MARKETERS in India have traditionally focused their attention and marketing effort on the higher socioeconomic classes (otherwise called SEC A&B). Both they and their advertising agencies have found these segments easier to understand and identify with. It has been believed that they are more easily targeted through the traditional mass media. The language and tone of voice used to communicate with this segment has a more familiar and comfortable ring to it.

This article examines the changes in the demographic profile, media habits and penetration of certain products, and suggests that it is now perhaps time to examine the relevance of mid and low socioeconomic classes ( SEC C, D&E) who, over the last decade, have slowly but surely grown in economic power and today contribute significant volumes to a number of product categories.

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. In this article ‘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 1 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.

We examined the changes in average monthly household income (MHI) across different socioeconomic classes using the socioeconomic classification.

According to data sourced from the National Readership Survey IV (NRS IV 1990-1991) and 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 2. This suggests that improvement in the standard of living has not benefited only the ‘haves’.

The per capita private final consumption expenditure (per capita PFCE at 1993-94 prices: surrogate for consumption expenditure) went up by 18% between the years 1993-94 and 1997-98 according to the 1999 issue of the National Accounts Statistics. Therefore, not only income but consumption expenditure as well has shown an increase. However, per capita PFCE data is available only at an aggregate level for both urban and rural India together. Since we expect consumption expenditure to be increasing at a faster rate for urban vis-a-vis rural consumers, this aggregate figure indicates that urban consumption expenditure has increased by at least 18%.

The last 10 years have therefore brought about an increase in the income of the urban Indian consumer; a change witnessed across socioeconomic classes, but much more so in the lower socioeconomic classes.

The most significant change, in media consumption, in the last decade has been an increase in the importance of television in the lives of the Indian consumer. Currently 66% of the adult (15+) urban population watches television all seven days a week vis-a-vis just 40% 10 years ago. On a weekday, the average viewer watches television for around two and a quarter hours. Television could slowly replace social interaction in all its traditional roles of opinion maker, informer, entertainer and influencer.

There has been some change in television’s viewership (percentage of people watching television in an average week) base in the last 10 years. However, the real change is the increase in the frequency with which viewers watch television. Television seems to have moved on from being entertainment to be indulged in on holidays to being part of the consumer’s daily routine.

There has been a 26 percentage point increase in the people watching television every day as illustrated in Table 3 below. This increase is much more pronounced in the mid and low socioeconomic classes vis-a-vis the high socioeconomic classes. This is especially significant because, as we explore later in the article, it is the mid and low socioeconomic classes who are driving penetration in some product categories. However, even now only 51% of individuals belonging to the SEC D&E households and 77% individuals belonging to SEC C households watch television seven days a week in comparison to 90% individuals belonging to SEC A households.

Cinema appears to be losing its viewership base possibly to television. The percentage of the population who do not go to a cinema theatre today has increased to 50% from 40% a decade ago. This change is more evident in the low and mid socioeconomic classes. Ten years ago, 31% saw cinema at least once a month, while only 20% watch it with the same frequency today.

We have examined the penetration (percentage of households owning that durable) of some durables, i.e. television, pressure cooker, electric iron, LPG stove, mixer/grinder, refrigerator and washing machine.

Television tops this list of durables with an increase in penetration of about 21 percentage points between 1990-91 and 1998-99. This translates into a huge increase in base of nearly 15 million households. Slightly less than half these households belong to the low socioeconomic classes alone. Another quarter of the households belong to the mid socioeconomic class. Similarly, pressure cookers have registered an increase of 17 percentage points, mainly due to a large increase in penetration in households belonging to the low and mid socioeconomic classes. In 1990, penetration for both these categories was already more than 75% in the high socioeconomic classes. In other words, growth could have stagnated in these two categories if the penetration in the low and mid socioeconomic classes had not taken place.

Consider this: currently 37% of television owning households are those belonging to the low socioeconomic classes. In terms of future potential as well, they are the largest untapped segment. Penetration of television in the high and mid socioeconomic classes is already above 80%, while in the low socioeconomic classes it is still only 51%. Herein lies the opportunity: one half of these consumers have been brought into the market; the other half remains untapped. Thus, if we were to consider which segment to look to for future potential for televisions, we should be looking hard at the low socioeconomic classes.

To further understand the market potential of households belonging to the low and mid socioeconomic classes, we examined the household penetration of some durables in these classes. Among households belonging to low socioeconomic classes, 68% own an electric fan, 40% own a pressure cooker, 34% own an audio system and 27% own an electric iron. Ownership levels in households belonging to the mid socioeconomic class are higher for these durables. 91% own an electric fan, 75% own a pressure cooker, 60% own an electric iron and more than a quarter own refrigerators.

Table 4 shows the absolute percentage increase in household penetration of some household durables between 1990 and 1999. Consider the increase in penetration of refrigerators, washing machines and mixers/grinders. These categories have shown the highest percentage point increase in penetration in SEC A households. In the low socioeconomic classes (SEC D&E), electric irons, LPG stoves, mixer/grinder (all household convenience appliances) have registered a healthy increase of 10 percentage points. However in these socioeconomic classes the increase in penetration of refrigerators is relatively low (4 percentage points), possibly because affordability is an issue.

Table 5 illustrates the absolute increase in household base (total number of households owning that durable) and the SEC wise composition of the additional base. Consider the case of mixers/grinders. In the last decade, there has been an increase of 9.9 million households owning mixers/grinders. 29% of these households are SEC B households, 28% are SEC C households and 27% are SEC D&E households. Thus the mid and low socioeconomic classes put together account for about 55% of the increase in household base. The scenario is similar for LPG stoves and electric irons. However, in the case of refrigerators and washing machines, households belonging to the mid and low socioeconomic classes comprise a smaller percentage of the additional household base.

Thus the mid and low socioeconomic classes comprise a significant segment of the market for some durables. However, they have a relatively smaller share in the market for higher end durables like refrigerators and washing machines.

Furthering this argument, let us look at two fast moving consumer goods (FMCG) categories , i.e. tea and edible oils. We examined the changes in penetration of the category at an overall level and specifically the penetration of the category in ‘loose’ as opposed to ‘packaged’ form.

In the last decade there has been some increase in the penetration of both these categories. However the percentage of households using loose tea or loose edible oils have decreased. This change is much more pronounced in the tea market.

In the last 10 years, the penetration of tea has gone up by 5%. The real change is the decrease in the proportion of households using loose tea. A decade ago, nearly half the tea-consuming households used loose tea (either only loose or both loose and packaged). Today, this proportion has dropped to about a third. Though this change has been observed across all the socioeconomic classes, the larger percentage point drop has been seen in the mid and low socioeconomic classes. Thus, households belonging to the mid and low socioeconomic classes are buying packaged tea more than before.

Similarly, in the edible oil market, the percentage of households using loose edible oil has dropped by 7 percentage points over the same time period. However, this change is mainly observed in the high and mid socioeconomic classes.

In conclusion:

* It is now becoming evident that households belonging to the mid and low socioeconomic classes are becoming relevant target groups for certain products.

* Together they constitute more than 70% of urban households.

* In the last decade they have grown in economic power.

* Their exposure to media, especially TV, has also grown in the last decade.

* In the last decade, they have driven penetration for certain durables like televisions and pressure cookers. In some other categories (indicative list) they have contributed substantially to the absolute increase in user base.

* 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 faced with the issue of slowdown in growth due to saturation in the high socioeconomic classes should examine these segments more closely as they represent increasingly important sources of future growth.

 

TABLE 1

Socio-Economic Classes

Source: NRS IV (1990-91) & IRS *(1998-99).

 

TABLE 2

Percentage Increase in Average MHI between 1990 and 1999

Source: NRS IV (1990-91) & IRS *(1998-99).

 

TABLE 3

Television Viewership (Number of days in a week TV is watched)

Source: NRS IV (1990-91) & IRS (1998-99).

 

TABLE 4

Absolute % Increase in Household Penetration between 1990 and 1999

Source: NRS IV (1990-91) & IRS (1998-99).

 

TABLE 5

Composition of Additional Household Base

Source: NRS IV (1990-91) & IRS (1998-99).