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Branding blunders: When the truth hurts – Ratner’s

22nd May 2009
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MyCustomer.com

When Gerald Ratner gave a speech poking fun at the poor quality of his company's products it led to serious repercussions for the business. So can honesty ever be the best policy?

By Louise Druce, editor

In what has to be one of the top branding gaffes of all time, Gerald Ratner could have been made for the saying ‘cut the crap’ when he destroyed the reputation of his business in just one speech .

For those unfamiliar with the infamous event back in 1991, when Ratner was the boss of one of the world’s most successful jewellery businesses, he jokingly told the Institute of Directors that the £4.95 sherry decanters being sold at Ratner’s branches were “total crap” and that the 99p earrings were “cheaper than an M&S prawn sandwich but probably wouldn’t last as long”. It may have caused mirth at the time but his customers didn’t see the funny side.

A journalist at UK daily tabloid The Mirror got wind of the speech and within hours Ratner’s remarks were splashed across the media at a time when the press was gunning for so-called company fat cats. “I was attempting to illustrate our markets,” Ratner told MyCustomer.com sister site BusinessZone.co.uk. “We controlled 50% of the UK jewellery sector so we would run three different operations aimed at the up-market, middle-market and down-market.”

Nevertheless, a few choice words meant £500m was wiped off the company’s value at a time when Ratner’s boasted 2,500 stores and profits in excess of £121m. And within 18 months, Ratner himself was eventually forced to quite as CEO after working in his family’s business since 1966.

Can honesty pay?

So is honesty ever the best policy? It has worked for some ad campaigns. Take Marmite’s ‘love it or hate it’ campaign below, which has dedicated half of its online presence for consumers who don’t like the taste of the product and tied it into its TV ads.

Even back in the 1970s, Listerine was producing commercials advertising the fact that although the mouthwash didn't taste very nice, it worked. Check out Oscar winner Morgan Freeman explaining why it's the "taste you love to hate":

However, when it comes to a specific fault with a product, while firms may be respected by customers for owning up and rectifying the problem, the same might not be said if they use it as the base for a whole marketing campaign. There is also a lesson for firms to learn when it comes to choosing the right brand ambassadors for your products and services.

It wasn’t all bad for Ratner. He has returned to the jewellery business with Geraldonline.com that, like his previous business, aims to sell products much cheaper than the competition. Although, it wasn’t all plain sailing either, with Ratner back in the papers over a legal battle that had ensued when he had previously wanted to call the business Ratneronline . Even now the tabloids like to refer to executive gaffs as ‘doing a Ratner’.

However, while Ratner admitted to BusinessZone that there is “not a chance” that his current venture will repeat the success of Ratner’s, he has learned to turn bad publicity to his advantage. It also led to another important lesson: never underestimate the competition. “I ensured the website was good enough and the prices competitive enough,” he said. “And one thing I do know is about the jewellery business.”

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