually wake up thinking, how can my clients in Tokyo sell another diamond to a consumer. I know they say, "What does a sightholder know about a Japanese consumer?" But that’s really the issue. The distribution system has to be much more focused on looking farther down the pipeline — into what attracts consumers. Sightholders must focus on generating creative ideas that will help their clients — jewelry manufacturers and retailers, — sell more diamond jewelry.

More than anything else our new program is about creating a new way of thinking about marketing by our sightholder/ distributors.

I’ll tell you an interesting story to illustrate this. While trying to learn about different marketing approaches we met with the people from Coca-Cola. Coca-Cola bottlers who actually market Coke are considered part of the Coca-Cola family. Everyone in Coca-Cola, from the president right on down to the person who sweeps the floors at the end of the day, is given the task of thinking about how to sell more Coca-Cola. This company-wide, family-wide focus on marketing, on how to sell more Coke has created the great success that Coca-Cola is today. Interestingly, everyone at Coke from the chairman on down, has to go out to work with supermarkets for a week a year to make sure they know what selling is all about. This creates a company-wide marketing/sales orientation. And that’s the sort of culture we need to create in what we call the DTC family.

MR: So basically what you’re saying is that even though they’re not in marketing, they have to have a marketing attitude.

SL: Exactly. We’re not expecting our sightholders to launch a branded advertising campaign. For most of them that’s not what it’s about. But it is about thinking about selling. And if you think about selling you have to think with the consumer markets in your head. You have to think about why consumers want diamond jewelry. And you have to think about what you might do to help them buy more.

MR: Should sightholders be thinking about selling diamonds or jewelry?

SL: In the end, consumers buy diamond jewelry. So we have got to think about marketing in a holistic way. Some diamonds, particularly larger stones, are sold on the merits of the diamond that happens to be housed in jewelry. But for a huge range of what we sell, it is jewelry consumers are buying. They are buying the look, the feel of the piece, as well as the magic of the diamonds. So you have to think about both.

MR: Why do you want the sightholders to become marketers?

SL: Because, as the Marketing Director of De Beers, I look at the growth rates we must achieve. I see the rapidly developing skill of our competition in the luxury goods sector. The world is much more competitive. When I consider the tools we have, I think it unlikely that the Board of De Beers is going to give me an extra $100 million in advertising because that’s not the solution to the problem. What we need is a whole range of downstream marketing partners who are also focused on selling diamonds, so when we have an idea we can multiply that idea and bring it more powerfully to the market than De Beers can on its own. The place for us to start in looking for marketing partners is obviously with our sightholder clients. Our hope is that our sightholders will extend our marketing concepts, through strategic marketing partnerships with their customers, right down into the consumer markets.

MR: Give me an example of what a sightholder could do.

SL: Here is a simple example. About two years ago we invented a Hong Kong millennium promotion tied in with the Chinese New Year. A collection of half-carat and larger diamonds would have the inside of the shank engraved with the letter two and three little two point diamonds making up 2000. That idea was sitting in my office on a presentation board during sightweek. Now, during sightweek, I don’t see many sightholders. They spend their time looking at the sightboxes. This time one of the sightholders asked if they could stop by to talk about something. He came over and saw this board sitting in the corner of my office, thought it was a good idea and decided to use it. He put together a program, took it to one of the major American retail chains, and they launched it prior to the millennium. It became one of the best selling units in that chain for the fourth quarter of last year.

Now that’s one idea, that took only about thirty seconds to communicate and came about almost by accident. A sightholder with initiative made it happen. Otherwise the idea would have never made it to America. Imagine if we could get that to happen 120 times a month, 10 times a year and suddenly you have a marketing explosion. This is the sort of model we can duplicate and can be hugely successful.

MR: What is the Diamond Trading Company – DTC — brand? How about the De Beers brand?

SL: We have developed this new identity for several reasons. Regarding the De Beers brand, as we’ve said for some time, it has value and we would like to find a way to bring it to market. We think that, together with a lot of other brands, the De Beers brand could drive this industry forward. But before value in the De Beers brand can be created, it must represent something exclusive and controlled and be used in a pretty limited way. When you look at brands in the jewelry sector it is obvious that no brand can have a very significant market share. You have Tiffany with about 1 percent market share, and Zales pushing close to 3 percent of the American market. These brands have to be exclusive things. It’s the nature of our business.

Since we wanted to generate brand value sometime in the near future, we needed an alternative identity to the De Beers brand. A brand that can support all of our sightholders and all of our goods. Again it’s obvious that if we used the De Beers brand with an Indian sightholder selling lower quality smalls, the brand wouldn’t keep its image for long. So we needed something that would be more of a hallmark and less of a brand per se. So that’s what drove us to develop a new identity.

The Diamond Trading Company – DTC brand is primarily a business-to-business (B2B) brand, an industry brand. We won’t make broad use of DTC at the consumer level, but we’ll use it to help position our sightholders within the industry. Obviously, it will take time for us to develop the full potential of the DTC brand, but once we establish it, it will have the potential to be a good downstream marketing tool for those developing strategic marketing partnerships in the future.

From the consumer’s perspective there are two important elements of our new identity. First is the slogan, "A Diamonds is Forever." I don’t think you’ll find many retailers in the world that don’t think that that’s a powerful slogan. It is a key element of our consumer identity and will be the key part of our consumer advertising as we go forward into 2001. To strengthen the slogan, we have introduced a new icon, the "Forevermark," which will become the visual symbol of "A Diamond is Forever." When you see the new icon you’ll think a diamond is forever. And you’ll think all the positive thoughts our advertising has generated for diamonds.

MR: What’s the promise behind the DTC brand?

SL: I think it’s good to think of DTC as a hallmark. Among the major concerns of our industry are the new technological challenges that we currently face and are likely to face in the future. While we are presently dealing successfully with things like enhancements and synthetics, the new technology will get better and we will always have to stay ahead of it. We think that in the future a hallmark that stands for original natural diamonds as they were formed eons and ages ago will be important to the consumer. Other issues like conflict diamonds, again highlight the need for a symbol to represent the purity of the diamond in ways that support consumer confidence. In addition, the DTC brand will hopefully bring with it all the emotional benefits from the advertising.

MR: Can any jeweler use the "A Diamond is Forever" slogan, or will it be restricted in some way?

SL: We always have restricted it in some way and the icon and slogan are obviously our property and something that we’re going to look after quite carefully. Our goal is to support people who are marketing oriented, who are investing in the competitiveness of our sector versus other sectors and building their businesses through marketing. So I do see a time and future when this identity is used to support the best of our marketing oriented jewelers.

MR: Will only certain sightholders be able to use "A Diamond is Forever?" Is only a De Beers Diamond forever?

SL: You know we said long and hard that all diamonds are forever so I’m not sure you can persuade a consumer that that isn’t the case. And that is in essence what the DTC identity is about. It’s about trying to support the broad range of diamonds. Now clearly, we are not a public utility, we are a profit making company. We have shareholders and we have producers and that is where our responsibility lies. And it is our goal to look after them. Anybody in our position producing from our own mines that account for well over 40 percent of the world’s diamonds, clearly needs an industry that is healthy and vigorous, otherwise we will suffer more than anyone else. And so the idea here isn’t that De Beers is turning its back on the industry. We need a healthy industry. But it’s a recognition that we’re in for the good of our stakeholders.

MR: Is it true that De Beers is going to use "A Diamond is Forever" as the exclusive property of De Beers to benefit the sightholders.

SL: Yes, we hope to create a competitive advantage for our sightholder. I suspect people will look after themselves effectively. There’s nothing better for someone in our position with our $5 billion plus in sales than to have a competitive marketing battle. That is actually what we’re trying to create. We are trying to create marketing competition in all sectors of the industry. I’m a great believer that a rising tide lifts all boats. And if it lifts our boats a little higher, then that’s a pretty good goal.

MR: The new logo is a "Diamond is Forever" logo, not a DTC logo.

SL: Yes, it’s the Forevermark.

MR: Is that Forevermark ever going to be put on diamonds?

SL: Well, our first step is to create awareness for the mark. And until it becomes associated with "A Diamond is Forever," we don’t want to see it anywhere. We don’t want it to be thought of by the consumer as some mark by a retailer in Oklahoma. It first has to be associated with us. Our goal is to think how it can be used to facilitate downstream marketing partnerships and how it can be used to help marketing oriented elements of our industry to succeed. Where that might take us we’ll have to see.

MR: When will the De Beers brand he introduced?

SL: We’ll just have to wait and see. I hate to say when because to be honest, it’s a complicated issue.

MR: What will the marketing people who work for you do and what will they be doing differently now that this new initiative is being introduced.

SL: Most of my people focus their efforts and time on the consumer markets and understanding the consumer. That’s going to be of critical importance as we go forward. They are going to have to significantly expand their knowledge back up the pipeline. They're going to have to understand diamonds and the diamond distribution system better than they do now. The other half of De Beers, the sales side, is going to have to go the other way. They're going to have to expand their knowledge from sales down the pipeline toward the consumer markets. And that’s the reason why we’re in the process of integrating the two divisions, consumer marketing and sales, into a single business unit called the sales and marketing unit which we will bring together for the purpose of trying to bring together the knowledge we have on the consumer markets and the knowledge we have on rough diamonds and how to sell them. We need to integrate that knowledge and use it to create a more effective downstream marketing program than what we’ve got now.

MR: So in effect the DTC is going to be investing in B2B diamond marketing.

SL: I think that’s really the task of our sightholders. And what we’ll do is help them where they need it, if they need it, to get the skill to run effective B-to-B marketing efforts. We still see our focus, our investment at the consumer level, because what we have to do is generate consumer demand. We really want our resources seen by the consumer rather than just jockeying for market share. That’s the sightholder’s task.

MR: How will you be helping sightholders?

SL: We’re starting a relatively straightforward training program and that’s really to get us all in the same frame of mind about how one evaluates business opportunities in the consumer markets. One of the things we’ve said quite clearly to our sightholders is that a key part of the rough allocation process going forward is our confidence that by allocating them rough, they're going to get those diamonds to people who are going to market them effectively. So, we’ve got to understand collectively what we mean by that and help them understand how to put together business proposals and use the information that we have on the consumer markets to help generate new ideas.

That’s really what our first set of training is about; how to think about incremental demand in the consumer markets and what their role can be in the development of that. And then how to share those ideas with us in a consistent format that we can evaluate. In the other areas, we have a wealth of information about consumer markets, about trends in the consumer markets, and that’s the sort of thing we’ll want to make available to them as they think about how to generate growth. We’ve got a lot of marketing skill and we think we can provide a range of value-added services to help them with both their B-to-B marketing and their downstream clients and above the line consumer marketing as well. I think that’s where we should start with them and then we’ll just have to see where it takes us.

Over the next year we’ll learn a lot more about what skills they think we have that they can use. And you know, it’s a two-way street. What we’re going to learn about their business from closer interaction with them will tell us what skills we need to take on board to make this thing work.

MR: What kind of consumer information do you have?

SL: As you know, we have a lot. People forget that unlike most industries where you sort of buy your data off the shelf, the jewelry industry doesn’t have that, so De Beers spends in the upwards of $5 million dollars a year collecting information about trends in sales. We know what markets are strong and what consumer segments in those markets are strong. We know what types of jewelry are strong, what size diamonds are being bought and at what price points and at what types of distribution outlets. And we know all this for most of the major markets in the world at some depth. We’ve used this information historically to help us develop the De Beers marketing program and identify new opportunities. The idea here is that while we will continue the above to make sure that our generic advertising is as effective as possible, we can also harness our information so our sightholders and their clients in the downstream consumer markets can use the information for their own benefit. To help, obviously, sell more of our diamonds as a result.

MR: What do you mean when you say "get diamonds in the right hands?"

SL: It is an expression I developed to try to explain what this is all about. It’s a very simple idea. In allocating rough diamonds — what’s really important to us? We want to put our rough diamonds in the hands of sightholders who will get them into the right hands in the consumer markets. That doesn’t mean that they open a retail shop, or sell them directly to the retailer. What it does mean is that those diamonds —from the DTC's rough sales — get to the consumer markets in the hands of the strongest marketers in that market. That’s important to us.

If goods are limited like they are at present, goods are hard to find, who do we want to have the goods? The guys that will market them. Why? Because without marketing effort, our industry will fall behind other industries. And if the good marketing guys can’t get the goods they won’t do the marketing. There’s nothing worse than the guy who has produced 50 million catalogs in September to mail out in November and he can’t get the goods. It’s a disaster. We want to see the goods going through to people who are prepared to market those goods. And it’s all part of the plan of how we lift advertising-to-sales ratios — to make sure the guys who are marketing oriented have diamonds that they can sell.

MR: Does this imply that the little guys in the market basically just get run over?

SL: No, because it’s a niche market. And a little guy can be a highly effective operator if he has a strong niche. But he ought to find his niche in his area where he can compete most effectively.

MR: Will you be able to give marketing advice to non-sightholders so that they can be more effective niche market players? One of the big issues is that De Beers, in helping its sightholders can cause everybody else to lose.

SL: You know, it’s a big bad world out there, and those who rise to the challenge and are skillful and effective will remain. Those who aren’t won’t. But that’s the world we live in. It’s a competitive world and the best will succeed. We want the best to be our sightholders.

MR: Does the diamond industry need the little guys?

SL: You know, if the diamond industry needs the little guys, the little guys will succeed. I think that there's a lot of niches in this business. For people who can effectively take a certain type of product, and add value to it and who can form a very strong downstream relationship with people who market their goods, then there’s no reason that they shouldn’t succeed. This isn’t an issue of size. But I do think it’s an issue of finding a way to create a competitive advantage. And competition is important. Survival of the fittest is important. Otherwise what happens to our industry? It fades away because it gets clobbered by the other more competitive guys. So we do have to be fit, tough, survival of the best, but the best doesn’t necessarily mean the biggest.

MR: De Beers is willing to help their clients’ clients?

SL: Yes, we want to help our clients to help their clients.

MR: So you’re also there to help the clients of De Beers put together marketing programs with the sightholders. And the clients could be all kinds of people not necessarily retailers?

SL: Absolutely, we’re not suggesting this is a strategy to eliminate everybody in the distribution line. What this strategy is about though, is that if you don’t add value in the distribution system, then you’re out. If you do add value, then you’re in. It’s relatively simple. People say to me, "Is this the end of the polished importer in Japan?" If he’s a value adder then he’s going to survive. But if he doesn’t add value than I’m afraid the law of natural selection occurs. And it’s not De Beers that’s making him go. He goes because he doesn’t add value. But if he adds value, he’ll be part of the system.

MR: Any advice to the industry?

SL: Start thinking about the consumer when you wake up in the morning.
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Tags: Conflict Diamonds, Consumers, De Beers, DTC, Hong Kong, Japan, Jewelry, LVMH, Richemont, Sightholders, Tiffany
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