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How Much Money Should I Spend on an Engagement Ring?

Written by , Posted in Diamond

How much should I spend on an engagement ring?

As much or as little as you want. Certainly, don’t worry about spending one or two month’s salary. And here’s why:

It’s the 1930s and the Great Depression is having a devastating effect on countries rich and poor. Personal income, tax revenue, profits and prices have dropped, and international trade has plunged. Unemployment has risen dramatically world-wide. In Europe, Nazi Germany are on the brink of invading Poland and the continent is about to slide into all out war. Times are bleak.

One of the counter-intuitive truths of business is that it rarely make sense to cut the advertising budget during a recession. In fact, the sensible thing to do is ramp up spending. And following the collapse in the price of diamonds in the 1930s, that’s exactly what De Beers Consolidated Mines Ltd did.

De Beers was one of the most powerful monopolies in the world,  having controlled the world’s diamond trade since 1888 when it had bought all the best mining claims in South Africa. By buying up mines, stockpiling diamonds and vastly limiting supply, De Beers had successfully managed to turn diamond – an abundant stone since the 1870s – into one of the most rare and coveted rocks on the planet. De Beers were masters of manipulation and in 1938, the cartel began a marketing campaign that would have a major impact on how you and I view diamonds today.

Engagement rings are first documented in Roman times, when women had straps of leather tied round their fingers. This probably came from a much older custom of tying up the legs of capture-brides so they could not run away. Fast forward to the 20th century, where in Germany, Austria, Italy and Spain, the notion of giving a diamond ring had never taken hold. In England and France, diamonds were still considered jewels for aristocrats.

This left the United States as the only real target for De Beers, where during the 1930s, diamond engagement rings (mostly small, poor quality stones) accounted for about 10% of the market. De Beers set out to strengthen the association in the American mind of diamonds and romance. Since young men bought most engagement rings, it would be crucial to convince them that diamonds were a gift of love: the larger and finer the diamond, the greater the expression of love. Similarly, young women had to be encouraged to view diamonds as an integral part of any romantic courtship.

De Beers’s monopolistic ways over the previous years meant that the South African company had fallen foul of American antitrust laws, preventing them from doing direct business in the U.S. Nonetheless, they were able to employ a New York based ad agency – N.W Ayer – to begin work on the American psyche. There was no brand associated with the campaign and diamonds were not intrinsically valuable like gold and silver, so De Beers marketed to values instead – those surrounding love, romance and marriage.

Paintings from top artists including Dali and Picasso were commissioned to grace glossy magazines. Radio, newspaper and magazine stories would stress the size of diamonds that celebrities presented to their loved ones (“the big ones sold the little ones”). The now infamous a diamond is forever tagline was created. Movie studios were given free loans of fabulous diamond jewellery and screenwriters were encouraged to use diamonds as plot points. Jewellers even gave speeches at schools. In short, people were convinced that a diamond engagement ring was not one of many options, but the only option. They were convinced that their ancestors had given diamonds rings when they probably hadn’t. They were even convinced that they should spend two months salary on the ring, a tradition invented during a marketing meeting in New York.

The campaign was an incredible success and depending on which poll you look at, diamond engagement ring sales leapt from 10% to 75%-80% over the next decade. They were now the leading line of jewellery in most department stores.

The U.S wasn’t De Beers’s only success story. In Japan, an even more incredible marketing coup was pulled off. Until the mid 1960s, Japanese parents arranged marriages for their children and there was no tradition of courtship, seduction or prenuptial love. When the De Beers campaign began in 1967, less than 1% of engaged Japanese women received a diamond ring. By 1981, 60% of Japanese brides-to-be wore diamonds. In just fourteen years, a 1500-year old tradition had been radically revised.  And after a further decade, the number had leapt again, this time to 90%. Diamonds became a norm in Japanese marriage.

Except for those few stones that have been destroyed (contrary to popular belief, this isn’t a difficult thing to do), every diamond that has been found and cut into a jewel still exists today. Millions of women wear diamonds, while millions of others keep them in safe-deposit boxes as family heirlooms. What these women probably don’t realise, is that their diamond’s resale value is nowhere near its purchase price. They would be lucky to receive even the trade price for it. Nonetheless, De Beers did not want to see millions of divorced or widowed carats entering back into the marketplace – the uncontrolled supply would have driven prices downwards. This is where the emotional tie of their marketing campaign became doubly important: it kept women from parting with their diamond rings, and it kept the demand for second-hand rings low.

If you have found this blog because you’re wondering how much to spend on an engagement ring, you have just become – like so many others before you – part of this incredible marketing story. De Beers no longer hold the monopoly that they once did: a number of diamond discoveries in Australia, Russia and Canada worked against them, as did the increasing popularity of synthetic diamonds and the publicity surrounding blood diamonds. Despite this, their incredible marketing legacy continues and a diamond engagement ring, the bigger the better, is still considered par of the course in 2014.

References & Further Reading
In Books
http://www.amazon.co.uk/Heartless-Stone-Journey-Through-Diamonds-ebook
http://www.amazon.co.uk/Diamonds-PRS-Resources-Ian-Smillie-ebook

On The Web
http://www.theatlantic.com/magazine/archive/1982/02/have-you-ever-tried-to-sell-a-diamond