Brand people failures: Ratner’s

When honesty is not the best policy

One of the most popular and influential books ever written about marketing is The 22 Immutable Laws of Marketing¸ written by Al Ries and Jack Trout and first published in 1993. Their fifteenth ‘law’ is ‘the law of candour’. This states that if a company admits a negative aspect about a brand, the consumer will think more highly about that brand because of the company’s sheer honesty.

Ries and Trout say that it goes against corporate and human nature to acknowledge a problem or weakness. ‘First and foremost,’ they write, ‘candour is very disarming. Every negative statement you make about yourself is instantly accepted as truth. Positive statements, on the other hand, are looked at as dubious at best. Especially in an advertisement.’

The authors go on to give a list of companies which have used this honest approach to great effect. They admire, for instance, the strap line ‘Avis is only number two in rent-a-cars.’ They also declare that ‘positive thinking has been highly overrated’:

The explosive growth of communications in our society has made people defensive and cautious about companies trying to sell them anything. Admitting a problem is something that very few companies do.

When a company starts a message by admitting a problem, people tend to almost instinctively open their minds. Think about the times that someone came to you with a problem and how quickly you got involved and wanted to help. Now think about people starting off a conversation about some wonderful things they are doing. You probably were a lot less interested.

Another example given is that of Listerine mouthwash, a brand that successfully deployed the slogan: ‘The taste you hate twice a day.’

However, despite the many successful examples of frank candour, there are times when honesty is not the best policy. Of course, if there is a serious and indisputable flaw with a product then it needs to be recognized and addressed by brand managers, so that they can move on to a more positive message. But if it is only an honest but negative opinion that is being expressed, it usually causes brand damage.

As Ries and Trout themselves acknowledge, ‘the law of candour must be used carefully and with great skill.’ To understand what can happen when great skill is not deployed, you could do worse than ask Gerald Ratner.

During the 1980s he built his Ratner’s business into the world’s biggest brand of jewellery, through a series of publicity stunts and takeover deals. In 1991, however, Ratner managed to destroy his brand in the space of a sentence. In a speech to the Institute of Directors in London, he said the secret to Ratner’s success was that many of its items of jewellery were ‘total crap’.

He also joked that Ratners earrings were likely to last for less time than a Marks & Spencer sandwich. Although the room filled with laughter, Ratner’s investors and customers couldn’t see the joke. Shortly afterwards he backtracked, saying that he was referring only to a very few items, but the damage had been done.

The Ratner’s brand name was now synonymous with ‘crap’ products and a lack of respect for its customers. The company’s share price plummeted from £2 to less than 8p, and consumer confidence sank without trace. Group profits fell from £112 million in 1991 to losses of £122 million a year later.

‘Consumers would have been totally embarrassed and humiliated to have bought its product. It just became impossible,’ says Tom Blackett, group deputy chairman of London-based branding consultancy Interbrand. Gerald Ratner, and his eponymous brand of jewellery, were forced to make an exit. Shortly after he left the jewellery trade, he took part in an interview and appeared to be taking the situation in his stride. ‘Someone said he had met comedians who wanted to be millionaires, but I must have been the only millionaire who wanted to be a comedian,’ he told the interviewer. However, in 2002 Ratner was back on a mission to resurrect the Ratner’s name and create an online version of the brand, called simply Ratners-Online.

‘I didn’t want to use the Ratner’s name but research shows that it is still the best-known name in the jewellery business despite the fact that there hasn’t been a Ratner’s shop for years,’ Gerald told the Evening Standard in 2001. In another interview, for the Guardian, he said the name would provoke curiosity from Web users. ‘We were going to call it something else but thought it was more likely to get hits on the Internet – even from a curiosity point of view.’

Whether this curiosity will be converted into long-term sales remains to be seen. Gerald also needs to make sure that this time he keeps his foot a good distance away from his mouth. ‘It is difficult for me to resist jokes, even if I am the only one that really finds them funny,’ he chuckles. ‘But I really will try.’

Lessons from Ratners

• Think before you speak. It often takes years to build trust among consumers, but as Gerald Ratner proved, that trust can be blown in a couple of words.
• Remember that most dangers come from within. Most brand damage does not arise from product flaws or distribution problems. A lot of it comes from employees or managers who fail to live up to their role as ambassadors of the brand. In service industries, where most employees are interacting with the public on a regular basis, it is especially important to maintain a positive attitude.