Bottom of Pyramid

Presented by- Dr. Sudipta Kumar Jana

Assistant Professor
IIPM, Kansbahal
The Bottom of the Pyramid (BOP) is a socio-economic concept that allows us to
group that vast segment - in excess of about four billion - of the world’s
poorest citizens constituting an invisible and unserved market blocked by
challenging barriers that prevent them from realising their human potential for
their own benefit, those of their families, and that of society's at large.
• Technically, a member of the BOP is part of the largest but poorest groups of
the world's population, who live with less than $2.50 a day and are excluded
from the modernity of our globalised civilised societies, including consumption
and choice as well as access to organised financial services.

• Some estimates based on the broadest segment of the BOP put its demand as
consumers at about $5 trillion in Purchasing Power Parity terms, making it a
desirable objective for creative and leading visionary businesses throughout the
world.

• One of the undeniable successes in this process is the explosion of the

Microfinance industry witnessed in many parts of the world.
The first person to really focus on BOP was C.K. Prahalad (1941-2010), who in the
process has inspired influential leaders and countless ordinary citizens sharing
his vision, to joint efforts for the unleashing of their creative and productive
potential as part of an inclusive capitalist system, free of paternalism toward the
poor.
• The pattern underlying the 80/20 Principle was discovered in 1897,
exactly 100 years ago, by Italian economist Vilfredo Pareto (1848–
1923). His discovery has since been called many names, including the
Pareto Principle, the Pareto Law, the 80/20 Rule, the Principle of Least
Effort and the Principle of Imbalance; throughout this book we will
call it the 80/20 Principle.
• So what did Vilfredo Pareto discover? He happened to be looking at
patterns of wealth and income in nineteenth-century England. He found
that most income and wealth went to a minority of the people in his
samples. Perhaps there was nothing very surprising in this. But he also
discovered two other facts that he thought highly significant. One was
that there was a consistent mathematical relationship between the
proportion of people (as a percentage of the total relevant population)
and the amount of income or wealth that this group enjoyed.4 To simplify,
if 20 per cent of the population enjoyed 80 per cent of the wealth,
 What is 80/20 Analysis used for?

• One use is to concentrate on the key causes of the relationship, the 20

per cent of inputs that lead to 80 per cent (or whatever the precise
number is) of the outputs. If the top 20 per cent of beer drinkers account
for 70 per cent of beer consumed, this is the group that a brewery should
concentrate on reaching, in order to attract as high a share as possible of
the business from the 20 per cent, and possibly also to increase their
beer consumption still further. For all practical purposes, the brewery
may decide to ignore the 80 per cent of beer drinkers who only consume
30 per cent of the beer; this simplifies the task immensely.
• Similarly, a firm that finds that 80 per cent of its profits come from 20 per
cent of its customers should use this information to concentrate on keeping
that 20 per cent happy and increasing the business carried out with them.
This is much easier, as well as more rewarding, than paying equal attention to
the whole customer group. Or, if the firm finds that 80 per cent of its profits
come from 20 per cent of its products, it should put most of its efforts behind
selling more of those products.
• In US shopping malls it has been found that women (some 50 per cent
of the population) account for 70 per cent of the dollar value of all
purchases.4 One way to increase the 30 per cent of sales to men
might be to build stores specifically designed for them. Although this
second application of 80/20 Analysis is sometimes very useful, and
has been put to great effect in industry in improving the productivity
of underperforming factories, it is generally harder work and less
rewarding than the first use.
 The 80/20 Principle turns conventional wisdom upside down

• Application of the 80/20 Principle implies that we should do the following:

! celebrate exceptional productivity, rather than raise average efforts

! look for the short cut, rather than run the full course
! exercise control over our lives with the least possible effort.
! be selective, not exhaustive
! strive for excellence in few things, rather than good performance in many
! delegate or outsource as much as possible in our daily lives and be encouraged rather than penalized by tax systems to do this
(use gardeners, car mechanics, decorators and other specialists to the maximum, instead of doing the work ourselves)
! choose our careers and employers with extraordinary care, and if possible employ others rather than being employed ourselves
! only do the thing we are best at doing and enjoy most
! look beneath the normal texture of life to uncover ironies and oddities
! in every important sphere, work out where 20 per cent of effort can lead to 80 per cent of returns
! calm down, work less and target a limited number of very valuable goals where the 80/20 Principle will work for us, rather than
pursuing every available opportunity
! make the most of those few ‘lucky streaks’ in our life where we are at our creative peak and the stars line up to guarantee
success.
 Marketing Myopia
• Marketing Myopia is a concept which was introduced by Theodore Levitt in his
article titled “Marketing Myopia” in which he discusses how business
organizations get misled due to lack of customer orientation.
• In elaborating the concept of marketing myopia, Theodore Levitt
highlights four principles which apply on a wider scale.
Those are,
•
 The belief in growth and expansion in the market demand
 The belief that there is no substitute for a leading or a superior products
 Having excessive confidence on mass production and reducing unit cost
 Declining unit costs and orientation towards experimentation and cost
reduction
• Theodore Levitt in his article has considered number of industries such as
Railway, Petroleum, and Retailing etc. to emphasize the notion that in the
absence of a broader view of the business any organization or an industry
might become extinct.
• Marketing myopia is a concept which looks at business failures from a different
paradigm to the conventional ways. A detailed analysis on business and
industry failures highlight the fact that the above principles apply
more or less in each case.
• From a broader perspective Theodore Levitt suggests a paradigm shift in the
way organization view the business.
• In short, organisation must learn to think of itself not as producing goods or
services but as buying customers, as doing the things that will make people to
want to do business with it (Levitt, 1960, p. 149)
• The “new marketing myopia” occurs when marketers fail to see the broader
societal context of business decision making, sometimes with disastrous results
with their organization and society. It includes three related phenomena
1) a single-minded focus on the customer to the exclusion of other
stakeholders,
(2) an overly narrow definition of the customer and his or her needs, and
(3) A failure to recognize the changed societal context of business that
necessities addressing multiple stakeholders. (N. Craig Smith, Minette E.
Drumwright, and Mary C. Gentile).