The “Strategy Clock” was developed by Cliff Bowman. He argued that the generic strategies and its choice depends on
⦁ Price and
⦁ Perceived quality.
Price is a cost that the customers have to pay for product possession. Perceived quality or added value is benefits that felt by the customer from the product possession.
The strategy clock is one of the less well-known strategy tools and is based on the principle that organizations achieve competitive advantage by providing their customers with what they want, or need, better or more effectively than their competitors. The strategy clock adopts the assumption that customers will accept any offering based on ‘perceived value-for-money’. The clock is based on different perceptions of the product/service offering against a price line. This results in some generic strategic options based on the positioning on the clock.
⦁ No frills – this combines a low price, low perceived benefit and is focused on a price-sensitive market segment. Price is the key competitive issue. There may be price-sensitive customers, who cannot afford better-quality goods, and buyers have high power, and/or low switching costs. Building customer loyalty is difficult, so providers try to ‘buy’ loyalty in other ways. It may also be a useful strategy where smaller participants avoid the major competitors, who may well be competing on non-price strategies.
⦁ Low price – organizations competing here are seeking to achieve a lower price than competitors while trying to maintain similar perceived benefits to those offered by competitors. To succeed here, an organization needs to identify and focus on a market sector which is unattractive to competitors, or, with more difficulty, compete on price. The key challenge is to reduce costs which others cannot imitate or match, resulting in a sustainable advantage.
⦁ Hybrid – this strategy seeks to simultaneously achieve differentiation, and a price lower than that of competitors. The success or otherwise of this strategy depends on the ability to deliver enhanced benefits to customers together with lower prices whilst achieving sufficient margins for reinvestment to maintain and develop the bases of differentiation. It can be advantageous in certain instances: if much greater volumes can be achieved than competitors, then margins may still be better because of a low cost base; if the organization is clear about the activities on which differentiation can be built, it may be possible to reduce costs on other activities; and as an entry strategy in a market with established competitors.
⦁ Differentiation – this strategy results in offerings that provide benefits different from those of competitors and that are widely valued by buyers. The aim is to achieve competitive advantage by offering better products/services at the same price or by enhancing margins by slightly higher pricing.
⦁ Focused differentiation – this strategy seeks to provide high perceived benefits, justifying a substantial price premium, usually to a niche market.
⦁ Increased price/standard value – this is where a company increases its price without any increase in quality. If the price increase is accepted, the company will experience increased profits, if it is not accepted their market share declines until they lower the price or add value. This strategy may work in the short term but is doomed to failure in the long run.
⦁ Increased price/low value – this is a classic monopoly pricing position where companies can charge what they like with no concern about added value where they have no competition. In a market economy monopolies do not tend to last long and companies are forced to compete on a rational basis. This is only feasible in a monopoly situation.
⦁ Low value/standard price – If a company has a low value product the price will have to be low to encourage customers to buy it. Any company that pursues this strategy is bound to fail.