One Offhanded Joke Cost This Business $1.8 Billion

E.A!

And today, “doing a Ratner” is in the dictionary

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Have you ever thought of making a joke during your speech?

Let me start first: I thought about it a couple of times when I was preparing for a speech. I thought It’d be nice to make a joke to break the ice with the audience.

Well…

Not always.

Unless your jokes cost a company nearly 2 billion dollars, there is no reason not to make jokes during your speech.

However, after reading Gerald Ratner’s story, you’ll think twice when you make a joke during your speech — especially the ones related to your company.

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In 1991, Gerald Ratner made what is arguably the worst marketing blunder in history.

When Gerald Ratner took the stage at London’s Royal Albert Hall in April 1991, he never thought his speech would be the end of his company. He was the owner and head of a giant UK-based jewelry company when one tiny joke would almost collapse his empire. While supposedly promoting how great the jewelry company he owns is, he stated it clear how “total crap” the items they were selling.

Ratner later claimed that the joke was taken out of context, but the harm to the company had already been done. On that crucial night in April, a joke would destroy it all in ten seconds.

This advertising blunder is estimated to have wiped $1.8 billion off the company’s value almost instantaneously, forcing the closure of more than 300 stores.

The biggest jewelry brand in the UK of the time never recovered after this incident.

Now, let’s start from the very beginning of Ratner’s story:

The Rise of Ratners

Gerald Ratner joined his father’s modest jewelry business in 1965 when he was 15 years old. He spent his teenage years learning about the “basics of the business.”

When he took over the company in 1984, the shops were losing £350,000 per year.

Ratner had learned an important lesson while growing up in London’s street markets: the vendors who yelled the loudest and had the most eye-catching displays got the most customers. As a result, he decided to use the same approach at Ratners.

Within months, bright red banners with all-caps pitches like “Last Chance: Mega Red Star Sale!” and “SALE SALE SALE: Half Price!” were plastered throughout Ratners’ shops.

Ratner also decided to promote his chain to a broader working-class population, with earrings, bracelets, and rings ranging in price from £1 to £20 on average.

“The business only took off when I changed the way we operated, because the family’s six shops were not making any money. Stores like Next and Top Shop were drawing in customers but the jewellers were empty. I had to make our shops appeal to 16–24 year olds, who in the 1980s had the disposable income. I put the earrings and chains in the front of the window and diamond rings at the back, and played pop music.” He later told the Financial Times.

However, this strategy had a price: competitor jewelers and the press continually criticized Ratners for selling “cheap” and “crappy” items.

Ratner’s method, however, paid off. By 1990, he had grown Ratners from 120 to over 2000 outlets, had acquired 50% of the UK jewelry market, and had annual revenue of £1.2 billion, with £125 million in net profit. In addition, they acquired rival jewelry stores such as Jared and Kay.

The Joke That Cost Nearly 2 Billion Dollars

Ratner was invited to speak at the respected Institute of Directors annual meeting in 1991 as a result of his success in the jewelry sector.

Gerald Ratner began his talk innocently enough, emphasizing the event’s thematic values of quality and wealth. Then, after about three minutes, he launched into a series of irrationally honest jokes.

He began with, “Ratners doesn’t represent prosperity, and come to think of it, it has very little to do with quality as well,”

Despite such a start, the speech was going well for a while. However, the unfortunate moment came when an audience asked about Ratner’s company’s ability to sell products so inexpensively. His now-famous response was:

“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.”
He went on to say that some of the earrings sold by the Ratner Group were:
“Cheaper than an M&S prawn sandwich but probably wouldn’t last as long.”

The Next Morning

Gerald Ratner believes that the comments were meant to be a joke and that he assumed that because it was a private event, nothing spoken would be made public. The journalists who were listening to him, on the other hand, didn’t see it that way, and his words were all over the national news the next morning.

In the morning, the headlines were like “Jewelry CEO Calls His Own Products CRAP.” He was called “Gerald Crapner” by the Sunday Times, a nickname that grew popular among dissatisfied ex-customers.

The impact of these headlines on the company’s value was almost immediate. Customers began avoiding Ratners’ stores like the plague after the company’s stock plunged by over £500 million (around $1.6 billion now).

After this blunder, the phrase “doing a Ratner” became a slang word meaning completely screwing up.

The Downfall

Ratners Group's stock plunged by £500 million (US$1.8 billion) within days after the speech, and by the end of 1991, it had dropped by 80%.

Ratner’s stores began closing by the hundreds a year following his speech, resulting in the loss of thousands of jobs.

The company claimed that the substantial drop in revenues was due to “a shift in shopping habits,” which is partially accurate, but it’s quite clear that it was due to Ratner’s speech, as seen by the $500 million hit to the gut they received just a year previously.

Gerald Ratner left the company in November 1992, and the firm was rebranded itself as the “Signet Group” in 2002, in an effort to dissociate itself from Ratner.

Despite the fact that his speech cost his company hundreds of millions of dollars, Ratner himself left out of the scandal relatively undamaged, as noted in this interview with him, “I sold my shares on the day I left. I didn’t make anything. The only good news was that the £1billion owed to the bank stayed with the company rather than me.”

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Ratner’s narrative is a good analogy in an age where tweet-centered CEOs like Elon Musk are equipped with massive digital audiences to whom they may instantaneously broadcast.

The expression “doing a Ratner” is now British slang for when someone says something idiotic that discredits their own product or clients, which happens far more frequently than it should.

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