Bowman’s Strategy Clock is a marketing model concerned with strategic positioning. The model was developed by economists Cliff Bowman and David Faulkner, who argued that a company or brand had several ways of positioning a product based on price and perceived value. Bowman’s Strategy Clock seeks to illustrate graphically that product positioning is based on the dimensions of price and perceived value.
Component
Description
Origin
Developed by Cliff Bowman in the late 1990s as a strategic framework for analyzing competitive strategies.
Overview
Bowman’s Strategy Clock is a strategic model used to evaluate and formulate competitive strategies based on different market positions and customer perceptions. It offers a range of strategic options that a company can consider to gain a competitive advantage.
Key Elements
– Price: The vertical axis represents the perceived price or value offered to customers. It ranges from low-price/low-value at the bottom to high-price/high-value at the top.
– Perceived Value: The horizontal axis represents the perceived value by customers, with low-value on the left and high-value on the right.
Strategy Options
The model presents eight strategic positions along the clock’s face, each representing a specific competitive strategy:
1. Low Price/Low Value: Offering products or services at the lowest price in the market.
2. Low Price: Competing primarily on price while delivering adequate value.
3. Hybrid (Focused Low Cost): Providing good value at a lower price than competitors.
4. Differentiation: Offering unique and premium products or services.
5. Focused Differentiation: Specializing in delivering high value and uniqueness to a niche market.
6. Risky High Margins: Charging high prices despite offering low value, taking a risk based on brand image.
7. Monopoly Pricing: Charging high prices for a product with no close substitutes.
8. Loss of Market Share: Sacrificing margins by reducing prices to maintain market share.
Applications
– Strategic Planning: Helps organizations identify their current market position and formulate competitive strategies.
– Market Analysis: Useful for evaluating competitors’ strategies and market dynamics.
– Product Development: Guides decisions on pricing, differentiation, and market positioning.
Benefits
– Offers a structured framework for understanding and selecting competitive strategies.
– Encourages businesses to think strategically about their market position.
Drawbacks
– Simplified Representation: Critics argue that it oversimplifies complex market dynamics.
– Subjectivity: The assessment of perceived value can be subjective.
Key Takeaway
Bowman’s Strategy Clock provides a visual representation of eight competitive strategies based on perceived price and value. It helps organizations make strategic decisions regarding pricing, differentiation, and market positioning. While it simplifies complex market dynamics, it offers a useful framework for strategic planning and analysis.
Bowman’s Strategy Clock seeks to illustrate graphically that product positioning is based on the dimensions of price and perceived value.
Here, the illustration features price on the x-axis and perceived value on the y-axis.
On the graph lies the circular Bowman’s Clock.
Varying combinations of price and perceived value lead to eight conceivable marketing strategies.
Businesses can pick one of the eight strategies that suit them best, according to the price and perceived value of the product, service, or brand they are trying to market.
Bowman’s Strategy Clock was developed in 1996 in response to Michael Porter’s Generic Strategies, a model that explained three general ways in which a company could gain a competitive advantage.
While Porter’s model was useful to some extent, some found his approach a little too generic and desired something more detailed.
Cliff Bowman then developed his model to expand Porter’s idea into the various strategic options that we will discuss in the next section.
The eight strategies of Bowman’s Strategy Clock
Businesses must select one of the competitive strategies of Bowman’s Strategy Clock according to their specific needs, circumstances, and the particular barriers they are experiencing.
For example, a business that competes on price should assess whether it has price leadership and can exploit cost advantages to sustain that advantage.
A business that competes on perceived value, on the other hand, should focus on understanding its target audience with respect to their needs, wants, and pain points.
To effectively differentiate themselves, it is also important that they understand how the market as a whole perceives competitor products.
Now it is time to dive into each of the eight strategies.
1. Low price and low value-added.
Since the first strategy involves low-value products sold at the lowest possible price, there is little scope for strategic positioning if a competitor is already selling for the lowest price possible.
The consumer also perceives very little value, despite the low price, which decreases brand loyalty.
2. Low price
The low price strategy means a product is the lowest cost option in its marketplace.
Businesses who want to utilize this strategy must manufacture products in large quantities while also being cost-effective and efficient.
According to Porter, there are three core strategies for competitive positioning: cost leadership, differentiation, and focus. Cost leadership is straightforward, as the player rolling this out will become the lost-cost producer in the industry.
Walmart is a classic example of a low price strategy market leader.
Walmart’smission can be summarized as “helping people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce.” While its vision is to “make every day easier for busy families.” Walmart defines “busy families” as the bull’s eye of its business strategy.
3. Hybrid
In the hybrid strategy, consumers perceive added value through a combination of competitive low pricing and product differentiation.
If the added value is offered consistently, this can be an effective positioning strategy.
Flatpack furniture outlet IKEA is a great example of the hybrid strategy.
IKEA is a brand comprising two separate owners. INGKA Holding B.V. owns the IKEA Group, the holding the group. At the same time, that is held by the Stichting INGKA Foundation, which is the owner of the whole Group. Thus, IKEA Group is a franchisee that pays 3% royalties to Inter IKEA Systems.
4. Differentiation
Sustainable competitive advantage describes company assets, abilities, or attributes that are difficult to duplicate or exceed. The qualities of these attributes mean the company that possesses them can enjoy a superior and long-term position in its market or industry. In business theory, sustainable competitive advantage is associated with cost leadership, differentiation, or cost focus.
The differentiation strategy is equated with high perceived value.
Because of this, brand equity is high – allowing businesses to compete in highly competitive markets.
Ultimately, the consumer chooses to pay a higher price for a product they could purchase elsewhere for less.
Starbucks is a company that uses the differentiation strategy to its advantage.
Starbucks is a retail company that sells beverages (primarily consisting of coffee-related drinks) and food. In 2018, Starbucks had 52% of company-operated stores vs. 48% of licensed stores. The revenues for company-operated stores accounted for 80% of total revenues, thus making Starbucks a chain business model.
5. Focused differentiation
Focused differentiation is where most luxury brands reside.
They have extremely high perceived value and a price to match.
Companies such as Rolex and Ferrari are competitive in this sphere through product promotion to their highly targeted audience.
Brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.
6. Risky high margins
As the name suggests, this is a high-risk strategy where businesses set high prices without offering much value in return.
Often, they are relying on brand equity to drive sales.
Inevitably, a competitor will enter the market and offer a product for a similar perceived value but at a lower price.
Businesses that offer gym memberships are one such example.
7. Monopoly pricing
A monopoly is a market structure characterized by the presence of a single, dominant individual or enterprise that is the sole supplier of a product or service. Monopolies are associated with a lack of competition and an absence of viable product substitutes. As a consequence, the company can sell products and services at prices that result in substantial profits.
A company that enjoys a monopoly over its market is less concerned about perceived value or pricing.
This is because the consumer is reliant on the business for the products and services that it offers.
Thus, perceived value is often low and so too is brand equity.
Despite total market share, monopolies are difficult to obtain and such companies are often dissolved by regulatory bodies.
American telecommunication company AT&T is a notable recent example.
8. Loss of market share
The loss of market share strategy involves products with low perceived value but with disproportionately high pricing.
When the iPhone was first launched in 2007, it quickly rendered the dominant Blackberry obsolete.
As a result, Blackberry phones lost their perceived value and market share very quickly.
Non-viable market positions in Bowman’s Strategy Clock
Note that the sixth, seventh, and eighth positions are not viable strategies in competitive marketplaces.
Whenever the price of a product is greater than its perceived value, the business will find it difficult to sell its products in the face of other companies selling cheaper alternatives.
Companies that find themselves in this predicament have two options.
They can either add perceptible value to the product or service on offer or increase perceived value by lowering its price.
If none of these initiatives can be accomplished, the business should exit the market.
Advantages and disadvantages of Bowman’s Strategy Clock
Advantages
Choice – as noted in the introduction, Bowman’s Strategy Clock sets out a broader spectrum of strategic options for a company when compared to Porter’s Generic Strategies. This gives decision-makers more freedom of choice.
Ease of use – while more detailed, Bowman’s framework is easy to understand and analyze. It provides multiple starting points for a business looking to establish and maintain a competitive advantage in a market-driven economy.
Disadvantages
One dimensional – the primary criticism of Bowman’s Strategy Clock is that it fails to account for firms that occupy more than one strategic position at the same time. Since the model is focused on developing a sustainable competitive advantage, the business in a market characterized by low competition will need to look elsewhere to define a strategy.
Differentiation – each of the eight strategic positions of the model is represented in a circle divided into segments, not unlike the face of a clock. However, the boundaries between each position are somewhat blurred and may be difficult to understand as a result.
When to Use Bowman’s Strategy Clock
Appropriate Scenarios:
Strategic Planning and Analysis: Useful in the strategic planning process as a tool for analyzing and comparing different competitive positions.
Market Positioning Decisions: Helps in making decisions about how to position a product or service in the market relative to competitors.
Strategic Application:
Competitive Analysis: Can be used to analyze the competitive strategies of rivals in the market.
Identifying Strategic Shifts: Helpful in identifying potential strategic shifts that a company might consider in response to market changes or competitive pressures.
How to Use Bowman’s Strategy Clock
Implementing the Framework:
Analyze Current Position: Assess where your current strategy falls on the clock.
Evaluate Market Conditions: Consider the market conditions, customer preferences, and competitor strategies.
Choose a Strategic Position: Based on the analysis, choose a strategic position on the clock that aligns with your business objectives and market conditions.
Develop Implementation Plans: Create detailed plans for how to implement and manage the chosen strategy, including resource allocation, marketing, and operations.
Best Practices:
Continuous Market Monitoring: Regularly monitor market conditions and be prepared to adjust your strategy as needed.
Align with Business Capabilities: Ensure that the chosen strategy aligns with your company’s resources, capabilities, and broader business goals.
Consider Complementary Strategies: Look for ways to combine different elements of the clock’s strategies to create a unique competitive position.
What to Expect from Implementing Bowman’s Strategy Clock
Enhanced Strategic Clarity:
Clearer Competitive Positioning: Provides a clearer understanding of your competitive positioning and strategic options.
Informed Strategic Decision-Making: Aids in making more informed strategic decisions by evaluating the pros and cons of different positions on the clock.
Organizational and Market Impact:
Impact on Market Perception: The chosen strategy will influence how customers and competitors perceive your brand and offerings.
Potential for Strategic Reorientation: Implementing a new position on the clock can lead to significant changes in business operations, marketing, and overall strategic direction.
Potential Challenges:
Resource Allocation: Effective implementation may require reallocation of resources, which can be challenging, especially in organizations resistant to change.
Balancing Trade-offs: Each strategic position comes with its own trade-offs and challenges, requiring careful balancing to achieve the desired outcomes.
In summary, Bowman’s Strategy Clock is a useful tool for analyzing and choosing competitive strategies based on price and perceived value.
While it provides a structured approach to understanding market positioning, its application requires careful consideration of the company’s unique context, market dynamics, and the feasibility of implementing chosen strategies.
The model serves as a guide for strategic decision-making but should be used with flexibility and an awareness of its limitations, particularly regarding the dynamic nature of markets and the complexities of strategic execution.
Bowman’s Strategy Clock example
While we briefly touched on some examples earlier, let’s describe some other companies in more detail for each of the eight strategies:
1 – Low price and low value-added
Dollar Tree is an American chain of discount variety stores with a core focus on extremely low-priced items in categories such as cleaning supplies, housewares, candy, party supplies, stationery, craft supplies, and seasonal décor.
Many items are disposable and sold for $1 or less, providing very little scope for a competitor to undercut Dollar Tree’s prices.
2 – Low price
American airline JetBlue used the low price strategy to not only remain competitive but expand across the country.
The company has been able to differentiate itself by serving airports with lower taxes and removing perks that tend to be underutilized at other airlines.
3 – Hybrid
Lush is a British cosmetics retailer that sells competitively-priced items with several important points of differentiation.
The company is known to support issues like climate change and sustainability, with this stance becoming part of its brand identity.
Lush has also made the often dull experience of buying shampoo and soap fun with its interactive, fun, and immersive retail stores.
4 – Differentiation
Apple is a master at implementing the differentiation strategy with superior levels of brand equity and perceived value.
The company has made phone ownership a status symbol and its consistently innovative products are always eagerly anticipated by consumers.
5 – Focused differentiation
Luxury automaker Rolls Royce uses focused differentiation to offer premium vehicles at very expensive prices to niche audiences.
The Rolls Royce Cullinan, for example, retails for $335,000 and offers lavish features such as lambs wool floor mats, a shooting star headliner, and a rear suite with two backward-facing leather seats and a picnic table.
6 – Risky high margins
The Juicero Press was an American-made juicing machine that was over-engineered and initially retailed for $699.
The high-margin product could only be used with proprietary packets of pre-juiced fruits and vegetables that were sold on a subscription basis.
Despite backing from serious tech investors, the company went bankrupt because its juicer was overpriced and delivered little value.
Consumers could obtain the same results from much cheaper machines and avoid the expense of having to purchase pre-juiced fruit.
7 – Monopoly pricing
Pharmaceutical company Pfizer had a monopoly in the Viagra market for over twenty years, selling the blue pills for as much as $65 each and earning $400 million just three months after it was launched in 1998.
But this success inevitably attracted the interest of competitors who challenged Pfizer’s patents and by extension, its monopoly.
The last of Pfizer’s patents expired in 2020, with a slew of much cheaper generic versions introduced since that time selling for much cheaper.
8 – Loss of market share
British supermarket chain Tesco lost market share over a period of years in the early 2010s despite the grocery market itself experiencing growth.
Market share was lost to competitors such as Lidl and Aldi established who offered similar products to Tesco but at much more attractive price points.
Case Studies
1. Low price and low value-added
Primark: Known for offering affordable fashion options.
Dollar General: A discount retailer providing a variety of goods at very low prices.
Ryanair: An airline known for its extremely cheap tickets and basic flight service.
2. Low price
Costco: Offers bulk products at lower prices with an annual membership.
Aldi: A supermarket chain offering a limited selection of products at very competitive prices.
BIC: Known for producing disposable consumer products such as lighters, razors, and pens.
3. Hybrid
Southwest Airlines: Low-cost airline with unique customer-friendly policies.
Toyota: Offers reliable vehicles with a mix of affordability and quality features.
Zara: Provides fast fashion – trendy clothing at affordable prices with quick turnaround from design to store.
4. Differentiation
Tesla: Known for its electric vehicles, superior battery technology, and autopilot features.
Dyson: Differentiates with innovative, high-performance household appliances.
Adobe: Offers premium software products like Photoshop, known for advanced features and capabilities.
5. Focused differentiation
Bose: High-quality sound systems and noise-canceling headphones.
Leica: Cameras and lenses known for their exceptional quality and craftsmanship.
Montblanc: Luxury brand primarily known for its high-end pens and watches.
6. Risky high margins
Goop: Sells high-priced wellness products with disputed health benefits.
Vertu: Produced luxury mobile phones with precious materials but limited technological advancements.
Bang & Olufsen: High-end audio products with premium pricing but often criticized for not matching the audio quality of competitors.
7. Monopoly pricing
Microsoft Windows: Set prices for Windows licenses, especially for OEMs.
De Beers: Historically had a near-monopoly in the diamond industry, influencing diamond prices globally.
Intel: For a long duration, it held a dominant position in the CPU market, allowing for premium pricing.
8. Loss of market share
Nokia: Lost significant market share with the rise of smartphones.
BlackBerry: Once dominant in the business smartphone market but lost to competitors like Apple.
Kodak: Failed to adapt quickly to the digital photography revolution, leading to a significant loss in market share.
Key takeaways:
Bowman’s Strategy Clock is a marketing model that investigates how a product might be positioned to give it a maximum competitive advantage. It is a more detailed framework that seeks to build on the somewhat more generic Porter’s Generic Strategies approach.
Bowman’s Strategy Clock features eight possible competitive strategies that apply to different markets and products.
Of the eight different strategies, three are associated with undesirable market positioning. Nevertheless, many businesses find themselves in these positions and must find ways to increase the perceived or actual value of their products.
Key Insights
Strategic Positioning: Bowman’s Strategy Clock is a marketing model that focuses on strategic positioning based on price and perceived value. It helps companies understand how to position their products to gain a competitive advantage.
Two Dimensions: The model uses two dimensions – price (x-axis) and perceived value (y-axis) to represent various market positioning options.
Eight Strategies: The circular Bowman’s Clock consists of eight different positioning strategies that businesses can adopt based on their specific needs, circumstances, and barriers.
Expansion of Porter’s Generic Strategies: Bowman’s Strategy Clock was developed as an expansion of Michael Porter’s Generic Strategies model, providing a more detailed approach to strategic positioning.
Examples of Strategies: Examples of strategies include low price and low value-added, low price, hybrid (combining low price and differentiation), differentiation, focused differentiation, risky high margins, monopoly pricing, and loss of market share.
Advantages: The advantages of Bowman’s Strategy Clock include providing a broader spectrum of strategic options compared to Porter’s model and being easy to understand and analyze.
Disadvantages: The model has been criticized for being one-dimensional and blurring the boundaries between different strategic positions.
Examples: Various companies like Dollar Tree, JetBlue, Lush, Apple, Rolls Royce, Pfizer, and Tesco exemplify different positioning strategies within Bowman’s Strategy Clock.
Improving Undesirable Positions: Companies in undesirable market positions can improve by increasing perceived or actual value, differentiating themselves, or adjusting their pricing strategies.
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Definition
Focus
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
