How to Destroy a Great Business through Stupidity

Very few people get overnight success unless of course, your company is a Courier who promises overnight delivery and success!

Perhaps you’ve heard of the “Ratner effect”

Who is Gerald Ratner? He is an influential British businessman and motivational speaker. He was what is loosely termed ‘A Barrow Boy’ and based his approach to business on his experiences as a boy in the local market. He learned that ‘people who shouted the loudest and appeared to give the best offers sold the most’.

Rise to Glory of The Ratner Brand

After Gerald was expelled from grammar school, he joined his father’s small, fledging jewelry business at the age of 15. He spent the first few years at the shop cleaning up, running errands, and learning the grassroots of the business.

When he inherited the company, Ratners Group, in 1984, it had 120 unimaginative, traditional storefronts, and was losing on average £350k a year. I don’t think anybody expected him to turn things around. He decided to employ his initial business philosophy of those who ‘shout the loudest and have the most garish eye-catching displays’ getting the best results.

He played pop music to attract his customers into the stores. All Ratner stores were plastered with vibrant orange and red posters, everything displayed in the windows was clearly branded with a price tag.

Ratner decided to market his chain towards a wider working-class customer. People loved his store because it offered affordable products to the working class. In fact, it was generally known as the place where working-class men bought rings for working-class women.

He sold earrings, bracelets, and rings at an average price of just £20, and as low as £1. This gamble paid off and within six years, Ratners grew to 2000 stores with an annual profit of £125m. This success enabled him to buy up competing chains.

In its heyday, the Ratners Group consisted of Ratners, H. Samuel, Ernest Jones, Leslie Davis, Watches of Switzerland, and over 1,000 shops in the US including Kays.

In record time, Ratners became a household name and made modest jewelry available to the masses, modernising a previously stuffy industry.

The speech that broke Ratner’s business

Life was going well for Ratner, expensive cars, houses, and he frequented high society events all over the world and even rubbed shoulders with Margaret Thatcher at Number 10. His success earned him an invitation to speak at the prestigious Institute of Directors’ annual convention on April 23, 1991. This event was attended by over 6000 businessmen and journalists.

On the Night, Ratner started his speech innocently enough, harping on the event theme’s values. However, three minutes into the speech, for reasons best known to himself, he decided to undo his entire life and the empire he had tirelessly built up over the years.

Asked how was it possible for his company to be selling a sherry decanter for the amazing price of £4.95, he answered, to the amazement of his audience and his shareholders, the following:

“How can you sell this for such a low price?” I say, “because it’s total crap.”

To make sure that he really did a good job of it, he also stated that his company:

“Sold a pair of earrings for under a pound, which is cheaper than a shrimp sandwich from Marks and Spencer, but probably wouldn’t last as long”.

It was no surprise, that the media had a field day with his comment. The Sunday Times dubbed him “Gerald Crapner” — a nickname that caught on with disgruntled customers.

The papers ran the story so many times that people started doubting the brand. The next morning, Ratner awoke to utterly terrifying news: his comments had made national headlines to the effect of: “JEWELRY CEO CALLS HIS OWN PRODUCTS ‘CRAP!’”.

The company’s shares dropped £500 million in just a matter of days.

Initially, Ratner tried to play it off by incorporating special in-store promotions that put a “humorous twist” on his remarks — but within a few weeks, it dawned that what he’d said had taken an irreparable toll on his business. The company had to reinvent itselves by changing the name to the ‘Signet Group’.

How would you feel?

So, how would you feel, if you had spent a long time looking for a special piece of jewelry for a loved one, to be told the item you spent your hard-earned money on was Crap?

Where is Ratner now?

I recently found a video that summarises the rise and fall of Gerald Ratner (also the title of a great read) and what’s he’s doing today. The video was posted on Youtube in 2015, some 24 years after his infamous speech. A billion-dollar speech that sunk a significant company. You may occasionally hear the term: “Doing a Ratner”, which essentially is short for: really screwing up.

Today, Ratner gives talks on how to deal with adversity and how to just keep going. Making a mistake is not the end of the road unless you want it to be. All you have to do is get up and try again. Unfortunately, Ratner is not the only famous person who’s made a gaffe while representing a brand.

Screwing Up

There have been many similar high-profile stumbles over the years. Some of them are;

Helen Mirren, actress and paid brand ambassador of L’Oreal said that using the company’s products “probably does mess it all.”

Matt Barrett, ex-CEO of Barclays, insinuated that customers shouldn’t use the bank’s credit card products because they could “pile up debts.”

John Pluthero, then-CEO of the telecom giant Cable & Wireless, sent out a memo calling his company an “underperforming business in a crappy industry.”

Michael O’Leary, CEO of Ryanair, called his passengers idiots. On another occasion, he used insulting language to put off customers who ask for a refund

Chip Wilson, the founder of lululemon, told customers his products “don’t work for certain women’s bodies.” — Source: Business Cobra

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Sources: Business Cobra