M A RKET I N G STRATEGY REPORT

Socio Economic Segmentation in India

Submitted to Prof. Rahul Gupta Choudhury

December 8, 2010

Submitted by,
Amit Kumar, 10PG491
Nehruji S, 10PG524

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Introduction
The Social Economic Classification that often appears in its abbreviated form as SEC is used
in the Indian consumer market to denote various classes of people.The classification was car-
ried out by the Market Research Society of India (MRSI) in the year 1988. The classification
takes into account two factors of the consumer namely the education and the occupation of
the person. The classification is done on the premise that there is an understanding or a rela-
tion between education and the income of the Chief Wage Earner (CWE) which translates to
purchasing power. The classification is done separately for the rural and the urban market.

The urban market

The urban market primarily refers to the market in the urban areas of India such as cities.
Based on the occupation and the education the market is classified from E2 to A1, with the
former being the lowest and the latter the segment with the highest purchasing potential.
Shown below is the socio economic classification grid for the urban market.

Source: Market Research Society of India

It can be observed that a trader who has only finished his high schooling (B1) but has a higher
spending power than a junior executive with a post graduate education (A2) will be placed at a
lower level when compared to the executive.

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Rural market
The rural market has a separate classification into four groups from R1 to R4 with the former
being the highest and the latter being the lowest class in terms of purchasing potential of the
chief wage earner in the family. It differs from the urban market in that the factors taken for
classification are the education of the person and the type of house of the chief wage earner
and not the occupation. It is done so on the premise that only a person with a decent employ-
ment will be able to afford to live in a pucca house.

Source: Market Research Society of India

New system- HPI

Since the factors used for classification are limited to two parameters namely occupation and
the education. But there always doesn’t exist a natural relationship between the two factors as
a small time entrepreneur without a high school degree might be doing a lot better than an
executive holding a post graduate degree on the monetary front. Hence the Market research
users council (MRUC) has devised another classification called New Consumer Classification
System (NCCS) which calculates a Household Premiumness Index (HPI) which takes parame-
ters like ownership and consumption of media services and products with other demographics.
The HPI concept allocates high scores for less penetrated product categories and services and
lower scores to higher penetrated categories or mass consumed categories. Thereby, HPI
eliminates judgmental factors making it applicable across all segments of households, from the
‘super rich’ to the ‘desperates’ in a given market. HPI is a holistic measure of potential, and not
just based on few basic factors.

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