A general classification of marketing used to describe the population is the Socio-Economic Classification or the SEC. It was created in 1988 and ratified by the Market Research Society of India (MRSI).
According to the SEC, consumers were classified based on the two basic yet essential parameters. The occupation and education of the (CWE) Chief Wage Earner or the Head of the household were considered to determine socio-economic segmentation.
IMRB International was the original developer of this concept. It emerged as a way of understanding the market segments and consumer behaviour. In the mid-1980s, MRSI adopted it as a measure of socio-economic class. Today, the SEC is used widely as a market segmentation tool.
Traditionally, SEC was of two types: Urban Grid and Rural Grid. The Urban Indian households were classified based on two parameters- Education and Occupation.
The Chief Wage Earner’s (CWE) education status and occupation are taken into consideration while segmenting them into seven groups, i.e., A1 to E2. On the other hand, Rural SEC Grid uses education and the Type of House, i.e., pucca, semi-pucca, and kaccha. These measures of socio-economic class are further utilised to classify rural Indians into four groups, i.e., R1, R2, R3, and R4.
What is Socio-Economic Classification and Why It Matters in Retail Marketing and Stock Management
Socio-Economic Classification (SEC) assists retailers to comprehend the diversity of consumers as they are classified based on their income potential, level of education and occupation. This type of classification enables the brands to develop appropriate marketing strategies and keep stocks in stores that respond to the local demand. Through the analysis of SEC data, the retailers can maximize assortment planning, maximize the shelf availability, decrease the stock-outs or over-stocking. Knowing who, where, and why people shop helps retailers to have a more personalized experience, promotion, and pricing that lead to more intelligent retail choices and increased customer satisfaction.
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Socio-Economic Classification (SEC) in India Works According to the Following Grid
1. Urban SEC Grid:
The SEC works according to its grid. There are eight classified educations and occupations in the urban grid, including:
| Skilled Workers | E2 | E1 | D | C | C | B2 | B2 |
| Petty traders | E2 | D | D | C | C | B1 | B2 |
| Shop owners | D | D | C | B2 | B1 | A2 | A2 |
| Entrepreneurs with no employees | D | C | B2 | B1 | A2 | A2 | A1 |
| Entrepreneurs with less than 10 employees | C | B2 | B2 | B1 | A2 | A2 | A1 |
| Entrepreneurs with more than 10 employees | B1 | B1 | A2 | A2 | A1 | A1 | A1 |
| Self-employed professionals | D | D | D | B | B | A | A |
| Clerical/Salesmen | D | D | D | C | B2 | B1 | B1 |
| Supervisory level | D | D | C | C | B2 | B1 | A2 |
| Officers/Executives-Junior | C | C | C | B2 | B1 | A2 | A2 |
| Officers/Executives-Mid/Senior | B1 | B1 | B1 | B1 | A2 | A1 | A1 |
The table above is relatively self-explanatory. The data is classified into three classes which include upper, middle, and lower classes.
From A1 to B1 is the upper class, the middle-class is in segments B2 and C, and D to E2 is termed lower class.
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2. Rural SEC Grid:
In the rural SEC Grid, the Indian population is classified based on the education of the chief wage earner of the households into sections R1, R2, R3, and R4.
| Education | Type of Houses | ||
| Pucca | Semi-Pucca | Kucha | |
| Illiterate | R4 | R4 | R4 |
| Literate but no formal school | R3 | R4 | R4 |
| Up to 4th standard | R3 | R3 | R4 |
| 5th to 9th standard | R3 | R3 | R4 |
| S.S.C./H.S.C. | R2 | R3 | R3 |
| Some College but not graduate | R1 | R2 | R3 |
| Graduate/Post Graduate (General) | R1 | R2 | R3 |
| Graduate/Post Graduate (Professional) | R1 | R2 | R3 |
In the above table, R1 denotes the Uppermost class while R4 is the lowest class.
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Limitations of Traditional Socio-Economic Classification in Retail
Despite the widespread use of the Socio-Economic Classification by the marketers, it does have weaknesses. It is entirely based on two parameters: education and occupation, which are not necessarily a true measure of income. It is not always the case that the higher the education the higher the income, and it is based on an assumption. A large number of people who are poorly educated earn more by doing business, skills based or even becoming an entrepreneur. Such a narrow vision might lead to poor targeting, improper product lines and stock planning may be ineffective in contemporary retail.
New Consumer Classification System (NCCS): An Advanced Approach
Market Research Users Council (MRUC) came up with the New Consumer Classification System (NCCS) to overcome the weaknesses of SEC. Based on the 11 consumer durables like TVs, refrigerators, and vehicles, it makes an evaluation of households based on several parameters including education, number of working adults, education of the housewife, and ownership of the same. In contrast to SEC, NCCS offers a more diverse perspective of purchasing power and style of life, developing a single grid of urban and rural India. This sophisticated system helps retailers to learn more about the changing consumer segments and enhances the accuracy of decision-making.
Importance of Socio-Economic Classification for In-Store Stock Management
The SIC assists retailers to match their store inventory to the buying behavior of various consumer groups. As an illustration, outlets with A1-B1 households can specialize in high-end products whereas the D-E2 regions might have to offer less expensive and more value-oriented collections. The local SEC mix will be understood so that the stock rotation is efficient, waste is minimized, and sell-through is enhanced. Retailers use the SEC data to predict demands (better), optimize supply chains and have the right product mix in each store.
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Practical Applications of SEC in Retail Marketing
Some of the ways retailers utilize SEC data include categorizing audiences, floor planning and tailoring marketing activities. It assists brands to know what type of products are likely to attract certain socio-economic groups as well as where promotions should be targeted. As an example, we can consider luxury product marketing to be deployed at the A1 zones and the prioritization of essential goods to be offered to B and C segments D and E. SEC also helps in the scheme of distribution routes, pricing approaches and regional consumer behavior pattern to push sales efficiency.
Advantages of Using Socio-Economic Classification in Targeted Retail Strategies
- Enables sharper consumer segmentation and better market understanding
- Helps in designing personalized promotions and targeted campaigns
- Optimizes product assortment and pricing for each SEC group
- Reduces inventory costs by aligning stock with demand potential
- Supports location-based marketing and new store expansion planning
These benefits make SEC a valuable tool for marketers aiming to enhance retail performance and customer engagement.
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Conclusion:
To solve the problems arising from the older SEC, the Market Research Users Council (MRUC) created a new classification termed NCCS, i.e., New Consumer Classification System. It helps marketers plan their media expenses efficiently. Marketers analyze and derive an idea of what consumers need and what they already have. It is primarily used to determine the purchasing power of the consumers.
The NCCS measures a Household Premiumness Index (HPI). HPI considers factors such as demographics, the highest education in the household, the number of working members, and the housewife’s education. It also takes into account the number of Consumer durables (pre-decided from a list of 11 items) owned by the family. The list of 11 things is Color TV, Personal Computer/Laptop, Electricity Connection, Air Conditioner, Ceiling Fan, LPG Stove, Two Wheeler, Refrigerator, Agricultural Land, Washing Machine, Car/Jeep/Van.
In the new system, there are 12 grades, starting from A1 to E3. The NCCS is beneficial in the following ways:
- More significant discrimination when compared with the current system
- A single system for both- urban and rural India
- No longer uses occupation. Thus, it’s less subjective
- The NCCS is simple. It’s easy to answer questions, saves time, and becomes easy to classify
There aren’t significant drawbacks to this system. However, minor changes in the system are bound to happen because “consumer durables” penetration changes faster than education or occupation.
Frequently Asked Questions
1. What is the socioeconomic class classification?
Socioeconomic class classification is a system used to segment people based on factors like income, education, occupation, and living standards to understand consumer behavior.
2. What are the key differences between Urban and Rural SEC Grids?
- Urban SEC Grid classifies households based on the education and occupation of the Chief Wage Earner (CWE).
- Rural SEC Grid classifies households based on the CWE’s education and the type of house (pucca, semi-pucca, or kaccha).
3. What is the New Consumer Classification System (NCCS)?
NCCS is an updated system replacing SEC, considering factors like household education, number of working members, and ownership of consumer durables to classify consumers more accurately.
4. What is a socio-economic group classification?
It is a method of dividing people into groups based on income, education, and occupation to understand their purchasing power and lifestyle.
5. What is R1, R2, R3, R4 in rural marketing?
In the Rural SEC Grid, R1 to R4 represent socioeconomic classes based on education and housing type, where R1 is the highest class and R4 is the lowest class.
