NEW SOCIO-ECONOMIC CLASSIFICATION OF INDIAN CONSUMERS
Introduction
A common classification that is used by marketers to describe the Indian population is the Socio Economic Classification (SEC). SEC is the classification of Indian consumers on the basis of two parameters: Occupation and Education of the chief wage earner (Head) of the households. While the Rural Indian Households are classified into SEC R1,R2,R3,R4. An effective socio economic classification system helps us in achieving the following: Targeting the right segments for a given product category, especially in the launch phase Conducting marketing research activities with the most appropriate consumers for a given category or brand Designing differential marketing strategies for different segments
Shortcomings of the earlier classification Credibility Issues Difficulty in tracking over a period of time Inability to indicate Purchase potential Difficulty in comparing Geographies Ignore the actual Income
Origin of the New SEC
Although this classification is popular for over 18 years, in a bid to keep pace with the fast-evolving economic outlook, consumer attitudes and preferences in the country, the Media Research Users Council (MRUC) and the Market Research Society of India (MRSI) have unveiled a new Socio-Economic Classification (SEC) system, under which all Indian households will be classified. With the growth of the economy and of small towns and rural, it has become imperative to look at a single system for both urban and rural India.
Formulation
The formulation of the new SEC system has largely been done using the Indian Readership Survey (IRS) database. The developmental work has also used IMRBs Household Panel data.
IRS is the largest survey of Indian households with a sample size of over 260,000 of this, roughly 175,000 are from urban India while around 85,000 hail from rural India. It was the sampling rigor and spread that led to the IRS being identified as the most appropriate database for the development of the new SEC Classification system.
Some key requirements for the development of a new SEC System: The new SEC system needed to be more discriminating, with sharper identification of the upper-most segment of the society; The new system needed to continue to be easy to administer; and There needed to be a common classification for urban and rural India
The New SEC
The new system classifies Indian households by using two parameters Educational Qualifications of the chief wage owner in the household; and the Number of Assets Owned (out of a pre-specified list of 11 assets). Based on these two parameters, each household will be classified in one of 12 SEC groups A1, A2, A3, B1, B2, C1, C2, D1, D2, E1, E2 and E3. These 12 groups are applicable to both urban and rural India. The top-most new SEC class A1 comprises of 0.5% of all Indian households. Nearly 2% of urban households and less than 0.1% of rural households belong to the new SEC A1. More than half of all SEC A1 households reside in the top six Indian citiesDelhi, Mumbai, Kolkata, Chennai, Bengaluru and Hyderabad.
At the other end of the spectrum, the bottom-most new SEC class E3 comprises of 10% of all Indian households. Only 2% of urban households and 13% of rural households belong to new SEC E3. Nearly 93% of all SEC E3 households are in rural India.
Compare
the new SEC system classifies households on parameters different from the old system, it will not be proper to compare the old SEC classes with their equivalent ones from the new SECeven if the two carry the same alphanumeric tags as in class A1 of the new SEC system should not be confused with class A1 of the old system. New SEC A1 is more homogenous, owns more assets, and is more affluent than old SEC A1
Advantages
System that was based on credible information System that stood the test of time System that helped in reasonably determining purchase potential System that was relevant across the length and breadth of the country System that worked across various cross sections of the society More discrimination as compared with current systems A single system for urban and rural India Less subjectivity-as we no longer use occupation Its simple -easy to answer, not very time consuming, easy to classify
Drawbacks
We need to be better prepared to handle minor changes to the system, because consumer durables penetration will change faster than education or occupation The questioning can appear intrusive to people who are unaccustomed to market research. Its not a problem elsewhere It classifies great industrialists and senior executive class together.
Lessons Learned
Two kinds of variables are better than one. But the gains from using three sets of variables is small
Systems that call for multiple grids or adding up points are time consuming; errors in classifying can occur A system that requires cards to be shown is not a good idea-its hard to manage this at the doorstep Occupation is a weak discriminator Systems based on consumer durables offer good discrimination
Outcome
Consumer durables (number owned) combined with education of chief earner is a satisfactory system Easy to administer-takes only about 20 seconds more than the current urban system Discrimination as good as or better than urban SEC Discrimination much better than rural SEC The focus then was to optimize these system-adding or dropping consumer durables, if needed Many versions of this system have been explored before arriving at the current system
Conclusion
The new SEC system is better than the current urban system, and much better than the current rural system The new SEC system is able to reduce heterogeneity within social grade-and stretch the differences by grade
VEDIKA GULATI Mba(PharmaTech) 4th Yr B-Division, SPTM