Bowman’s Strategy Clock
Strategy is something that is easy to take for granted in business. Many business owners and managers fall into the trap of thinking that they can just roll out a great product or service and instantly have a successful business.
While it helps to have something great to sell, you also need an overall strategy for your business to ensure that you are able to execute all parts of the operation efficiently. If you fail to create a good strategy, there is a chance that your business will fall short despite your best efforts.
One tool that you can use to find your place in the market is Bowman’s Strategy Clock. This is a method of strategy thinking that breaks down your potential strategy options into eight segments.
Most businesses should be able to find the right strategy for their operation within one of these eight options. All eight are listed below, along with a short description.
Low Price – Low Value
This is the ‘cheap’ end of the market. Goods do not cost very much in this segment of the market, and they aren’t of a very high quality, either. Most likely, you aren’t going to select this part of the strategy clock as your ideal starting point for a business. Instead, you might find that you have to try to compete at this level because you don’t have another option. If the product or products that you are selling don’t stand out from the rest of the market in any way, this is where you will be forced to fight for sales.
When a company wants to sell a high volume of a product for a low margin, this is the area of the market where they choose to compete. Low cost leaders are often some of the biggest names in a particular market, as it requires tremendous volume to turn a profit when selling your goods for a very low price. Most smaller and medium sized businesses are unable to take this approach because the volumes they achieve simply will not sustain the business over the long term without a high retail price.
It isn’t necessarily easy to slot yourself into the ‘hybrid’ segment of the market, but it can be a good place to land if you are able to do so successfully. When a company takes a hybrid approach, it means that they are competing both on the quality of their products as well as the price. If you can manage to build a reputation for selling quality goods while also being among the low cost leaders in the segment, you will have a chance to grow customer loyalty and gain market share.
This part of the market is all about standing out from the crowd despite selling something that plenty of other businesses have to offer. The key to being differentiated in your market is branding – you have to make an impression with your target audience, to the point that they will choose your product over other options even if you are selling at a higher price.
The luxury brands that exist throughout many markets are said to use a focused differentiation strategy. The high price that these items sell for comes along with a higher perceived value in the minds of the consumers. Margins are extremely high in this part of the market, but volume tends to be rather low. If you attempt to position your business in this market segment, you are going to need a strong marketing team to give your brand the image and recognition that it needs to move product at such a high price point.
Increased Price – Standard Product
Most businesses will find this to be perhaps the most difficult position on the wheel to occupy. With this strategy, you are simply going to raise prices without changing anything about the quality of your product. Obviously risky, you could find a payoff in the form of larger profit margins – or you could find your sales numbers quickly slipping while you rush to lower prices once again.
This might be effective as a short term strategy if your company is enjoying positive feedback from customers currently, but raising prices is a sure way to force the market to look elsewhere in the long term.
High Price – Low Value
This strategy is really only an option for those who have a monopoly in their market. If you have entered a market niche that is light on competition, you may be able to charge high prices while offering a relatively low quality product.
Of course, in the long run, other competitors are sure to enter the market at a lower price and you will be forced to adjust. Monopolies are very rare in today’s global economy, and when they do arise, they never last for long before the competition arrives.
Low Value – Standard Price
The final strategy on the wheel is a losing one. If you are going to provide the market with a poor quality product, yet you are going to try to sell it for the same price at higher quality products, you are going to lose in the end. Many businesses have tried to ‘cheat’ this law of business by sneaking into the market with a poor product, but they never last long and they almost always lose money in the process.
Using Bowman’s Strategy Clock is a great way to get an idea of how various businesses are competing in the market, and where you can fit into that market to carve out revenue for yourself. One good technique to use with the assistance of this tool is to look at your competition and try to place each business appropriately on the clock. Once you decide how it is that your competitors are trying to succeed in the market, you can look for opportunities and make your move.
You can read more about Bowman’s Strategy Clock in our free eBook ‘Top 5 Strategy Development Tools’. Download it now for your PC, Mac, laptop, tablet, Kindle, eBook reader or Smartphone.
- Bowman’s Strategy Clock is used to analyse the competitive position of a company’s offerings in comparison to those of it’s competitors.
- There are 8 possible options, three of which (6, 7 and 8) are uncompetitive because the price is greater than the perceived value.
- 1) Low Price and Low Value Added: The product is not differentiated and the customer perceives very little value, despite a low price.
- 2) Low Price: Businesses positioning themselves here look to be the low-cost leaders in a market. Margins on each product are low, but the high volume of output can still generate high overall profits.
- 3) Hybrid: This involves an element of low price and some product differentiation. It can be a very effective strategy if the added value is offered consistently.
- 4) Differentiation: This requires high quality product with strong brand awareness and loyalty.
- 5) Focused Differentiation: This the strategy adopted by luxury brands, who aim to achieve premium prices by highly targeted segmentation, promotion and distribution.
- 6) Increased Price-Standard Product: This is a very short-term strategy as the opportunity to sell for a high price without justification seldom lasts long.
- 7) High Price-Low Value: This is only sustainable where the organization has a monopoly.
- 8) Low Value-Standard Price: Setting a standard price for a product with low perceived value is likely to lead to an ongoing loss of market share.
- As with Porter’s Generic Strategies, Bowman’s Strategy Clock considers competitive advantage in relation to cost advantage or differentiation advantage.