Case Study Analysis: Spence Diamonds

Marketing II

Case Study

Instructions:

Please read the following case study and respond to the following questions at the end.  Include your name on this paper, and do not exceed three (3) additional pages, double spaced, 12 pt. font, for the sum of your responses.

Total:  30 Marks, worth 15% of your overall grade in this course

Case Study Analysis:  Spence Diamonds

Spence Diamonds is Canada’s largest Canadian-owned diamond specialist with seven different locations across Canada including Vancouver, Calgary, Edmonton and Toronto. The diamond industry is worth upwards of U.S. $64 billion and it is an old, mature industry run by large controlling companies such as De Beers.  Spence Diamonds is breaking the traditional boundaries of diamond retail stores.  Spence made retail history when it changed its approach to displaying diamonds.  Instead of keeping the diamond jewelry behind glass, as most other retailers do, Spence opens its display cases to customers – allowing them to handle and view up close high quality prototypes of its diamond jewellery. This gives customers the opportunity to browse without being pressured or intimidated by a salesperson.  At Spence there are Diamond Consultants certified by the Diamond Council of America available to answer questions about any of the designs or the diamond quality.  Consumers no longer have to look behind the glass and politely ask to see a diamond up close.  Spence Diamonds breaks tradition by having the glass open to the customer side.  This creates a relaxed, welcoming environment and aids in purchasing.

Founded in 1978 by Doug Spence with its first location in Vancouver, British Columbia, the chain has grown to seven locations in British Columbia, Alberta, and Ontario.  The goal of the company is to create a better diamond buying experience and according to the company website (www.spencediamonds.com) that goal is the motivating force of everything the company does.   By specializing in diamonds alone, Spence is able to offer its customers better value, quality and service. The company manufactures the majority of its 4,000 plus items of diamond jewellery in its Vancouver manufacturing facility.

Shopping for a diamond at Spence is different than at other retailers.  The thousands of display rings are not real diamonds but rather high quality prototypes that customers are freely encouraged to try on and examine on their own terms.  This practice keeps the overhead costs of the stores low and the savings are passed on to the customer.  Through the company’s high degree of vertical integration Spence Diamonds can offer not only the best value to its customers but also the industry’s most comprehensive guarantee.

The Spence Diamonds Guarantee is unique. They offer an unprecedented Buy-Back Policy and a 45 day return policy even on custom designs.  The policy reads as follows, “At any time within five years from the time you purchase your Spence ring, we will buy your centre diamond back from you for exactly what you paid for it!  This does not include setting fees, semi-mounts with other diamonds or sales tax. (We asked but the government won’t give us back the tax!)  Simply return your Spence ring in its original condition with your original invoice if you wish to take advantage of our Diamond Buy-Back policy.  This offer applies to any purchase made on or after May 27, 2005.”[1]

As a service to its customers, Spence offers large amounts of educational materials to help buyers make an informed purchase decision.  There is information about diamond cuts and the 4C’s of diamond quality.  There is also a printable ring size guide available on the website so that every detail of a ring purchase can be researched before the customer even enters the showroom.  There are videos on the site that help prepare customers for the showroom experience.

Sean Jones, the President of Spence Diamonds, says the best jewellers will not only explain the finer points of cut, clarity, carat, and colour, but will actually show a customer the difference, using proper diamontology instruments like a proportion scope.  “All diamonds look good under the lights of a jewellery store,” says Jones, but the proof and the quality is in the stone’s brilliance.  And Jones says -whether you want big, or beautiful, or rare, be sure to insist on the best cut, “and make sure the person is certified and has lots of trust and credibility behind them.”[2]

Spence Diamonds is best known for its engagement rings and it offers a wide range of designs including classic and modern solitaires, a variety of stone shapes including round, princess, and marquis styles.  They offer carat sizes to suit any style and budget.  Other diamond jewellery found at Spence includes diamond bracelets, earrings, necklaces, and right hand rings.  Spence employees have intimate knowledge of the complete process from importing and manufacturing to final sales which are all handled in house.  All Spence Diamond Consultants are required to become DCA Certified Diamontologists to be able to provide information to buyers such as diamond care, diamond grades and conflict diamonds.  All Spence Diamonds are guaranteed conflict-free.

Advertising for Spence includes radio ads that are witty and targeted towards a young male audience. Doug Spence, the founder of Spence Diamonds, produced his own radio ads for over 20 years before he retired.  Now the ads are produced by an advertising agency in Vancouver who, on a limited budget, need to produce 60 spots a year where they mention the word “diamond” at least 10 times in every spot.  The ads run for approximately 50 weeks every year. The ads talk to young men but don’t exclude the women who really help to drive the sales of diamonds.  During one campaign every ad opened with the line “It’s not easy making sense out of matters of the heart.  Thank goodness there’s a store that makes sense out of diamonds,” and closed with the line “Give a diamond with all your heart, but use your head to buy one.”[3]

More and more consumers are taking a look at Spence Diamonds as they consider one of the most important and expensive purchases of their life.  The company’s original approach to diamond retailing has helped make them the largest Canadian owned diamond retailer in the country and they continue to grow their business with a new tagline “Visibly Better Diamonds, Obviously better prices.”

Questions:

 

1. Identify the current elements of the marketing mix for Spence Diamonds. What one significant change to their current marketing mix would you recommend for Spence, given the changes occurring in their marketplace, and why?  (6 marks)
2. What are 2 advantages and 2 disadvantages of Spence’s approach to developing a competitive advantage through customer service?  Provide one specific example of how you think they do this.  (5 marks)
3. What stage of the product life cycle is Spence’s flagship engagement ring product in?  Given that stage, you identified, what should be their overall marketing objective?  What are 2 different (specific) market initiatives they should be pursuing to achieve this objective?  Use specific examples to support the final part of the question.  (6 marks)
4. What are the 3 keywords you would use to describe the brand personality that Spence possesses?  Why did you use those particular words?  Does Spence have brand equity?  Why or why not?  What key initiatives would you recommend for Spence in the future to improve its brand equity?  Be specific with examples.  (5 marks)
5. Given the nature of Spence’s business and their external pressures, what category of pricing approach would you suggest they employ?  Why?  What specific pricing approach would you follow within that category, and why? (4 marks)
6. Describe in your own words the channel structure used by Spence.  What is one specific area of value that each participant in their channel contributes?  Be specific. (4 marks)

 

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