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.

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SEC Classification

Marketing Funda : Socio Economic Classification (SEC)

Funda#3 : What is Socio Economic Classification ( SEC) ?

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.The SEC classification,created in 1988 ,was ratified by Market Research Society of India (MRSI) ,is used by most media researchers and brand managers to understand the Indian consuming class.

According to SEC, the Urban Indian households are classified on the basis of the two parameters Education and Occupation into

SECA1,A2,B1,B2,C,D,E1,E2

In urban households, SEC A1 include those with graduation/post graduate holding senior positions like CEO’s and Middle level managers and also those entrepreneurs having some college education and employs more than 10 staffs. The chart is self-explanatory.
While the Rural Indian Households are classified into SEC R1,R2,R3,R4.
In the rural classification, the parameters are Education of the Chief wage earner and the type of the house.

The SEC classification helps the marketers to identify segments tha t has high consuming potential.The high potential types : A1,A2, the medium ones and the bottom of pyramid ones. The SEC classification is used by Media planners to decide the media which gives the client maximum effectiveness. The research team at the me dia houses uses the NRS and IRS surveys' raw data to identify the reach of the media in these SEC segments and uses this input for pitching their campaign to large advertisers.

Although this classification is popular for over 18 years, the classification has its negatives also since it takes only two parameters: education and occupation .This is based on the assumption that higher education leads to higher income thus higher consuming potential. But we know that this may not be true always. A trader or a retailer with no qualification can earn more income than a Post graduate executive, but SEC will categorize the traders/retailers not as SEC A1or A2.

Hence Market research users council ( MRUC) has devised another classification called New Consumer Classification System( NCCS) which calculates a Household Premiumness Index ( HPI) which takes parameters like ownership and consumption of media services and products with other demographics.

All these classifications create jargon that we teachers lecture and brand managers are still searching for the White Light that provides the key to understand the Indian consumer.

Source: cks.in,readbetweenps.blogspot.com,agencyfaqs