Socio-Economic Classification

SEC, i.e. Socio-Economic Classification is a classification made in the urban and the
rural sector, to identify the consumption pattern and the household purchase
behavior. Based on education levels, occupation, type of household, etc. the
population is divided into separate bands, called the Socio-Economic Classes.
The Urban Sector is divided into SEC A1, A2, B1, B2, C, D, E1, E2
(Calculated as a function of Educational qualifications of the CWE* and his
occupation)
The

Rural

Sector

is

divided

into

SEC

R1,

R2,

R3,

R4

(Calculated as a function of Educational Qualifications of the CWE* and the type of

the household he stays in Pucca, Semi Pucca or Kaccha)
*CWE = Chief Wage Earner and is the person who contributes the most to the
household expenses
Following is the exact division in the Rural Sector:

(Source: Ficci Press Release)

Urban Classification

But According to an article Targeting New Customers, the Urban Indian households
have broadly been classified as
- high socioeconomic class referring to SEC A & SEC B
- mid socioeconomic class referring to SEC C, and
- low socioeconomic class referring to SEC D & SEC E.
The analysis adds that this classification is pertinent as compared to an income-level
based classification, since lifestyle reflects the consumption patterns more closely
than the income levels.
Though this might not be the best time to counter this new concept, but supposedly,
Socio-economic Classification is not fool-proof, as is elucidated in an article in
Exchange media - SEC is an indicator or a pointer towards the likely to consume
set but often defies the reality of not pointing clearly towards the consuming
class, which is the purpose of any targeting by any marketer. The drawback of using

Monthly Household Income (MHI) lies in the difficulty of capturing the correct data,
as the respondents are hesitant to disclose the correct MHI.
There is more subjective perspective to the calculation of SEC than an objective one
and so is a debatable classification.
An alternative to this approach is the concept of HPI, or Household Potential Index
HPI enables a direct comparison of urban and rural on the same scale. An interesting
inference from this classification is that the analysis indicates that SEC R1 is close to
SEC B2 and SEC R2 is close to SEC D of urban.
It divides the population into 3 classes:
a) Upper most segment of the consuming class (the lakhpathis or crorepathis who also
spend and consume)
b) Middle segment which is the core target for growth of very many categories
c) The lower most segment, which is the volume generator for many FMCG
categories and lower end durables and services
A nice concept of Premium goods - Something that is wanted by many but
consumed by few. If the penetration level of a good is low, it commands a higher
premium. This premiumness in turn should be factored in deciding the classification,
which is catered in HPI calculation, but not in SEC method. If penetration levels are
low, a high value is given to the corresponding HPI, and mass products have a low HPI.
Such a method can be spanned across diverse households, and therefore obviates any
distinction

to

be

made

between

rural

and

urban

households.

From a Marketers perspective SEC entails understanding the potential of

markets, whereas HPI indicates the consumption intensity of markets, calculated
by the average scores of a household