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Wedding Industry and “Two Month Salary Rule”

07 may 2009

A recent survey found that despite the economic situation, U.S. brides and grooms to be are not cutting back on their wedding budgets, instead they are shifting their expenses to long lasting items such as honeymoon, photography and the engagement ring, informs.

The Modern Bride magazine study also reported that 90 percent of brides said they are either keeping to their original budget or plan to spend more.

An important finding is that 86 percent of surveyed brides said they are spending on jewelry the same amount as six months ago or more, with 81 percent saying they “desire” platinum, according to the Conde Nast Bridal Group.

The report also quotes the IDEX Online analysis by Ken Gassman “State of the Jewelry Industry—2008 Jewelry Demand” that states that the number of weddings in the U.S. is projected to increase by approximately 30 percent.

Mining giant De Beers popularized the diamond as the stone of choice for engagement rings with its famous "A diamond is forever" tagline and the suggestion that "two months' salary" is the appropriate spend on an engagement ring, reminds.

Consumers still choose to say "I do" with diamonds, even in the midst of a stark recession. In fact, 71 percent of National Jeweler's product panelists who were asked about bridal sales reported that over the past three years, their sales of loose diamonds, diamond engagement rings and weddings bands have either increased (41 percent) or held steady as a percentage of overall sales (30 percent), while only 29 percent reported that bridal sales fell.

When asked how the bridal market has changed in the past 10 years, the majority of panelists were able to sum up the shifts in two words: the Internet.

"The market has become more competitive," one retailer said. "With the Internet, people pre-shop all the time and have an idea of what they want for how much. The two are not always realistic if you are selling quality and service."

However, one panelist said the Internet can lend jewelers more authority, in store.

"Customers are not as happy with the purchase from the Internet," the panelist noted. "Several customers told me that information received was not accurate."

For some jewelers, bridal appears to be the one bright spot in their stores' sales recently.

When asked how the economy has altered the way retailers handle the bridal business, panelists' responses were all across the board.

But the strongest theme that emerged was that retailers aren't changing the way they do bridal business, with some noting their bridal business is up or unaffected by the recession.

"Ironically, our bridal business has gone up," one retailer wrote. "It's just the rest of the categories that are suffering because of the economic turn. People don't stop falling in love!"

Another jeweler strongly agreed, "[Our bridal business] remains steady while other segments decreased last year, increasing our percentage of overall sales that are bridal. Since this segment remains strong, we will focus our marketing dollars on engagement customers."

Although it is considered that the “two month salary guideline” for diamonds was invented in the 40s, it was actually introduced in the 90s, when the then all-powerful De Beers saw it as a way to boost the “average price” for engagement ring, Rob Bates says in his blog on Commercials asked: “How else can two months salary last forever?” And a print ad suggested, rather shamelessly: “Spend less and the relatives will talk.” (It was done tongue-in-cheek. But still …)

We don’t hear too much about the “two month salary guideline” these days – and in this environment, it’s almost quaint to think about getting people to “trade up” their rings. De Beers has basically given up promoting it, and I would argue it doesn’t really fit in with the more benevolent modern image it is trying to promote – and, of course, it’s cut back its generic promotion regardless. Still its web site does have this “two month salary guideline” calculator. (I plugged my salary into that calculator. All I can say is: Keep dreaming, guys.) And I’ve seen it on many jewelers’ web sites.

So, did the “guideline” work? In Entrepreneur recently, it was described as “widely accepted by the public.” People certainly know about it. Yet it led to a bit of a backlash, and was referenced disparagingly on The Simpsons and in Blood Diamond. JCK focus group participants described it as “unfair, pretentious, and unrealistic.” And honestly, the idea that the industry could invent a guideline for how much to spend on its products took more than a little chutzpah.