MC Explains | Are you an Indian consumer? You'll now be classified in a new way

ISEC, introduced by Market Research Society of India (MRSI), an autonomous body, takes on a more advanced approach by including the occupation of chief earner, level of education of the highest educated male adult as well as education of the highest educated female adult. What this does is that it discriminates households on affluence level such as High Class, Upper-Middle Class, Middle Class, Lower-Middle Class and Low Class.

According to MRSI, ISEC makes way for sharper and refined targeting. It is more stable than NCCS and omits the need for frequent updates. ISEC’s discriminating quality is visible with each class behaving differently, thus being more relevant as the economy develops with improvements in the standards of living, increased asset ownership, infrastructure development and government interventions. Moreover, social capital in India can be defined by the education of the female and this parameter helped improve the classification, the industry body said.

What went wrong with NCCS?

The older consumer classification model of NCCS divided Indian households by using two parameters of the educational qualification of the chief wage earner and the number of assets owned from a pre-specified list which includes colour TV and two-wheeler. Experts note that consumer goods may not correctly indicate the standard of living for households, affecting targeting of consumer by brands and researchers.

The NCCS model reflected the reality when it was introduced 10 years ago, but there have been transformations in the Indian economic landscape over the years. The transformation has been driven by increasing asset ownership, infrastructure development and government interventions which has led to expansions of the upper classes and contractions of the lower economic strata. And this has made the NCCS model inapt.

How is ISEC better than NCCS?

Unlike any previous consumer classification model, ISEC considers women’s education as a key definer of social capital, an attribute that is highly pertinent in current day, said MRSI Director General Mitali Chowhan. "To put it in context, women today have more power in making socio economic decisions. For example, if it is a decision of buying a washing machine, probably 15 years ago a man would have made that decision but today a woman takes that decision. And these aspects are important for brands to track to target the right audience."

NCCS was introduced at the time when digitisation was gaining momentum and women representation in household decisions was marginal, noted Amit Adarkar, chief executive of IPSOS India. "Our country has evolved greatly since then and it is essential that we follow a socio economic classification that is equally evolved,” he said.

ISEC has more granular classification of households which has the most affluent class at the top of the pyramid and the lowest income households at the bottom. This is unlike NCCS model which bunched up households in a few categories, making it difficult to understand the affluence level of a household.

How ISEC will help brands to target consumers?

Let's understand this with an example. How will the two models discriminate consumers of personal wash category with the average price of the product which is equal to or less than Rs 80?

The ISEC model shows that the personal wash category has a higher penetration in upper-middle and middle class households with 53 percent buyers coming from these two levels. On the other hand, NCCS model shows that 50 percent buyers come from the high income households, according to Kantar Worldpanel, a company dealing in consumer knowledge.

“The development and progress of our economy is at a rapid pace. At such a pace it is even more important for us as advertisers and spenders to understand our consumers and their behaviour. ISEC gives a holistic view of our audience segment and how they are equipped to make decisions,” said Sunil Kataria, chief executive officer of Raymond Lifestyle for India and international, and chairman of The Indian Society of Advertisers.

A better and deeper understanding of consumer cohorts is always appreciated as it equips brands the opportunity to identify and target consumers in a sharper manner and opens up avenues for sharper communications, said Shashi Sinha, CEO of IPG Mediabrands India.

Socio-economic classification enables brands and agencies to understand their target audience’s behaviour and profiles and set price points. Updates to the current socio-economic classification is critical given the changing landscape of Indian households. ISEC addresses this with classification using household education and occupation profiles, MRSI said.