Bridal is the most important category in your store. But if you’re like most jewelers, you’re still searching for the best method for maximizing sales and profit from your engagement ring department. Fortunately, the answer for how to accomplish your objective can be found in a fundamental marketing concept called Segmentation.
It is axiomatic that in any consumer product category, differing consumer preferences lead to “segments” within the market. The classic paper on Segmentation was written in 1962 by a group of Colgate Palmolive researchers who were studying the toothpaste market. The CP team found that toothpaste consumers fell roughly equally into three segments: those who wanted fresh breath, those who wanted white teeth, and those who wanted cavity prevention. Interestingly, there was very little overlap among the groups, so it therefore followed that the best marketing strategy was to create multiple toothpaste brands with characteristics that were desired by each consumer segment, and then develop advertising messages that maximized demand and sales.
In this regard, diamonds are actually a lot like toothpaste, because it’s pretty clear that the Segmentation strategy that is now being universally applied by the majors - especially by Signet - is producing a desirable effect. Recognize that they face all of the same competitive pressures that you face, and their business models require an even higher margin structure to be profitable, so the fact that they have all chosen a similar, multiple diamond brand strategy, is especially telling.
As I survey the diamond retailing landscape, I’m struck by the way that most of you - in fact, the vast majority of you - sell diamonds the same way you buy them. You buy 58 facet diamonds based completely on “Back of Rap” in the context of GIA grading terms, which has allowed you, as a buyer, to commoditize the product so that you can buy it at the lowest possible price. But you then turn around and sell them in precisely the same way, which virtually assures that your margins will be destroyed in the process.
So increasingly, your top line suggests that you have a pretty good business, but your bottom line is horribly compromised in the process by the consequent reduction in margins. So instead of assuming that all of your diamond customers have the same desire that you have (basically to buy at the lowest possible price relative to the physical properties of the diamond), let’s do a little Segmentation analysis, and break up the buying audience into the following ten segments:
1. The Story Listener - This segment probably represents the largest portion of Millennial consumers. They hate it when you try to sell them. They’re narcissistic, entitled, and completely fickle when it comes to brand loyalty. But they do LOVE stories, so a buying experience that includes the origin story of what they’re contemplating buying is highly seductive.
2. The Tree Hugger - This segment, also comprised primarily of Millennials, is highly motivated by a sense of social responsibility. They were probably Bernie supporters, and will drive farther, and pay more, for a product that is eco-friendly and sourced in a socially responsible manner.
3. The Engineer/Techno-geek - While it’s true that 80 percent of the time, she drives the diamond purchase, there’s a subset of male shoppers with significant technical proficiency who delight in the mathematical/structural/optical elements of the diamond. For them, there is a “performance-driven” element that is actually a thing of beauty, and so access to metrics and/or a technical explanation really wows these guys.
4. The Price Point Shopper - This couple typically enters your store with an extremely specific budget, and while, yes, they’d like something pretty, they are totally fixated on the spending amount.
5. The Payment per month Shopper - This couple can be considered a subset of the price point shopper, except in their case, it’s not fixation on a price; it’s fixation on a monthly payment. For them, access to financing is key, but you better hit their monthly payment budget or they’ll be off to the next store.
6. The Commodity Shopper - This couple appears, at least on the surface, to be just like you. They know their GIA terms, and they’ve spent hours on Blue Nile, so they appear to want the best “Back-o-Rap” price. Only if they were totally sold on this, they probably would have already bought online.
7. The Online Shopper - As a brick and mortar store, you’re toast here, but if you can sell competitively online, there’s hope. GIA all the way, price is critical, but you can forget margins.
8. The I Want It Big Shopper - This couple is price-driven, but they will compromise quality to get a larger stone. At the same time, they do still have a visual standard, so they will balk at diamonds that are not at least somewhat pretty.
9. The I Want It REALLY Big Shopper - This couple is like the preceding type, but is less discriminating when it comes to appearance. They want BIG, and they don’t care how crappy the diamond is, as long as its carat weight is “big” by their personal standards.
10. The I Want a Pretty Stone at a Good Price Shopper - This couple will go with your recommendation if they trust you, don’t need a cert, but do need a stone that looks pretty at a price that makes sense (to them).
As you can see, a wide variety of consumer segments exist, so it makes absolutely no sense to try to sell each of them the same diamond, and in the same way. The majors “get” this, which is why they have reacted just like the toothpaste companies, by building Segment-specific brands aimed at targets that are most likely to react by making a purchase. Here are a few examples:
The Story Listener’s buying attributes line up perfectly with Mine to Market, such as Jared’s Chosen.
The Tree Hugger lines up with Lab Grown, such as Robbins Brothers’ E diamond.
The Engineer/Techno-geek wants understandable performance characteristics, so will gravitate towards specialty cuts, like the Leo, or Ideal cuts, like the Tolkowsky, as will the Price Point and I Want It Big Shoppers (but Lab may also come into play here).
The Commodity Shopper will want a GIA at a killer price, but may get talked into a lesser cert if the store possesses enough credibility to warrant a high trust level.
The Online Shopper will want a GIA at an even lower price.
The I Want It Really Big Shopper will go for a clarity enhanced, or an uncerted I2 (See Kay Now and Forever).
The I Want a Pretty Stone Shopper wants a nice look, and will likely select an uncerted bluffy I1 if the price seems reasonable (as will subsets of the I Want it Big and Price Point Shoppers).
You know these customers exist within these Segments, pretty much as I have described them, because you see them every day. But perhaps you haven’t thought through the strategic implications, or felt that you had access to a way of adjusting your offerings so that you could accommodate their various desires. So instead, you just drop your price on your standard 58 facet generic, fully-commoditized inventory, and play defense, hoping not to lose the sale. It’s time to equip your store, and your staff, with better weapons.
The majors have adjusted their offerings so as to accommodate the wishes of these consumer segments. Unfortunately for them, their mall-centric business models are becoming a huge problem, to the extent that as an independent jeweler, you are now entering an era in which I honestly believe you will have the upper hand (more about this amazing shift next month, as the De-Mall-ification of America plays into your hands, creating the most advantageous environment for independent jewelers in two generations!).
It’s time to play offense, by weaponizing your loose diamond inventory so that you have the right diamonds, with the right appeal, for multiple segments. Fortunately, you don’t have to have huge breadth of selection. Consider the true average swing plane for your diamond sales. Are you selling 1/2s, 3/4s, and 1s most of the time? Or do your sales run a bit larger, from 3/4s to 1 ¼ carats. Or maybe your sales really start at carats, and run to 2 carats. Whatever the case, you only need 3-4 stones in each category to start winning a lot more sales.
So stop playing defense. It’s time to take advantage of this simple formula. Invest in your company’s future by incorporating this proven strategy into your loose diamond department, and you’ll expand your sales, market share, and profitability, and you might even rediscover the reason you originally went into the jewelry business!