Wednesday, April 30, 2008

Marketing Q&A : SEC Classification

Marketing Practice Reader Ajith Pillai asks a very important question
"SEC Classification is not exhaustive…how will you include a housewife..who is not working…but has some required education…what about households where there are two earning members…whose classification will you take…one who is a graduate sales man and the wife is a graduate shop owner… how can the classification of a house hold be done in this case…? I think its High time to Shift to LSM classification in india
Ajith is very true and SEC classification cannot be fully depended as a tool to understand Indian consumers. The main drawback of SEC is that it considers only two parameters , education and earnings. The classification also takes into account the education and earnings of the chief wage earner. So in the case of the example sited by Ajith, the classification fails.

Having said that , there is no alternative to SEC classification right now. There are experts who say that SEC 's failure is noted only on the top 10% of the classification. ie SEC A1 & A2 while the SEC still relevant in other sections where education and earnings of the CWE is a good indicator.

Ajith also mentions the relevance of using LSM. LSM stands for Living Standard Measurement. This is a proprietary tool used by HUL for better understanding of Indian consumers. LSM divides the Indian consumer class into 18 clusters based on 25 parameters. But since it is proprietary , I am not sure whether everyone will be able to use this classification.

It is time for Indian marketers to add more tools for understanding Indian market. The sheer size of the Indian market calls for a huge investment in research . Indian marketers still have some inhibitions in investing in such kind of researches.

Related Post
SEC Classification

7 comments:

  1. Dear Harish,
    I must congratulate as you are doing a great job. When ever I get time I go thru your Blog.

    Your Blog reminds me of one my Prof who was our visiting faculty in IISWBM Calcutta,
    he was Late Prof Subroto Sengupta, you may have read his book .

    I can suggest you one thing why don't you write a book absolutely on Indian Brands which will come very handy for all the BBA and MBA students.

    Are you planning for writing books.
    Please revert back.
    I will buy copy.

    With Warm Regards.

    ReplyDelete
  2. Hi,
    An interesting idea. LSM is UL owned and used globally but the model has its own flaws.
    It suits well if you were using LSM for FMCG, but then its has its own cons. not going into detail as i get to use it very often, i wuld say ts is more dependent on money power. As India grows and new money is no more new attitudes and not just buying power will decide where people fit in.
    Second thing on LSM - one might use 25 variables and make 18 groups, but on field execution is not all that easy. those 25 variables and 18 groups have same issue as SEC. LSM 10+ is as good as SEC A1 and SEC A2 and it still leaves ambiguity (sorry i wont push the details)
    BUt for more effetive marketing reserachand taretting one cud use SEC + another criteria which should work. for media SEC behaviours can be determined using TGI models

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  3. Hii...
    I must say that you are doing a commendable job. I am a BBA student, I had a project on advertisements, your blogs have helped me a lot. I didn't find a single website as thorough as yours. I have just started blogging but I am reading your blogs for the past fews weeks. You might be a busy person( seeing your blogs) but I would request you to visit my blog.

    ReplyDelete
  4. I disagree with the analysis done on the SEC style of Classification.

    The dilemma of who is the CWE is taken care of in the definition of CWE itself: the person who makes the highest contribution to the expenditure of the household.

    So yes, it may not be the best tool for classification, but it is definitely not "not exhaustive".

    As mentioned in other comments too, LSM too faces a lot of limitations. And to use it for anything other than FMCG becomes very tricky.

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  5. Respected Sir
    Would you please throw some more light on these classification models in one of your post? It would be of great help to us.

    Thank you in advance!

    ReplyDelete
  6. Anonymous1:05 PM

    SEC classification takes into account the Education and Occupation; not the Earnings of the CWE as stated above; thought I should clarify this.

    I do accept that the SEC classification as well as LSM has a lot of drawbacks.

    Hence, in the absence of a better option; what we currently do (in consumer research) is that we use the SEC, in combination with 'Income' and 'Durable Ownership'... this gives a much better read.

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  7. Hi Harish,
    Just to clarify SEC classification is Education & Job profile and not earnings. The reason for that is, if you take earnings as a parameter, you also need the range, whereas Job profile segregates as skilled & non skilled hence even if the earning levels vary, they fall in same category...

    ReplyDelete

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