The precious metal is appealing to consumers' emotions
The precious metal is appealing to consumers' emotions to combat slowing sales. Robert Gray reports
Everything that glitters is not gold. While other segments of the UK's luxury goods market have thrived, the precious metal has failed to shine.
The latest figures from the World Gold Council (WGC), the marketing body funded by the leading gold mining companies, show that in the second quarter of 2004, global consumer demand for gold rose 11 % year on year. In Europe, however, the trend remained 'generally negative'.
In the UK, gold has suffered at a time when the two other precious metals -silver and platinum - have enjoyed growing demand. According to the UK's Assay Offices, which check and hallmark precious metals, gold is still the most popular of the three, with about 24m units assayed in 2003 - but this has shrunk from 27m in 2001. In contrast, silver has grown by about 51 % over that period to 11 m units and platinum by 171% to 300,000 units.
To stimulate demand, the WGC is launching a 10m 'Speak Gold' international print advertising campaign created by Bartle Bogle Hegarty (Marketing, 2 September). The agency used photographers from the National Geographic Image Collection to capture the emotional role of gold jewellery in the lives of women around the world.
The activity will initially target key markets such as the US, India, China, the Gulf states and Italy. Funding is not yet in place for 'Speak Gold' to be rolled out in the UK, which is seen as a secondtier market by the gold producers because most consumer demand here is for nine-carat gold. Other markets prefer 18- and even 22- carat products - although, interestingly, WGC figures show 13% year- on-year growth in 18-carat gold in the UK.
The 'Speak Gold' executions, which have something of a 70s feel, use the headline 'There's one language everyone understands'. But consumers in the UK, notorious for their reluctance to master foreign tongues, seem to find the language of gold more of a struggle than their counterparts in other nations.
Jim Prior, managing partner of branding agency The Partners, which has worked with the UK's second-biggest jewellery chain, Goldsmiths, believes gold has lost out as luxury has become more 'democratised' due to the rising number of consumers with significant disposable incomes. Whereas conspicuous consumption was once in vogue, Prior (eels there is now a greater onus on value for money.
'More people are looking to do more with their money,' he says. 'Traditionally, jewellery and watches were people's biggest rewards, but they are now looking to exotic holidays, plasma TVs and gadgets such as iPods.'
This tallies with WGC research that asked consumers in the US, China and Italy how they would spend $500 (280). The results showed a bias toward a weekend away over gold jewellery.
Philip Olden, WGC's managing director of international jewellery and marketing, denies that the outlook for gold is bleak. He claims that with annual retail sales of $60bn (34bn) a year, gold is on a par with Coca-Cola -and a brand to which people have deep emotional attachments.
He concedes, however, that segmentation studies have revealed a 'young, hedonistic' group of consumers who are not as captivated by gold as others. 'For them, I think gold is overshadowed by other products,' he says.
Wolff Olins creative director Lee Coomberagrecs. 'Thc notion of what we consider luxury has changed,' he argues, 'We define ourselves as much by how we spend our time as by the objects we have around us.'
Wolff Olins worked with the WGC scveral years ago to develop a brand positioning for gold based around the connections between the metal and special moments in life. Coomber remains optimistic about the strong emotions gold can engender, but feels its appropriation by hip hop and thc'bling' culture spoofed by comic character AIi G may have diminished its appeal to some affluent consumers.
Bartle Bogle Hegarty group director Steve Kershaw admits that focus group research has discovered some consumers nowviewgold as'naff and brash'. But he argues that this is not just a reaction to 'bling' culture, but a result of the marketing community's appropriation of gold. Golden Churn, Golden Grahams, Golden Wonder, not to mention the many gold credit cards - the list of auric brands is long.
'Consumers' associations with gold weren't with the metal,' says Kershaw. 'They were with other things that cheapened and tarnished itsimage.'
The challenge for the WGC and highstreet jewellers is to wrest back control of what gold stands for. If they fail, its value will remain diminished in the eyes of the UK public, even at a time when world gold prices arc rising.
Solutions to this dilemma will not come cheap. In 2003, the WGC spent $48m (27m) marketing gold to consumers, roughly a quarter of what was spent by the diamond industry and a small fraction of what luxury goods companies commit to marketing worldwide. The organisation must convince its paymasters to stump up more cash if it is to find a way of boosting its appeal to younger consumers.
According to Ledbury Research, which surveys consumers with more than 100,000 in liquid assets, the affluent buy jewellery less frequently than the UK average: about 33% buy it once a year, against a UK average of 44%. However, they spend nearly 2.5 times as much. Research also shows that, on the whole, the younger affluent market (up to mid-3Os) prefer silver to gold. They see gold as a dated metal, more associated with older generations.
On the supply side, silver is a less expensive raw material and therefore preferred by new or smaller, design-led jewellers, and this contemporary angle is more appealing to the young,' says Ledbury director James Lawson. 'What is also clear from our work with luxury jewellers is a relative lack of branding, which represents a major opportunity for companies in this sector.'
Research by Red Media Premium Knowledge points to a growing number of consumers buying jewellery for themselves. In the past year, 40% of buyers of designer jewellery costing more than 500 were treating themselves.