Segmenting India — Thoughts on not-anymore-new SEC.

A follow up of a tweet I put out yesterday:

Lazy Sunday Tweet

Throughout marketing lectures in my MBA classes and in agency presentations at my jobs, I have heard “SEC” (Socio Economic Classification) based segments mentioned repeatedly. I vaguely remember something like this existing in the US, so this was the ‘Indian version’ of it, I assumed.

Many items in it seemed dated / irrelevant to me but still all ‘marketing / research gurus’ seemed OK with it. It was more like — You don’t ask more, it is what it is and we need to pay lip service to it by referring to it whenever we make our own segments.

So, when the new SEC (PDF) got released in 2011, I was thinking this was going to be used in a big way by marketing professionals. It was at least going to be better than before. But it seems like I was the only one excited about it — People in marketing world continued to use old SEC system (at least the ones I have come across) as if the new release did not happen at all.

A recent ‘best of’ article (we need to have a word for blog posts, like what ‘best seller’ for books is) in Founding Fuel by Haresh Chawla, linked below, which talked about India-One, India-Two and India-Three reminded me of the SEC thing that I decided to re-read what it had.

How India's digital economy can rediscover its mojo

Here are my summary notes from the new SEC classification:

• Old SEC system had a different way of classifying Urban and Rural consumers. Urban consumers were classified based on the “occupation & education of the chief earner in the family”, into these 8 types: A1, A2, B1, B2, C, D, E1 and E2. Rural consumers were classified based on the “education of the chief earner and the material used in construction of their house”, into these 4 types: R1, R2, R3 and R4.

Current here means OLD. Numbers of % of Indians in that group, based on 2008 data.

Caption comments same as before.

• As anyone who has done a bit of thinking about segmenting consumers would realize, it is very difficult to bring out all occupations of people (in one of my products, we missed out on small shop owners in a product, who strangely had a different behavior than other small businessmen we had) and that multiple people work in several households
• So the new SEC did a few things. It did away with the Urban/Rural divide and also things like ‘Occupation’ and ‘Material used for construction’. Instead it only has two things to consider — Number of household items owned (from a predefined list of 11 items) and the Chief earner’s education. IMO, the education part is still a bit misleading because there are multiple people at home and no point seeing education of only one person! But then, that is my opinion. New SEC thus classifies ALL Indian consumers (irrespective of rural/urban) into 12 categories: A1..A3, B1, B2, C1, C2, D1, D2, E1..E3.

NEW = From 2011.

• The household items considered are as follows: Electricity Connection, Ceiling Fan, LPG Stove, Two Wheeler, Color TV, Refrigerator, Washing Machine, Computer/Laptop, Car/Jeep/Van, Air Conditioner and Agricultural Land.

And it finally maps to this:

If you are reading this, you are likely in A1, nothing less.

• The PDF itself says that we need to regularly review this — like once in 2 years — since consumer durables penetration will happen faster than education & occupation. But unfortunately, I could not find any update to this in IMRB or MRSI website.
• Obvious things missing from the list of household items, circa 2016 — Smartphone, Data Usage and I would include a DTH connection as well. Even if not DTH, Smartphone, Wi Fi / Data connection are very critical to add
• Nonetheless, with the existing classification, I was curious how India-1, India-2 and India-3 (of Haresh Chawla) would compare. If you have not read it yet, go back & read it. It is worth a full read before you read this further.

Here is a straw man:

• India-1 is just A1, A2, A3 & B1
• India-2 is B2 through D1
• India-3 is the rest — D2 to E3

Percentage of population wise, this is the comparison:

• Haresh had 15% of Indians in the India-1 segment while this comes to only ~10%.
• Haresh had 30% of Indians in the India-2 segment while this comes to almost the same — a bit more actually at ~32%
• Haresh had the rest 55% of Indians in the India-3 segment while this comes to ~58%

From what I understand, Haresh’s analysis has primarily been from “How India Earns, Spends and Saves” book. It is a huge one at 224 pages — I did not read it completely. From what I can see, it does not offer any ‘classification’ per se. It is only about % of population and the respective quartiles/percentiles, with loads and loads of data inside it. Not any common segments like A1, A2 that can be used for a product’s segmentation by the industry (& doing it wrong with just lip service haha).

So, I think there is definitely a need for a SEC type classification but done well and suiting our times.

Your thoughts on this post and in particular on the classification of India-1, India-2 and India-3 would be highly appreciated :)

PS — Another thing I have been curious is — Why does India not have cohorts like the ‘Baby Boomers, Millennials etc.’ of the US market? I have been meaning to create one. Let us see :)