Bowman's Strategy Clock Model & its Eight Competitive Directions for Edge

Mon, 05/05/2014 - 00:19 -- Gulzar Ahmed

Bowman's Strategy Clock is a model used by a company while designing marketing strategy to analyze its competitive position in comparison to the offerings of competitors. It is a diagrammatic representation which shows relationship between customer value and prices.

Micheal Porter developed Generic Strategies which also called Porter marketing technique. These generic strategies represented the three ways in which a company could compete other rival firms and provide customer satisfaction (goods & service) at a better price, or more effectively than its competitors. Basically Porter emphasized that companies compete in market either on the base of price (Cost leadership), on perceived value (product differentiation), or by focusing (market segmentation) on a very specific customer.

Competing through offering more perceived value or through lower prices became a very popular way to gain competitive advantage. For many companies, however, these strategies were a bit too general therefore; they wanted to think about some more detail and different value and price combination. Cliff Bowman developed the Bowman's Strategy Clock in 1996 based on Michael Porter’s Generic Strategies. It expands Porter's ideas into eight strategic options for companies to follow when comparing their competitive edge against competitors.

This visualization is a graphical representation which allows companies to further investigate exactly what each company offers while choosing the best way to stay above the competition. This corporate model by Bowman extends Porter's three strategic positions into eight detailed positions, and explains the cost and perceived value combinations that are used by many firms, as well as identifying the likelihood of success for each strategy.

Companies use Bowman’s strategy clock as a framework for creating an edge against the competition. As I mentioned before this diagram allows businesses to travel eight directions in an effort to determine what they offer to customers at what prices.

Follwoing are Eight Strategic Positions of Bowman's Strategy Clock

Position 1: Low Price / Low Added Value

This is a segment specific option and companies do not usually choose to compete in this category. This is the "bargain basement" and many companies do not want to be in this position. Companies choose this position when their product lacks differentiated value. A company can apply this through cost effectively selling volume, and by continually attracting new and potential customers.

Company will not win any customer loyalty contests, but it may be able to sustain itself as long as company will stay one step ahead of the consumer (I am not going to mention any company names here!) Products qualities for this position are inferior but the prices are attractive enough to convince consumers to try them once.

Position 2: Low Price

A Company can select this option for their products or services when it will be low cost leaders. When a company will operate under this strategy (low prices) its profit margin will become very low so company need to sale high volume. If a company which is low cost leader have large enough volume or strong strategic reasons for its position, it can sustain this approach and become a powerful force in the market. If a company cannot do this, it will just trigger price wars that will only benefit customers, as the prices are unsustainable over anything but the shortest of terms.  Walmart is a major example of a low price competitor that convinced suppliers to enter the low price arena with the assurance of extremely high volumes.

Position 3: Hybrid (Moderate Price & Moderate Differentiation)

Hybrids are those interesting companies which offer products or services to its customers at a low price, but offer products or services with a higher perceived value than its other low cost competitors. In this strategy volume is an issue but companies build a reputation of offering fair prices for reasonable goods and services. Discount department stores are the good examples of those companies that pursue this hybrid strategy. As the quality and value of product is good so consumer is assured of reasonable prices. This combination often builds customer loyalty for the particular brand or services.

Position 4: Differentiation

In differentiation option a company develops such products and services which offer unique attributes that are valued by customers. When a company develops and designs such products and services which differentiate (high perceived-value) it from competitors it always got a competitive edge. Branding play a key role in differentiation strategies as it allows a company to become synonymous with quality as well as a price point.  Nike is very well known for high quality and premium prices and Reebok is also a strong brand but it provides high value with a lower premium.

Position 5: Focused Differentiation

In Focused Differentiation companies products offers high perceived value products against high prices. This strategy adopted by those companies whose customers buy products or services based on perceived value alone. It is not necessary that products have any real value, but the perception of value by the customers is enough to charge very large premiums. Think of companies like Armani, Gucci, Rolls Royce etc. If a customer believe pulling up in Rolls Royce Silver Shadow is worth 25 times more than in an economy Ford then customer will pay the premium. The companies which adopt this strategy operate in highly targeted markets and gain high margins.

Position 6: Increased Price and Standard Product

Sometimes a company takes a chance and simply increases their prices without any increase to the value side of the equation (no features and innovation in Product and service). If the price increase is accepted by customer, company will enjoy higher profitability and if it isn't, their share of the market fall, until company make an adjustment to their price or value. This strategy cannot work in long-term proposition as an unjustified price premium will soon be discovered in a competitive market.

Position 7: High Price / Low Value

This strategy can be implemented in a market where only one company offers the goods or service (monopoly pricing). As a monopolist, company don't have to be highly concerned about adding value in their product or services because, if customers need what company offer, they will definitely pay the price company set.

Monopolies do not last very long for consumers in a market economy, because in today world new companies start entering very soon, and companies are forced to compete on a more level playing field.

Position 8: Low Value / Standard Price

Any company that pursues this type of market strategy will definitely lose market share. If company has a low value product or services, the only way company will sell it is on price. For example a company can't sell day-old bread at fresh prices. If company will mark it down a few cents, suddenly company will see a viable product.

Summing up all above, we can say that if a company will use Bowman's Strategy Clock as a guide, it can easily compare its products or services to other company in the same industry.