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View transcript

When quality is all in the mind.

When quality is all in the mind

Few falls from corporate grace have been as spectacular. One moment Gerald Ratner was leading the biggest jeweller in the world; the next he was sacked from the family business he had built up in only six years from around 100 shops to 2,500.

Between the two was Ratner's speech to 5,000 of the great and good of the British business world, brought together by the Institute of Directors at London's Royal Albert Hall. The speech dealt in large part with the quality and range of Ratner products and how he turned the business from stuffy old jewellers into a trendy fashion store. But the company accountant, who read the draft, persuaded him to lighten the mood a little. So he reinstated a couple of jokes he had actually used before:

'We do cut-glass sherry decanters - complete with six glasses on a silver-plated tray your butler can serve you drinks on - all for £4.95. People ask how you can sell this for such a low price. I say because it is total crap.'

'We even sell a pair of gold ear-rings for under £1, which is cheaper than a prawn sandwich from Marks and Spencer. But I have to say that the sandwich will probably last longer than the ear-rings.'

The rest, as they say, is history. The press took up the story - the Sun headline was 'Crapners' - £500 million was wiped off the valuation of the company, a billion-pound turnover was slashed overnight and Gerald Ratner himself eventually lost the only job he had ever wanted.

Of course, the quality of products being sold in Ratners jewellers had not changed between the start and end of the boss's speech. What did alter was people's perception of them. In the February 2011 issue of Quality World, Russell points to perception as being at the heart of reputation and branding, where a brand builds on the company's reputation and is often defined by a consumer's instinctive feeling about the product.

The author discusses the double-edge relationship between a company's reputation with its customers and the quality of its products and services, where a reputation for high quality can ensure greater customer loyalty, employee engagement and a larger market share, but a reputation for poor product or service quality can damage the brand or even destroy the organization.

Russell stresses that it is not only the big brands that are at risk from damage to their reputation, and the risks are especially great in the era of social media and user-generated content on the internet.

The influence of the social media need not, of course, be negative. A number of companies have carved out a reputation for using social media effectively to build strong relationships with their customers. Starbucks, for example, asks its customers for suggestions on how to make the company better, and discusses online the ideas that are put forward. Online retailer Zappos.com invites its 'fans' to interact with its products and even organizes a Fan of the Week contest, while Ford consistently puts reader comments higher on its web pages than 'official' text from the company itself.

In the April 2011 issue of Marketing Week, Costa discusses how firms can gain competitive advantage by channelling their marketing efforts into ensuring that customers and their needs are placed at the top of the list of companies' concerns. She highlights Pret a Manger, Lastminute.com, Virgin Atlantic and Procter & Gamble's Tide as brands that have gone beyond the minimum efforts required simply to help people out.