taking a shine

How lab-made diamonds are stealing the shine (and market share) from natural ones

More than 95% of industrial diamonds are synthetic, so why aren't more people using them in engagement rings?

Lab-made, synthetic diamonds are becoming increasingly similar in quality, cut, and clarity to natural ones. Technological advances has resulted in their growing use and acceptance in industry – but cracking the luxury consumer market is the final frontier. This is in large part to do with the the way consumers place value on products.

The idea of creating diamonds in a laboratory is not new. Scientists have been at it since the mid-19th century, armed with the knowledge that diamonds are the product of carbon that’s exposed to high heat and pressure. But applying this in a lab environment remained elusive until the 1950s. Since then, three different techniques have been developed to produce increasingly authentic-looking synthetic diamonds. This applies to their appearance, as well as their physical properties such as thermal conductivity, electron mobility and hardness, which can even be superior to natural diamonds.

Thus, synthetic diamonds are increasingly used in high-tech laser cutting and polishing tools. Electronic applications are also being developed for various industries, such as power stations. Analysts estimate that more than 95% of all industrial diamonds are synthetic.

Two types of threat  

An immediate threat that synthetic diamonds pose to the traditional industry is from those that are falsely marketed as natural. With the labour costs of cutting and polishing natural diamonds on the rise, there is a growing concern that synthetic versions are being passed off as the real deal to make savings. Synthetic variants are around 15% to 25% cheaper.

But this is a relatively manageable threat. Preventive measures such as devices that allow quick detection of synthetics and a new Natural Diamond Quality Assurance programme have been put in place. And discussion is ongoing regarding laws that require retailers to explicitly mark synthetic diamonds.

The bigger threat comes from losing market share to consumers who might consciously choose synthetic diamonds over natural ones. The natural diamond industry is still suffering from increased awareness of “blood diamonds” – diamonds that have been used to finance conflict. The synthetic diamond industry has exploited this trust by marketing theirs as “conflict-free” and “ethical”.

But there’s another issue, which cuts to the core of why diamonds are considered so valuable and are such a mainstay of the jewellery industry. It’s all to do with what people perceive to be valuable.

Value is in the eye of the beholder  

Price is always determined by what people are willing to pay for products – and this is no different with diamonds. Research carried out by my team over the years, continuously demonstrates that value is multidimensional in nature. There are three specific dimensions that matter: social, personal and functional value.

Social value represents how valuable we perceive something to be in relation to other people – will it make us look good, will it boost our image or status? Personal value reflects how it will satisfy our wants and desires. And functional value represents how useful the product is perceived to be. For every purchase, we assign different levels of importance to each of these dimensions.

When it comes to value perception of natural against lab-grown diamonds, the difference is clear. The fact that synthetic diamonds have such a greater acceptance when it comes to their industrial applications (such as high-end precision tools) is predominantly driven by the functional nature of their use here. So when synthetic diamonds satisfy their needs at a comparatively lower prices they buy this category of diamonds.

But for consumers – and buyers of engagement rings especially – diamonds have a far more significant emotional attachment. Diamonds actually surged in popularity as a result of an exhaustive marketing campaign by De Beers, which used to have a monopoly on the global supply of diamonds. The company created demand for diamond engagement rings with a massive, and incredibly effective, campaign that included the slogan: “A Diamond is Forever”.

The strong emotional element to the way that diamonds have been marketed cannot be captured through their functional value. They therefore have substantial personal value – the very cost being marketed as a reflection of the amount the buyer loves the person they are giving them too.

As with other luxury goods, diamonds have an enormous social value. To most consumers they are not just an item of acquisition, but something to show off. And if they are being bought as part of an engagement ring there is an element of showing how much you value the other person.

This is a real barrier for the synthetic diamond industry. Even the term “synthetic” undervalues the regal association with diamonds. In this regard, the synthetic diamond industry needs a substantial strategy to crack the market. The positioning based on calling the diamond “conflict-free” is helpful but it’s not sizeable enough, as the natural diamond industry is increasingly scrutinising its supply chain to remove conflict-zone diamonds.

Something on which the synthetic diamond industry has not yet focused (but could) is this emotional connection that makes these diamonds socially desirable, as well as encouraging pride in buying them. It will require substantial efforts at an industry level and not just from one or two firms.

Until then, the price-conscious consumer who is more interested in the functional value of diamonds will provide a small market for synthetic diamonds. But if they want to reach the mainstream they’ll need to market themselves to appeal to the societal and personal value perceptions people have. Meanwhile, the natural diamond industry should make the most of its market dominance.

Paurav Shukla, Professor of Marketing, University of Essex.

This article first appeared on The Conversation.

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As India turns 70, London School of Economics asks some provocative questions

Is India ready to become a global superpower?

Meaningful changes have always been driven by the right, but inconvenient questions. As India completes 70 years of its sovereign journey, we could do two things – celebrate, pay our token tributes and move on, or take the time to reflect and assess if our course needs correction. The ‘India @ 70: LSE India Summit’, the annual flagship summit of the LSE (London School of Economics) South Asia Centre, is posing some fundamental but complex questions that define our future direction as a nation. Through an honest debate – built on new research, applied knowledge and ground realities – with an eclectic mix of thought leaders and industry stalwarts, this summit hopes to create a thought-provoking discourse.

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Is it time to re-look at constitution and citizenship in India?

The Constitution of India is fundamental to the country’s identity as a democratic power. But notwithstanding its historical authority, is it perhaps time to examine its relevance? The Constitution was drafted at a time when independent India was still a young entity. So granting overwhelming powers to the government may have helped during the early years. But in the current times, they may prove to be more discriminatory than egalitarian. Our constitution borrowed laws from other countries and continues to retain them, while the origin countries have updated them since then. So, do we need a complete overhaul of the constitution? An expert panel led by Dr Mukulika Banerjee of LSE, including political and economic commentator S Gurumurthy, Madhav Khosla of Columbia University, Niraja Gopal Jayal of JNU, Chintan Chandrachud the author of the book Balanced Constitutionalism and sociologist, legal researcher and Director of Council for Social Development Kalpana Kannabiran will seek answers to this.

Is CSR simply forced philanthropy?

While India pioneered the mandatory minimum CSR spend, has it succeeded in driving impact? Corporate social responsibility has many dynamics at play. Are CSR initiatives mere tokenism for compliance? Despite government guidelines and directives, are CSR activities well-thought out initiatives, which are monitored and measured for impact? The CSR stipulations have also spawned the proliferation of ambiguous NGOs. The session, ‘Does forced philanthropy work – CSR in India?” will raise these questions of intent, ethics and integrity. It will be moderated by Professor Harry Barkema and have industry veterans such as Mukund Rajan (Chairman, Tata Council for Community Initiatives), Onkar S Kanwar (Chairman and CEO, Apollo Tyres), Anu Aga (former Chairman, Thermax) and Rahul Bajaj (Chairman, Bajaj Group) on the panel.

Can India punch above its weight to be considered on par with other super-powers?

At 70, can India mobilize its strengths and galvanize into the role of a serious power player on the global stage? The question is related to the whole new perception of India as a dominant power in South Asia rather than as a Third World country, enabled by our foreign policies, defense strategies and a buoyant economy. The country’s status abroad is key in its emergence as a heavyweight but the foreign service officers’ cadre no longer draws top talent. Is India equipped right for its aspirations? The ‘India Abroad: From Third World to Regional Power’ panel will explore India’s foreign policy with Ashley Tellis, Meera Shankar (Former Foreign Secretary), Kanwal Sibal (Former Foreign Secretary), Jayant Prasad and Rakesh Sood.

Are we under-estimating how critical water is in India’s race ahead?

At no other time has water as a natural resource assumed such a big significance. Studies estimate that by 2025 the country will become ‘water–stressed’. While water has been the bone of contention between states and controlling access to water, a source for political power, has water security received the due attention in economic policies and development plans? Relevant to the central issue of water security is also the issue of ‘virtual water’. Virtual water corresponds to the water content (used) in goods and services, bulk of which is in food grains. Through food grain exports, India is a large virtual net exporter of water. In 2014-15, just through export of rice, India exported 10 trillion litres of virtual water. With India’s water security looking grim, are we making the right economic choices? Acclaimed author and academic from the Institute of Economic Growth, Delhi, Amita Bavisar will moderate the session ‘Does India need virtual water?’

Delve into this rich confluence of ideas and more at the ‘India @ 70: LSE India Summit’, presented by Apollo Tyres in association with the British Council and organized by Teamworks Arts during March 29-31, 2017 at the India Habitat Centre, New Delhi. To catch ‘India @ 70’ live online, register here.

At the venue, you could also visit the Partition Museum. Dedicated to the memory of one of the most conflict-ridden chapters in our country’s history, the museum will exhibit a unique archive of rare photographs, letters, press reports and audio recordings from The Partition Museum, Amritsar.

This article was produced by the Scroll marketing team on behalf of Teamwork Arts and not by the Scroll editorial team.