bowmans-strategy-clock

What is Bowman’s Strategy Clock And Why It Matters In Business

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.

Understanding Bowman’s Strategy Clock

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.

cost-leadership
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-vision-statement-mission-statement
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.

who-owns-ikea
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
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-business-model
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 similarly very high. 

what-is-brand-equity
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

monopoly-examples
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.

iphone-sales-2007-09

As a result, Blackberry phones lost their perceived value and market share very quickly.

Read: What Happened to BlackBerry?

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.

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.

Other strategy frameworks

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