Socio Economic Classes (SEC categories)

Posted on October 15, 2006 | 4 Comments

Almost every one associated with retailing, marketing, media and consumer
economics is required to deal with SEC categories. These categories are
important as they help in effectively segmenting markets and targeting
communication to core consumers.

Terms like, SEC A, SEC B, and the like are freely tossed around by all,
however, only a few know their real meaning. Very few, for example, may be
aware that many traders, who may be affluent with more spending power than
most executives will fail to make the ‘high’ grade, if they are not graduates.

Although, MRUC & Hansa Research have come up with a new concept of
Household Potential Index (HPI) to reclassify consumers, SEC continues to
remain universally referenced classification of consuming classes. While, a
detailed postings on HPI will soon follow, we explain below the basis of
classification of different urban SEC categories and their relative importance in
relation to marketing/ retailing potential:

The socioeconomic classification (SEC) groups urban Indian households on the

basis of education and occupation of the chief wage earner (CWE: the person
who contributes the most to the household expenses) of the household into five
segments (SEC A, SEC B, SEC C, SEC D and SEC E households in that order).
This classification is more stable than one based on income alone and being
reflective of lifestyle is more relevant to the examination of consumption
behaviour. Here, ‘high’ socioeconomic classes refers to SEC A&B, ‘mid’
socioeconomic class refers to SEC C and ‘low’ socioeconomic classes refers to
SEC D&E. Data sourced from Indian Readership Survey (*IRS 1998-1999)
gives the education and occupation profile of the chief wage earner of
households.

The CWEs of nearly half the SEC A households work in executive positions.
The other half comprises mainly of industrialist/businessmen or shop owners.
Almost all of them are either graduates or post graduates. CWEs of SEC B
households are primarily employed at clerical or supervisory levels (46%). 29%
are shopkeepers while 10% are industrialist/businessmen. Less than half are
graduates or post graduates (45%). 38% are educated till the 10th or 12th grade,
while 13% have had some college education. (* IRS 1998-1999 refers to IRS
round, July 98-May 99)
The mid socioeconomic class (SEC C) comprises households whose CWEs are
employed at clerical or supervisory levels (37%), skilled workers (33%), petty
traders (12%) or shop owners (18%). Three quarters of them are educated till
the 10th or 12th grade while the rest have attended school till a maximum of the
9th grade. Less than half the CWEs of households belonging to the low
socioeconomic classes (SEC D&E) are unskilled workers. About 28% are
skilled
workers while 18% are petty traders. 45% have attended school till a maximum
of the 9th grade and 31% are illiterate.

Table below shows the socioeconomic classification of urban Indian

households. The high socioeconomic classes, i.e. SEC A&B, constitute over a
quarter of the urban Indian population. The mid economic class, SEC C
constitutes 21% of the population while the lower two SECs account for over
half the population.

According to data sourced from the Indian Readership Survey (IRS 1998-1999),
urban households have increased their average monthly household income
(MHI) by 2.1 to 2.3 times between 1990 and 1999. The increase in average
MHI has been higher in the low socioeconomic classes (SEC D&E which
account for over 50% of the urban households), i.e. about 14 percentage points
more than the percentage increase in average MHI of the higher socioeconomic
classes (SEC A&B) as shown in Table. This suggests that improvement in the
standard of living has not benefited only the ‘haves’.

TABLE: Socio-Economic Classes

NRS (1990-91)
IRS (1998-99) & IRS(1998-990)
% increase in
% avg. MHI

Projected Base: All 49174

Urban Households (in
000s):
SEC A 10 113
SEC B 18 113

SEC C 21 117
 SEC D & E 51 127

It may be observed from the above that:

 Households belonging to the mid and low socioeconomic classes (SEC C,

D &E) are becoming relevant target groups as they constitute more than
70% of urban households.
 In the last decade they have grown in economic power.
 This suggests that households in the mid (SEC C) and low (SEC D&E)
socioeconomic classes are segments that can no longer be ignored
marketers/ retailers should consider these segments more closely as
potential source of growth.