Indian Consumers

Socio-Economic Classification In addition to income classification and consumer classification, Indian households can also be segmented according to the occupation and education levels of the chief earner of the household (the person who contributes most to the household expenses). This is called as Socio-Economic Classification (SEC), which is mainly used by market planners to target market before launching their new products. SEC is made to understand the purchase behavior and the consumption pattern of the households. The urban area is segregated into: A1, A2, B1, B2, C, D, E1, E2.

Socio-Economic Classification Occupation

Education Less 5-9 School Some than 4 Graduat PostIlliterate yrs of certificat colleg yrs in e graduate school e e school

Skilled

E2

E1

D

C

C

B2

B2

Unskilled

E2

E2

E1

D

D

D

D

Shop owner

D

D

C

B2

B2

A2

A2

Petty trader

E2

D

D

C

C

B2

B2

Above 10 persons

B1

B1

A2

A2

A1

A1

A1

Below 10 persons

C

B2

B2

B1

A2

A1

A1

None

D

C

B2

B1

A2

A1

A1

Clerk

D

D

D

C

B2

B1

B1

Supervisor

D

D

C

C

B2

B1

A2

Professional

D

D

D

B2

B1

A2

A1

Senior executive

B1

B1

B1

B1

A2

A1

A1

Junior executive

C

C

C

B2

B1

A2

A2

Employer of-

Source: Indian readership survey (IRS)

Sections A & B refer to High-class- constitutes over a quarter of urban population Sec C refers to Middle-class-- constitutes 21% of the urban population Sections D & E refer to Low-class-- constitutes over half the urban population To understand the table, consider an example: A trader whose monthly household income (MHI) is more than that of a person in section A cannot be included in this SEC because his educational qualification or occupation do not qualify him for inclusion. Sec C constitutes households whose Chief Wage Earners are employed as : Skilled workers

33%

Petty traders

12%

Clerk/Supervisor

37%

Shop owners

18%

3/4th of them have studied till 10th or 12th class while the remaining 1/4th have studied till 9th class. Less than half of the Chief Wage Earners of households belonging to sections D & E are unskilled workers. Petty Traders are 18%, while Skilled Workers are about 28%. More than 80% of the population of upper strata consumers is living in the top 7 cities. Those top 7 cities are Mumbai, Kolkata, Delhi, Chennai, Ahmedabad, Bangalore, and Hyderabad. With increase in economic prosperity, this population (upper strata consumers) is growing at 10 percent annually.

The rural area is segregated in to: R1, R2, R3, R4.

Education of chief wage earner

Type of House Pucca

Semi-pucca

Kuchcha

Professional degree

R1

R2

R3

Graduation/ PG

R1

R2

R3

College

R1

R2

R3

SSC/HSC

R2

R3

R3

Class 4-Class 9

R3

R3

R4

Up to class 4

R3

R3

R4

Self-learning

R3

R4

R4

Illiterate

R4

R4

R4

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Indian consumers most optimistic in Asia-Pac: survey Press Trust of India / New Delhi June 9, 2009, 17:18 IST

Indian consumers are the most optimistic lot in the Asia Pacific region, says a study that gauged their mood for the second half of 2009. According to the MasterCard 'worldwidendex of consumer confidence', India has the highest score among Asia-Pacific markets, with consumers being optimistic about employment, economy and quality of life. "India in particular shines as one of the few markets with a lift in its consumer confidence score from six months ago. Its consumer confidence score increased from 63.9 six months ago to 68.0," the survey stated. Indian and Chinese consumers' remain confident about the next six months, despite a widespread drop in consumer confidence across 16 markets in the Asia/Pacific, Middle East and Africa region. In India, the three markets surveyed were New Delhi, Mumbai and Chennai. As per the survey, Delhi consumers are the most optimistic with an Index score of 79.3, up 25.2 points from 54.1 six months ago. Mumbai scored 61.7 points followed by Chennai which was marginally lower at 61.3, the survey revealed. ______________________________________________________________________________________ ______________________________________________________________________________________

Indian consumers are buying more than ever

The country is growing, and is a place where business will thrive in the near future. To understand this better consider the following favorable shifts that have taken place in the consumer patters of buying.

Favorable shifts in consumption pattern:

Analysis shows that over the years, the expenditure on non-food items has grown faster that the expenditure on food items. India is witnessing a great change in the lifestyles and buying patterns of consumers. Convenience foods like instant coffee and noodles are now very popular. The number of modern gadgets like washing machines in the number of house holds is now on the increase. As we have mentioned before, yesterday’s luxuries are now becoming today’s necessities. The Indian consumer has more money and is now using it more liberally than ever before. Food and drink have acquired a greater "fun" image for him than ever before. Because of the TV and the booming media, even the economically lower class of the Indian population craves for a lifestyle like the well-to-do people they see on the TV. __________________________________________________________ __________________________________________________________

Indian consumers and the market The Business World - May 2006 By Rama Bijapurkar CONSUMER window data on markets is exceedingly useful, since it analyses markets as a collection of people who buy products, and not as a collection of products sold by a set of competitors. Unfortunately, such data is also difficult to come by. So, when such data comes along that is recent, nationally representative, low-priced and high-quality, my advice is to snap it up immediately! The Guide to Indian Markets 2006, by Hansa Research and Media Research Users Council is one such report, based on the Indian Readership Survey (IRS) of 2000 and 2005, an all-India study, with a large and rigorously designed and selected sample of about 1,65,000 households in urban India and about 75,000 in rural India. In each household, the housewife has been interviewed for details of household demographics, FMCG consumption, and ownership of durables, and a randomly selected adult, aged 12 years or above, interviewed for media habits. So, for all those who doubt survey data, this is about as good as it gets - for now. The best way to use this book, according to me, is for individual businesses to read it and develop their own point of view on the Indian consumer market, as relevant to their business categories and strategy. It is important for businesses to define "my target India", because data on India is usually confusing and contradictory. The uninitiated dismiss it as bad data but, in reality, it is because of the 'glass is half empty/ half full' syndrome of a totally heterogeneous market comprising people simultaneously living in many eras. Further, I wouldn't waste any time in agonising over whether this data should become the new Holy Grail, replacing all other sources of data currently in use. Many data sources are actually better, for the Indian consumer market is a many-splendoured beast and, for a comprehensive view of it, multiple snapshots from different angles and through different lenses are needed. One interesting lens used in this report is the consumption lens. The Indian consumer market has been defined and graded entirely on consumption and ownership and not on income. I have said ad nauseum, and beg leave to say again, that consumption data is like maternity - a certainty; while income data is like paternity - often a matter of opinion. The demographic lens provides real numbers not conjecture on critical questions like percentage of women who work outside the home, homes that have a liberalisation generation child, social class A households that live in small towns, etc. Another view is through the brand performance lens. It is a good lens but one that I am less excited with, given that my religion is about consumers and not competitors, about people not products. Understanding consumption structures from the people's point of view does help shape competitive advantage and moves away from the question: "Doesn't everybody know these are the rules of the game in this category?" Here are some take-aways from the book that I found very interesting.

1. Consumer classes, i.e., stratification of the market based on consumption indicators: The construct of consumer classes was first put forward by Dr. S.L. Rao and I. Natarajan of National Council for Applied Economic Research (NCAER) in 1996, when they created a terrific framework which classified Indian consumers into affluence groups called Rich, Consuming Class, Climber, Aspirant, and Destitutes. However, it was highly opaque and did not say precisely how he classification was made. As a result, it was hard to use as a market segmentation and targeting tool, and for further market research. NCAER has now come full circle, and its new consumer classes are income linked again, which defeats the original objective of laying more emphasis on maternity (certainty - consumption) than paternity (conjecture - income). The IRS classification of consumers is based on proven consumption behaviour not income. The basis of classification is absolutely clear (see 'The Great Indian Pyramid), though unfortunately, the labels make up for the clarity in their sanskritised opacity! The basis is a construct called HPI (Household Potential - or affluence - Index), which calculates for each household a score based on the consumption or non-consumption of a basket of 50 FMCG and durable products. A higher score is awarded for a less penetrated one (e.g. air conditioner or ketchup) and a lower score to a widely penetrated one (e.g. colour TV or toothpaste). Households with similar HPI scores have been grouped together to create eight consumer classes. Each has been further described in terms of specifics of ownership (see 'Profiling the Consumer Classes of India').

Thus, 70 per cent of the Siddha class (literally, those who have succeeded in entering the upper classes) of 6 million households owns refrigerators, uses fabric whiteners, and has bank accounts; 50-70 per cent own motorised transport and have a telephone, and 30-50 per cent, surprisingly, eat noodles regularly! Over threefourths of Siddhas live in urban areas, 95 per cent of the housewives are literate and 30 per cent are graduates.

This does fit our mental image of the 'middle class', but for those who are disappointed that they account for just 3 per cent of all households, this is a call to reality. As Thomas Huxley once said, it is the slaying of a beautiful hypothesis (of a large middle class) by an ugly fact. 2. The Hierarchy of Durables: In urban India, the most ubiquitous entry products into households are the television and the pressure cooker- the entertainment and efficiency needs (see 'Hierarchy of Durables'). The pressure cooker, I think, badly needs a successor. Women and kitchens have changed, but the pressure cooker reigns supreme! The refrigerator, the two- wheeler and the telephone are the next lot of durables that urban households acquire. Then comes the washing machine. Here, the question to ponder over is: What would it take to take washing machines up to the refrigerator's level of importance? In rural India, the hierarchy is only slightly different. Rural India is serious about entertainment. The television and audio player are the entrylevel durables, in that order, sharing honours with the pressure cooker. Two-wheelers and telephone are next.

In the forthcoming Businessworld Marketing Whitebook, in an article co-authored with Ashok Das of Hansa Research, we discuss the degree of evolution or sophistication of a category, defined as the ratio of high-end products' ownership in a category to the total ownership of it. Even SEC A, which is topmost in urban India, is a not very sophisticated or evolved market - 61 per cent of the audio equipment is cassette- and not CDbased, 70 per cent of the refrigerators are non frost-free and 61 per cent of washing machines are semiautomatic. Clearly, we are going to see upgradation-driven value growths as soon as someone sets up easy and fair value buy back schemes for the existing durables

population. Or reprogrammes the Indian mind to find another way of thinking "paisa vasool"!

3.Consumer demographics: The male-female ratio in the 12+ age group in Delhi is a shocking 55.4 vs 44.6 per cent. Compared to most of north India, the more enlightened south is a relief - The ratio here being exactly 50 - 50 per cent in Tamil Nadu and a pleasant 48-52 per cent in Kerala. Our child centricity is with good reason too. Fifty per cent of the Indian households have a 5-12-year-old and 30 per cent have a teenager (16-19 years old). Why then do we have such small toys and books markets, and such a nonexistent youth culture except at the top 1 per cent of the market? Also, 40 per cent of households have 55-year-olds and above. Yet, the geriatric healthcare and fitness market is yet to seriously take off, despite a large body of customers having the same pain points (literally!). Sixty-two per cent of Indian households are nuclear, even in the villages. Further, the stereotype of the modern housewife in our minds and our advertising needs to change. Even in urban India, over two-thirds of housewives have not finished school and only 12 per cent have college education. The rural picture is worse. The challenge is to bring modern ideas and behaviour to a community that is visually literate and exposed via

television, very ambitious for its children and, I am willing to bet, ready to learn given the little formal opportunity they have had to do so. Maybe, and I'll bet on this too, the consumer's readiness to adopt new ideas is far ahead of the marketers' stereotype of her. Now, to address the "working women percentage" guesswork that we all do. Seventyseven per cent of urban housewives and 60 per cent of rural housewives do not work outside the home. However the north-south divide is again very stark, with southern states having about 15 per cent more housewives than the average working outside the home. 4. Company Franchise: Between 2000 and 2005, Hindustan Lever and ColgatePalmolive increased the number of Indian households they were present in, though their presence decreased in percentage terms. Nirma and Philips lost on both counts. Marico, Dabur, Parle, and surprise, surprise, the Tata group (tea, coffee, salt) increased on both counts. All things considered, there's no beating the scale of Hindustan Lever. It is present in 166 million of the total 207 million Indian homes, with Colgate-Palmolive coming a distant second at 85 million homes. ______________________________________________________________________ ______________________________________________________________________