Classification system revamp for targeting clients better4 min read . Updated: 30 Apr 2011, 01:07 AM IST
Classification system revamp for targeting clients better
Classification system revamp for targeting clients better
Mumbai: Marketing departments are set to change how they target customers, with a revamp of the current categorization system aimed at reflecting changes that have taken place in Indian society, with economic growth having increased the amount of disposable income in the hands of people and altered consumption patterns.
The Media Research Users Council (MRUC) in association with the Market Research Society of India (MRSI) will announce on 3 May a change from the prevalent socio-economic class (SEC) system to the new consumer classification system (NCCS), according to two media executives familiar with the plan.
The SEC model now used by various research companies and brands classifies the affluence of a household using occupational and educational parameters. Marketeers use this information to target households that fit their brand’s profile. For instance, a premium car brand may only target the top SEC A category.
MRUC has been working on the new classification system for around five years, said one of the individuals cited above.
“The body realized that the Indian economy had moved forward and the existing classification system did not adequately capture consumption patterns," the person said.
MRUC will only be able to comment after the industry briefing scheduled for 3 May, said director general Shaswati Saradar.
Before SEC, the MHI (monthly household income) system, which classified households based on income, was used.
“But respondents frequently over-stated or under-stated their income, which is why we adopted the British system of SEC," said Anand Halve, co-founder of brand and communications consultancy Chlorophyll. “Fundamentally, SEC is used by brands to plan advertising expenditure. They divide their audience into socio-economic classes—SEC A, B, etc.—and target those classes best suited for their brand. If it’s a mass brand, they target the lower SECs—C, D, etc.—in advertising campaigns."
The SEC classification was devised in 1988 by MRUC and MRSI. It classifies rural and urban households differently. The urban classification is a function of the chief wage earner’s educational qualifications and occupation, while the rural one is based on occupation and type of house (pukka, semi-pukka, etc.). Urban households are graded from SEC A1, A2, B1, B2, C, D, E1 to E2. The rural sector is divided into R1, R2, R3 and R4.
The NCCS model will look at education and ownership of durables and related items instead of occupation, said the executives cited above. There will be 12 new classifications: A1, A2, A3, B1, B2, C1, C2, D1, D2, E1, E2 and E3, in descending order of affluence. The list of possessions covered will include air conditioners, cars and/or other vehicles, computers, liquefied petroleum gas cylinders, stoves, colour television sets, ceiling fans, agricultural land, refrigerators, electricity connections, etc. There will be no separate classification for rural areas.
Opinion is mixed among some of those who will use it the most.
The merits of the NCCS model will need to be understood before it can be deployed, said Shubha George, chief operating officer (MEC) at GroupM India Pvt. Ltd. “(We) would need to understand MRUC’s rationale for moving on to the new system before accepting it or rejecting it."
Others such as Srikanth Raman, general manager, StarWiz (strategy unit) at Starcom MediaVest Group, said it is good news for the 22,000 crore-plus advertising market. Change is long overdue and the reclassification could lead to more robust findings, he said.
SEC’s occupation parameter is more reliable, said L.K. Gupta, chief marketing officer of LG Electronics India Pvt. Ltd.
“If you ask me, there are a lot of households in south India that lead a spartan life in spite of having a high income," he said. “A friend of mine for instance earns well, but has chosen not to buy a television set. That’s his decision. Ownership of certain durables, etc., may not give a good indication of the type of household it is. The current system gives a far better understanding of the situation on the ground."
The SEC classification was representative of the earlier economic reality, which is now changing, said Sanjay Tripathy, executive vice-president and head (marketing and direct channels), HDFC Standard Life Insurance Co. Ltd, and a part of the MRUC technical committee.
“With the booming economy and abundance of opportunities, occupation is not the only criteria to give a clear representation of the social strata," he said. “Unskilled labourers like carpenters, construction contractors, etc., have seen a wage explosion, whereby their aspirations and awareness are similar to much more educated and skilled workers. Their kids can now go to the same schools and influence parents to buy similar products as higher SECs."
Tripathy added that the current SEC discriminates between the uppermost and lowest levels, and isn’t representative of the situation on the ground.
“The urban-rural divide is narrowing with increasing media penetration. Rural areas are driving a large proportion of growth," he said. “In the future, they will definitely be a driver for financial services as well. Thus, there should be one classification for both urban and rural (areas) optimized for wealth/affluence of consumers. It would also indicate the propensity to spend beyond the current income."
The purpose of SEC is to primarily divide consumers into “most desirable" and “least desirable" categories, said Rahul Kansal, chief marketing officer of Bennett, Coleman and Co. Ltd, which owns The Times of India and The Economic Times newspapers. “The way you arrive at these groups may change, but the fundamental objective doesn’t," he said.
HT Media Ltd, which publishes Mint and The Hindustan Times, competes with Bennett, Coleman in some markets.