He was at the top of his game. A multi-million pound jewellery business, a huge high-street market share, and the kind of business savvy most of us can only dream of.
Until one fateful day when he told a couple of seemingly harmless jokes and killed his business stone-dead.
I’m talking, of course, about Gerald Ratner – king of naff jewellery and all-round smart cookie.
After all, this was the man who understood that “business hibernation in recession means death. Death through stagnation.” (This is true.)
And he understood this, something I’m continually trying to convince business owners of: “The easiest thing to do to combat recession, the simple answer, is to just lower prices — but where’s that going to get you? It doesn’t get you anywhere. If your margins go down you’ll suffer.” (I’d go further and say that discounting like that will kill your business.)
So how did he go from someone on top of the world and with a deep understanding of how to make a business thrive, to £1 billion in debt with the bank and sacked from his own family company?
Poorly judged jokes.
He gave a speech at the Institute of Directors in 1991, in which he talked about why discounting is terrible. Which is great. But then he decided to be “funny”.
“We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, ‘How can you sell this for such a low price?’ I say, “because it’s total crap.”
And on top of that, he carried on digging with:
“We even sell a pair of earrings for under £1. Gold earrings as well. And some people say that’s cheaper than a prawn sandwich from Marks & Spencer… but I have to say, the sandwich will probably last longer than the earrings.”
Never, ever, ever insult your customers. Even if what you’re saying is true (which of course it was — Ratner’s jewellery was total crap. Awful stuff).
Those two jokes cost Gerald Ratner his career and his family business. They lost £500m before they rebranded a couple of years later. And, as I said, he owed the bank £1 billion (can you even imagine owing that much money?) and got sacked.
From his own family business.
Ratner’s filled a need in the market. It served people who didn’t have much, but wanted in on the bling that the rich could afford. Ratner’s customers weren’t stupid; they knew this stuff wasn’t great quality — how could it be, at that price? But there was a collective agreement that it would never be spoken of, and that was fine and dandy.
These customers wanted the illusion and that was enough.
Gerald Ratner shattered that illusion and insulted them in one fell swoop, and they voted with their wallets.
What you want to be doing is surprising and delighting your customers and clients. I can show you how in my book, Business For Superheroes.
Vicky Fraser is a copywriter, author, and entrepreneur. She really did run away with the circus… but when she’s not swinging from a trapeze, she’s showing other copywriters and small business owners how to work with better clients, make more money, and stop missing bathtimes, first words, and dinners with angry partners. In fact, she wrote the book on it. Get your copy here.
PS Gerald Ratner rose back into fortune a few years later, like some kind of malignant phoenix, from the ashes of Ratner’s. If you want to hear that story, tune in tomorrow…