Socio Economic Classification Grid of India

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What is socio economic classification?

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

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Refers to a method by which the general population is divided into segments basis their social and economic status

Origins of socio economic classification

A set of bands were identified (which in itself varied between companies and clients) and basis incomes stated by a respondent, they were classified into segments such as:

Below poverty line Poor Lower middle class Middle class Upper middle class Affluent / rich

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Till mid 80s, marketing research agencies and clients used the income based classification method

Origins of socio economic classification (contd)

Credibility issues

Difficulty in tracking over a period of time

Due to inflation and other issues, the value of a particular salary band keeps on changing. For e.g. the Rs. 10000 of today may be equal to Rs. 8000 of tomorrow

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In India less than 2% of the earning population pay taxes while this can be largely attributed to financial constraints, it is also true that many people hide or mask their actual incomes to escape tax. Hence, in a typical market research scenario, very few people actually reveal their true income

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However, this method of classification had several shortcomings:

Origins of socio economic classification (contd)

Difficulty in comparing geographies

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Incomes used to vary considerably by the geography that one belonged to given a host of conditions thereby making it impossible to compare and assess different geographical locations

Ignorance about actual income

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In case of blue collared workers and below, there is a great chance of people not even knowing about their total income as their income is susceptible to vagaries i.e. daily income as against a regular salary, several days in a month where they cannot find work, seasonal incomes, especially in businesses such as agriculture

Origins of socio economic classification (contd)

Hence, there was a need for a:

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
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With these objectives, industry stalwarts came together and designed the modern socio economic

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Modern socio economic classification

Basis various combinations of these variables, consumers can be classified into different socio economic classes A1, A2, B1, B2, C, D, E1 and E2 (in that order from affluent to deprived)

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The Chief Wage Earner is defined as the person who contributes the maximum to the total income of the family. This was relevant for the Indian condition, as the main contributor to income usually had the maximum say with regards to purchase decisions in the family

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The modern socio economic classification method uses two major variables to classify the population at large i.e. EDUCATION and OCCUPATION of the chief wage earner

Modern socio economic classification (contd)

It now stands the test of time

as respondents evolve in financial and educational status, their SEC changes accordingly

It is more credible

It is true for pan India

as it bypasses the vagaries that are otherwise associated with income based classification, which is usually geography dependent

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It estimates purchase potential with reasonable

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as most people will not have any issues in sharing their educational and occupational background

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It addresses many of the issues that otherwise existed with income based classification:

Modern socio economic classification (contd)

The urban version and The rural version

Pucca (means house with concrete and steel) Kaccha (means thatched houses or huts) Semi Pucca (means a mix of concrete and thatched houses)

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The urban version uses variables as indicated in the previous section i.e. INCOME and OCCUPATION the rural version on the other hand uses EDUCATION and TYPE OF HOUSE, as occupations can be almost similar across most Indian villages

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The modern socio economic classification system has two versions:

Urban SEC grid

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I have below a list of educations and occupations can you please indicate the education levels and occupation of the person who contributes the maximum to family income? (CWE Chief Wage Earner or the person contributing the maximum to family income may not always be the highest earning member in the family CWE Education Code Illiterate 1 Literate, but no formal schooling 2 School upto 4th standard 3 School 5th to 9th standard 4 SSC / HSC (10th 12th) 5 Some college (incl. Dip) but not6 graduate Graduate general BA, BSc, Bcom 7 Graduate profess BE, MBBS, Btech 8 CWE Occupation Code Unskilled worker 1 Skilled worker 2 Petty trader 3 Shop owner 4 None 5 Businessmen / 19 6 industrialist (no. of employees) 10 + 7 Self-employed8 professional * Post Grad general MA, MSc, Mcom 9 Clerk/Salesman 9 Post Grad general ME, MD, MTech 10 Supervisory level 10

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Urban SEC grid

(contd)

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/Some Graduate /Graduate / college Post Post but notGraduate Graduate graduat general profession e al

Occupation of theIlliter School School SSC Chief Wage Earner ate up to 5thHSC 4th /to 9th literat e but no formal schooli ng

Self employed D Clerical D Supervisory D Officers / ExecutivesC Junior Officers / ExecutivesB1

D D D C B1

D D C C B1

B2 C C B2 B1

B1 B2 B2 B1 A2

A2 B1 B1 A2 A1

A1 B1 A2 A2 A1

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Unskilled Skilled workers Petty traders Shop owners Businessmen /Non Industrialists 1 9 with 10 +

E2 E2 E2 D D C B1

E2 E1 D D C B2 B1

E1 D D C B2 B2 A2

D C C B2 B1 B1 A2

D C C B1 A2 A2 A1

D B2 B2 A2 A2 A1 A1

D B2 B2 A2 A1 A1 A1

Urban SEC Grid

(contd)

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The SEC grid too has its share of problems, as it clubs rich Industrialists like Anil Ambani in the same bracket as a senior corporate professional Hence, in such cases, wherein we need to focus on super affluent, we use additional filters (outside the SEC grid) in research assignments consumer ratings on these filters help us in estimating their extent of affluence / evolution for e.g.

Number of international trips in a year (non business) Number of durables owned Area of residence Club membership

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Urban SEC Grid

(contd)

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Interestingly however, agencies and clients over the years have tried to get an income angle into the standard socio economic classification matrix while there have been many conservative estimates, the following appears to be closest to the reality of what I have observed and understood over the years
SEC A1+ (affluent, senior most staff, senior businessmen, CEOs )

30000 + MHI (MHI means monthly household income from all sources)

SEC A1 (educated, senior managers )

20000+ MHI

SEC B1

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Rural SEC Grid

EDUCATION OF CHIEF WAGE EARNER ILLITERATE SELF LEARNING (NO SCHOOL) UPTO CLASS 4 CLASS 4 CLASS 9 SSC / HSC COLLEGE GRADUATION / POST GRADUATION GENERAL GRADUATION / POST GRADUATION PROFESSIONAL

R4 R3 R3 R3 R2 R1 R1 R1

R4 R4 R3 R3 R3 R2 R2 R2

R4 R4 R4 R4 R3 R3 R3 R3

____Thanks____

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PUCCA HOUSE SEMI PUCCA HOUSE

KACCHA HOUSE