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Applied Marketing 101: Diving for PURLs

As I write this, I am flying back to the East Coast after an exceptionally successful series of Shows in Las Vegas. In many respects, the mood at JCK was the best I’ve seen for at least six years, as retailers jammed what is increasingly becoming a Gems One booth that, with only five work stations, needs to become significantly larger (and since we just can’t seem to get more booth space, I think we may have to look into building a second story for our booth next year). What fun it is to be on a roll!

Applied Marketing 101: The next three stone

If you’re a regular reader of this column, or you’ve ever worked with me on advertising and merchandising plans for your company, then you know how much time and effort I put into understanding trends. Any student of our business can identify key trends that shaped specific periods   (S-link tennis bracelets, Y-necklaces, Three Stone, Circles, etc). What ultimately separates the winners from the losers is the capacity to understand the forces that create these trends, so that you can properly anticipate and react to them.

Applied Marketing 101: Strategies for competing with the Majors for Bridal Sales (part 1)

Like it or not, you are in direct competition with the Major Chains and Department Stores for engagement ring sales. If growing the bridal component of your business is an important objective, then the extent to which you’ll accomplish your goal will be dependent on the development of an effective strategy. In this article and the next, we will consider how to build that strategy.

Applied Marketing 101: How to offer credit like the chain stores

Gems One’s Gemstar kiosk credit program delivers strong results

Prout-Fig1Last May, I wrote about the impending launch of a multi-lender consumer financing program aimed at providing better credit options to help independent jewelers compete with the major chains. Kay Jewelers doesn’t beat our customers to bridal sales because they have better jewelry. They beat them because they can provide access to financing for a wide range of uncreditworthy consumers, and our customer can’t. So a program that levels this part of the playing field possesses the potential to be an enormous game changer. We now have a large body of application transaction data, and I thought you might be interested in the results.

I had initially discovered the kiosk program by studying the current state of the art in the flooring and furniture retailing environments. The kiosk’s internal software allows consumers to fill out a single credit application, and then sends the consumer’s information to multiple lenders, so that credit applications with varying degrees of creditworthiness can be routed to finance companies that specialize in different consumer segments. I was amazed to see it in action, and immediately contacted the software provider to see if we could do the same thing with jewelry. The answer was that we could. The challenge was to find lenders who would want to play.

Jewelry is an especially challenging consumer product to finance, for three reasons. First, it’s small and easy to scrap, so it’s not very attractive as collateral for a consumer loan. Second, it’s pretty much the only consumer product where its desirability is contingent on an ongoing relationship. Nobody stops wanting a sofa because they broke up with their girlfriend. But they sometimes do stop wanting an engagement ring when the fire in the romance it symbolizes flickers out. Third, the lenders were all aware of past credit programs in our industry that were fraught with fraud, as a few bad apples (sadly, there are some of those) processed fraudulent applications and gave the entire industry a black eye.

The result is that while our software partner had a choice of over 20 lenders for furniture and flooring, it took months to finally talk a group of four secondary and tertiary lenders into participating in a jewelry program. Yes, Primary Lender A was happy to be the primary first tier lender, but by requiring a consumer FICO score of about 695, they really only give credit to consumers who don’t “need” credit. And Primary Lender B, the alternate predominate lender in the jewelry sector (possessing roughly the same scoring criteria) didn’t want to play. And yes, we were able to get four lower tier lenders to participate, but we detected that while they were willing to test the waters, they were initially going to be very, very careful.

After nearly six months of negotiation and implementation, by January of 2012 we were ready for a test with seven stores. The initial results were encouraging, so we made the choice to ramp up the program to 100 stores during the summer. None of this was easy, but the possibility of finding a way for our customers to give credit the way Kay, Jared, and Zales do was so enticing that we felt extremely motivated to try.

Prout-Fig2As you can see from Fig 1, by October we were starting to get a nice pool of data as our jewelers started to engage their customers with the program. The Primary’s approval rate immediately shot up in almost every store, not because they loosened their standards, but because affluent consumers who were normally reluctant to fill out credit applications (and expose their income level to store sales associates) were far more comfortable doing so in the privacy of a kiosk environment. That was a nice confirmation of a benefit to our customers, but still, what we were really looking for was what was happening with consumers who they were turning down. And you can see from Fig. 2, for the first three months, the lower tier lenders were playing things extremely close to the vest.

But then November and December came, and as you can see, the approval rate of every lender shot upwards as it became clear to them that the overall system was working, and we had been careful about the retailers who we had let into the program. The software was working exactly as we had hoped, and as we started to distribute direct mail pieces with a “Scan to Win” element that drove consumers to the kiosks, our customers were starting to see some significant activity.

The uptick in financed sales in some stores (who really put emphasis on the program) was incredible. Several of our customers were actually contacted by the Primary and asked to present current financial reports, because their financing had increased so rapidly (several by over $100,000 in December alone) that the lender was spooked that they might be in trouble, and were processing fraudulent applications. Yes, you read that right. Their sales financed by the Primary lender increased by over one hundred thousand dollars in a single month solely because of the kiosk! And that doesn’t include the huge sales increases we were starting to see as the secondary lenders started to make more approvals.

The data from December were spectacular. Over half of the consumers turned down by the first tier were being accepted by one of the other lenders, producing an overall approval rate of 75 percent. And now that we’ve got real data, we’ve got a new list of lenders who suddenly want to play. One I’m really happy about is Genesis, the company that does Zales’ financing, so we will now have our first lower tier lender that actually has jewelry experience. And we have two more primary lenders in the pipeline who should be on board by JCK, and several other second and third tier lenders who want in. It’s funny… when we started a year ago, getting lenders to participate was like pulling teeth, but now that we’ve got lots of data (and really good results), suddenly everybody wants in.

We’ve also just finished putting together a pilot program with a specialty lender that will allow us to start testing what happens when we blanket zip codes with a pre-approved financing offer for our jewelers in their local markets, the way that retailers in other industries do. And we also just finished a test of a retailer website application system, where consumers were able to discover that they can get financing from our jewelers before they even come into the store. The test was flawless, so now every Gemstar participant will be able to have an easy credit application on their websites.

Overall, we’re really happy with our first year results, so we’re going to triple the number of participating stores this year. As I mentioned at the beginning of this article, my objective was to give our customers a chance to level the financing playing field with Kay Jewelers and Jared. Based on Gemstar’s 2012 results, I think demand for antacids in Akron, OH (Sterling’s headquarters) may increase pretty rapidly in 2013.

Class Dismissed!

George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it., or at Gems One’s New York office at 800-436-7787.

 

Applied Marketing 101 - The view from Vicenza

As I write this, I am returning to America from the Vicenzaoro Show on a Delta 767 bound for Kennedy airport. The Winter Vicenza Show is the annual starting point for style and design in the world of precious metals, so if you want to understand the trends, you come here. Yes, I will also be in Hong Kong in March, and it is only after I’ve visited that city’s Show that I’ll start to pull the trigger on what we’ll be merchandising for the Fall Season, but if you really want to understand “what’s next” in our industry, it will have its roots in Vicenza.

Applied Marketing 101: The disappearance of the big spenders

As I write this, it’s the evening of December 22, and I’m on a train from New York City bound for home, several hours away. I spend the first 22 or so days of December each year at our office in Manhattan, monitoring our customers’ progress with our promotions, managing an enormous in-stock merchandise assortment (everything from $29 steel bracelets to $15,000 diamond Riviera necklaces), working on next year’s programs, and even occasionally answering the phones when we’re totally slammed with incoming reorders. We set all sorts of records this month, so as I now return home in a combined state of satisfaction and exhaustion, I have very high expectations for next year. But I’m also troubled by what I’ve been hearing all month. Something has changed, and I am now sensing that a fundamental alteration in consumer behavior may have taken place that bears examining.

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