Diamonds are Forever - Advertising
I'm posting a 14-part series of mini-essays on diamonds (but really about the economic point of view). Here's part 10.
Advertising
Brinig also documents that America’s first nationwide advertising campaign began in the 1930’s at De Beers’ behest by New York advertising agency Ayers (1869-2002).
It was Ayers (in 1947) which coined the expression “diamonds are forever.” Ayers went so far as to negotiate with Hollywood producers to shoehorn betrothal scenes into movies, the most notable of which occurred between Mae West and Cary Grant in the 1933 She Done Him Wrong (adapted from a 1928 play named, coincidentally, Diamond Lil).
Like middlemen, advertising often gets a bad rap.
John Kenneth Galbraith is famous for arguing that capitalists “create” new wants in consumers by way of advertising. Yet, in the diamond case, Ayers most certainly did not create the new diamond craze that was sweeping the United States. As Brinig shows, the diamond engagement ring took off four years before the Ayers campaign began in 1939. Ayers apparently piggybacked on the momentum created by women’s demand for a credible indication of marital commitment.
Advertising, by itself, is not sufficient to compel consumers to develop brand loyalty. As Joseph Schumpeter once remarked, “The prettiest girl that ever lived will in the long run prove powerless to maintain the sales of a bad cigarette.”
What gets lost in the Galbraithian preference debate are all the other functions that advertising fulfills in the free enterprise system. It provides useful product information to buyers. It allows producers to engage in the sort of rivalrous jostling that ultimately delivers value to consumers. It facilitates the opportunity of one producer to expose the secrets of others, keeping them mutually honest.
And, just like diamonds themselves, advertising fosters commitment. When consumers observed De Beers launching the first nationwide ad campaign in U.S. history, they were reassured that De Beers was in it for the long run.
Imagine what would have happened if De Beers had attempted to cut costs by selling faux diamonds. People would have stopped buying diamonds, at least new diamonds from De Beers. As a result, De Beers would never have recouped the massive advertising investments they made.
Advertising serves to make commitments credible.