Diamonds are Forever (But maybe not your wallet)

Economics and Marketing. Two simple terms that have enraptured me since the beginning of my University career.

Supply and Demand is the reason why goods sell. These concepts derive from consumer behavior and profit-maximizing firms. A fairly simple concept. One that Marketing turns upside down, inside out, and hangs to dry just to laugh at.

The four P’s of Marketing are Price, Product, Promotion and Placing. These, the Marketing Mix, are responsible for the sales of a product. But sometimes the obvious use of these variables are…not so obvious at all. Take a look at Stella’s post on luxury goods and you’ll see what I mean. DeBeers sells diamonds during a recession not as a luxury good, but as a necessity of love, an eternal link between a couple, a symbol of the eternal, a lifetime, your future…

But probably not as a rock.

Marketing has the amazing feature of adding value to almost anything, from a rock (diamonds), to soda pop (see my first post) and even pieces of paper. Yet, I feel that the most fascinating way that a company can create value is by creating a man-made shortage in supply, otherwise known as “limited edition” or “luxury” goods. These goods go for miles above the average price for any product, matching the full willingness to pay from a consumer (consumer surplus, begone!). DeBeers and their monopoly on diamonds effectively allows them to control the world’s Supply and manipulate one’s valuation of the good’s price, affecting Demand. Effective marketing leverages this (supposedly natural) phenomenon and allows the company to effectively sell “rocks” for a fortune.

Adding value is always the ultimate goal of Marketing. But sometimes, if we take a step back, we can see how much marketing really affects us. Sean Dales mentions in his blog about how “invasive marketing is BAD” because it is blatant and annoying. I agree with many of his points but I have a different opinion. Blatant and obvious sure is annoying…but wouldn’t a force that acts in the background to influence our decisions be even…creepier?