Customer Loyalty & the Bowman Clock

Customer loyalty and client retention is the primary focus of our PR Firm – HireLoyalty.    If you have followed our past articles, you will have seen that all the topics we write about end with how the companies can influence customer loyalty and retention. At HireLoyalty we believe that true ‘fans’ and clients of businesses make up the core of survival for every business. This explains why loyalty is imperative to all organisations – whether for profit or non-profit.

Measuring customer loyalty and retention is imperative for the growth of every business, yet per research performed by HireLoyalty companies commit less than 2% of their budgets to customer retention efforts. Customer loyalty is usually seen as an offshoot of a marketing effort – hence, it is somewhat abysmally studied at that level.

What organisations need to realise is that customer loyalty is absolutely imperative for today’s competitive market. The corporate giants such as Coca Cola, MTN and Nestle etc. we see today have a strong sense of loyalty attached to their products. Even in non-competitive markets, the customer has a choice: a customer can choose to save her/his money instead of buying the product in the first place.

It is imperative for a business to have some standard of measure to know exactly:

  1. how their product is doing on the market, given the performance of competing products
  2. how loyal their customers are to their products

Customer loyalty tools such as Customer Effort Score (CES), Net Promoter Score (NPS) etc. are used to determine customer loyalty of the organisation’s very own customers. Tools like NPS, CES etc. do not provide the deep insights that organisations need to make critical business decisions.

Every business needs a combination of standard measures for advanced market analysis that yields good insight for businesses.

There is a plethora of strategies that organisations can adopt; in this article we introduce to you the Bowman Strategy Clock.

Bowman’s Strategy Clock

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The Bowman Strategy Clock was developed by Cliff Bowman and David Faulkner in their book Competitive and Corporate Strategy, as an update on a strategy tool developed by Michael Porter called Porter’s Generic Strategies.

The Bowman Strategy Clock looks at product/service positioning in a market against price and perceived quality. There are 8 points on the clock, depicting a trade-off between price and perceived product/service quality.

The clock therefore allows companies to critically assess their strategic positioning of the brand and to also determine the position of their competitors. For the purpose of easy assimilation, the Ghanaian non-alcoholic beverage market (water included) will be used to explain the importance of Bowman’s strategy.

 

Point 1: Low Price and Low added value

This point is usually for basic products or services that are very specific to a particular type of market. For example, people do not go over their heads to buy a particular brand of pure water when sitting in traffic on a sunny day.

Although having some level of differentiation helps in the low price/low revenue segment on the Bowman Clock, it ultimately comes down to having a formidable distribution and marketing network. Therefore, think about all the competing products that have equal price points with little added value; those products are most likely to be on the first point of the Bowman Strategy Clock.

Point 2: Low Price

Low price is a strategic position on the Bowman Clock, especially in developing countries like Ghana. This is because consumers are always looking for a bargain. A scan of the Ghanaian soft-drink beverage market shows that most drinks in returnable glass are conveniently priced at 1 or 2 cedis. The energy drink market is also flooded with various 500ml PET bottles that are also priced at 2 cedis. The aim of the low-price strategy is to be a cost-cutter and offer exponential savings to the consumer.

Point 3: Hybrid

The hybrid stage on the Bowman Strategy Clock works well for products that are well-known and marketed. That is because the hybrid product beyond the low price also has some perceived inbuilt value. For such products, the brand can charge a slightly premium price – given that there is loyalty with the product or the product has existed for a number of years.

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For example, the Coca Cola brand of beverages is well-known and beloved. Given that situation, Coca Cola can command a slightly higher price than competing brands. Brands in the hybrid category are still seen as low-cost and do not necessarily advertise themselves as luxury brands. A mix of loyalty, popularity and accessibility is needed for products/services deemed as hybrid to succeed.

Point 4: Differentiation

At the differentiation stage of the Bowman Strategy Clock, the perceived value of the product (or service) must clearly be demonstrated – whether it is correct packaging or added nutritional benefits etc. It must be clear enough that consumers are willing to pay premium for that type of product.

In the beverages industry, sparkling water commands a higher price and is innately distinct from other brands or forms of packaged water. This allows sparkling water to be highly priced and served in niche places such as 5-star hotels.

Point 5: Focused Differentiation

Focused differentiation is a notch above differentiation. Products in this segment come at a high cost, and therefore their value is also seen to be high.

Products that are in the focused differentiation stage are not extremely popular in developing countries such as Ghana, due to minimal income and expenditure levels.

Point 6: Risky High Margins

Risky High Margins – as its name suggests – cannot stay in the market for long. This is because although producers charge exorbitant prices for them, the additional perceived value is minimal and hence cannot be sustained.

This kind of market positioning never inspires Customer Loyalty.

Point 7: Monopoly Pricing

Monopoly pricing in point 7 depicts that only products which have a complete monopoly can charge exorbitant prices while providing very little value.

The Ghana Water or Electricity Company are examples of manufacturers with monopoly pricing. Institutions with monopoly pricing are usually regulated by the state or a Public Utilities Board.

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That said, it is hard to talk about Customer Satisfaction (and thus Customer Loyalty) in any monopoly market.

Point 8: Loss of Revenue

Loss of revenue is a point where products with little perceived value charge disproportionately higher prices, which ultimately leads to loss of revenue.

It must be noted that: points 6, 7 and 8 are the most undesirable points on the Bowman Strategy Clock – hence, companies would do well to match the prices they charge with the value that customers aim to get.

The Image below has some examples – mainly from companies in the UK, but mostly known to us:

 

In Conclusion

The Bowman Strategy Clock is a useful tool that all types of organisations can use to determine their place in the competitive market against their competitors. A trade-off between price and perceived value is imperative, hence having this clock to guide you in that decision-making process is a great way of having a good product fit in the market.

And you need to understand the perceived value of your product or service in the eyes of your consumers before you can set your plans for Customer Loyalty: by the way, Pragmatic Customer Insights is one of our verticals.

 

 

Thank you, and Good Luck.

Kwaku and Spiros

About the authors:

Spiros Tsaltasa former University Professor & PR Practitioner, and Kwaku Abedi – an uprising Digital PRofessional, are PRrincipals at HireLoyalty (www.HireLoyalty.com), the only Loyalty PR company in West Africa that Consults (How-To), Measures (Test-To) and Trains (Learn-To) in anything relating to Customer Loyalty and Loyalty-focused PR.

As a NED (Non-Executive Director), Spiros is also associated with HIREghana www.HIREgh.com).

They welcome all your comments/ remarks/ feedback /suggestions at Press [at] HireLoyalty.com. HireLoyalty can be reached at +233 20 741 3060 or +233 26 835 2026

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