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II
The potential market for different products, or for that matter, specific brands and offers
within a product, may well be very different. The consumer class that you target as a
marketer of Cheese would be very different form the one that you target as a marketer of
Refrigerators and so on. Hence, the size and profile of the market (number of prospects)
would change depending on the specific product offer. The final objective is to showcase
through examples, ways of arriving at the target segment for a couple of products, using
the consumer classes arrived at through this analysis. However, we shall come to that
later. Letus first take a quick look at the current ways of segmenting the market.
Till now, marketers have used variables such as SEC,Income, Per Capita GDP, etc. to
estimate the size and profile of various classes in India. However, there have been several
debates on the very usage ofthis data.
Marketers have always maintained that income is a good classifier only if the data on
income is closer to reality. Says Rama Bijapurkar, an independent market strategy
consultant, "Survey income data is reliable and comparable qver time, but it is not the
absolute truth on total income. Hence it should be viewed as a 'label of affluence'." Quite
true. People are often not fully aware and are usually quite reluctant to reveal their 'actual'
incomes. So,what a surveyor would typically get is an understated figure of income. The
problem is that one cannot accurately determine the extent of the understatement. Since
most surveys collect income details from the housewife, the basic assumption is that she
is aware of the total household income. With the exception of the fixed income salaried
class, a majority of housewives are not aware of the full income. Even for the salaried
class, except for the monthly pay cheque, the rest is often unaccounted for. In many
cases, the household expenditure isreported as the household income.
On SEC,the dissatisfaction raised by marketers is of a different type. SECbeing based on
just two variables, marketers have felt that it is not adequate for finer definitions. (refer
glossary for the detailed SEC grid). The concept of SEC that was derived about two
decades ago, may not be as relevant in today's context where education and occupation
indianmarkerguide@ml"uc.net
patterns have seen substantial changes. 'Almost everybody seems to be SECA' is what
some marketers have to say. Evidently, it may not be a good enough discrimination any
more. Further, consumerism in the country has developed to an extent that it does not
take a person with a high profile education and occupation to own cars or other such
expensive products. Also, since in the SECsystem we have different definitions for Urban
and Rural India, marketers are unable to plan in a holistic manner. With rural incomes
rising,SECisof limited use when it comes to overall consumer profiling.
It is to overcome these issues, that we have introduced a new way of classification: the
Household Potential Index (HPI).
Household Potential Index (HPI)
HPIattempts to assign a 'premiumness' value to each household. Here, premiumness has
been defined as something that is 'wanted by many' but 'consumed by few'. Simply put, it
is the inverse of penetration. For example, 41% of all homes in India have a Television,
but only 2% have a Flat TV. Hence, homes with a Flat TV are considered to be more
'premium' in the HPImeasure.
The concept of HPI allocates high scores for less penetrated products and services. On
the other hand, lower scores are attached to higher penetrated or mass consumed
categories.
The Methodology and HPI scores
The IRSdatabase covers a huge range of products and services. This allows us to allot HPI
points to each household based on the consumption or ownership of a large range of
products and services. A basket of 50variables have been used for the calculation of the
HPI scores. These include Durables, FMCG products, Services and Demographic
variables (refer Table1.1).
Tablel.1: 50variables used to construct the HPI
Categories Description- -----~ ~18 Durables Entertainment 3
Transportation 2Kitchen 7Other Durables 6
22 FMCGs Personal Care 8Household Care 4
Food & Beverages 10
4 Services Telephone, C&S,Internet, Banking
6 Demographic Variables Education 3House 2
Number of Working Members
Each variable is assigned a score depending on the penetration of that variable at the
national level. Points are assigned for each variable consumed or owned by the
household. The scores for each variables thus obtained, aFesummed up to arrive at a total
score for the household. This score reflects the relative value of the household in terms of
its use of products, services and other consumer evolution measures.
The year 2004has been taken as the base year for this analysis. Over the years, you will be
able to observe the progress of consumerism in any class, as this measure will provide a
single index by which this movement can be judged.
Advantages ofHPI
• The single largest advantage of using HPIover any other classification method is that
the households that form the upper end of the HPI pyramid are truly the
'consuming/owning class'. Thus, ifwe are looking at the top 1percentile homes, this
set consumes/owns many more products/services as compared to households that
fall in the 2nd percentile, and so on .
• Another important advantage of HPI is that it makes Urban and Rural households
-
THE GREAT INDIAN PYRAMID
Given that HPI is a more direct indicator of 'consumption/usage', we have used HPI
scores to construct the Pyramid of Indian Consumer Classes. The criteria used? The first
class's average HPI score needs to be double (approximately) that of the next class. In
other words, as we move up the classes, the consumption potential doubles with every
subsequent class.
Fig. 1.1THE GREAT INDIAN PYRAMID
Sampanna2%, 4 mn, HPI*484
Siddha3%, 6 mn, HPI* 235
Unmukh9%, 19 mn, HPI* 119
Saamaanya10%,21 mn, HPI*65
Legend for each Class:Name, % of Indian household population, No. of households, • Average BPI score
Refer to Appendix n for English translation of Indian Consumer Classes of Pyramid.
The illustration, Fig. 1.1, presents the structure of the Pyramid of Indian Consumers
Classes. The entire country has been divided into 8 consumer classes based on their
average HPI scores. If we look at Table 1.2, Samriddha I, which is the top 1 million
households (0.5 percent of the population) has an average HPI score of 1997.
Samriddha II, the next 0.5 % population percentile, has an average HPI score of 988.
Samriddha I exhibits twice the consumption potential as compared to Samriddha II
(average HPI score 1997vs. average HPI score 988). A similar trend will be observed in
the subsequent classes.
Value of Durables Owned in the Different Consumer Classes
This classification concept has been validated using several other indicators. As an
example, we present here a validation of the construct through a very robust variable:
'value of durables owned by the household'.
This analysis takes into account the average market value of all durables in a household,
for more than 30 durables1• Every household in the 240 thousand sample of the IRSis
asked about the ownership of these durables and based on the responses, the total value
of durables owned by the household is arrived at. This value has been compared to the
average HPIscores of each class to draw a parallel.
" , G.j! \',+ "'#
1,,'" ",,'"
.....•. Table 1.2-,'
J
1 '-
HPI scores as aAverage value ofValue of durablesClass
proportion ofdurables ownedas a proportion of
HPI scorethe orevious class~Rs. in 'OOOs)the previous class'--~
Samriddha (I)1997 589
Samriddha (II)
9880.5!315 0.5
Sampanna
4840.51970.6
Siddha
2350.51160.6
Unmukh
1190.5680.6
Saamaanya
650.5360.5
Sangharshi
320.5130.4
Nirdhan
150.5 20.2
All India
66 27
'Refer Appendix II for the list of Durables.
An average household in Samriddha I has an HPI score of 1997and owns durables worth
Rs. 580 thousand. The average HPI score of the next class is half that of the previous class.
Similarly, the average value of durables owned in this class is almost half of that observed
in Samriddha I. The pattern is more or less similar across all the classes till we reach the
lowest Class. Ifyou notice, the proportion of average value of durables versus its previous
class starts diminishing from the Saamaanya class downwards. Given that durable
ownership in the household is a very good discriminator of consumerism, the bottom
three classes (Saamaanya, Sangharshi and Nirdhan), though large in size, are very
distinct from each other.
PROFILING THE CONSUMER CLASSES OF INDIA
Table 1.3_I 30-50%II51-70%II>70%
Samriddhal
Flat TV, AC, Fabric BleachesPC, DeodorantFour Wheeler, Ketchup, Camera
Samriddha IIFour Wheeler, PCCamera, Milk Food Drinks,Washing Machine,
Ketchup, Instant Noodles
Floor Cleaner, Ghee
Sampanna
Deodorant, Honey,Washing Machine,Mosquito Repellent, Telephone,
CD Player,]am, Ketchup,
Floor CleanerToilet Cleaner, Music System,
Camera
Rubs & Balms, Motorised Transport
Siddha
Instant Noodles, Motorcycles,Vanaspati, Toilet Cleaner,Refrigerator, Bank Account,
Milk Food Drinks,
Telephone,Fabric Whitener
Floor Cleaner
Motorised Transport
Unmukh
Toilet Cleaner, Telephone,Mosquito Repellent, Ghee,Bank Account, Utensil Cleaners,
Motorised Transport, Refrigerator
Music SystemTalcum Powder, Pressure Cooker
Saamaanya
Mosquito Repellent,Bank Account, Utensil Cleaners,Shampoo, Toothpaste, TV
Ghee
Rubs & Balms, Pressure Cooker
Sangharshi
Music System,Shampoo, Talcum Powder,Biscuits, Fresh Milk
Pressure Cooker,
Toothpaste, Fabric Whitener,
Rubs & Balms, Bank Account
TV
Nirdhan
Vansapati, Shampoo,Fresh Milk, BiscuitsDetergent Cake/Bar,
Tooth Powder
Washing Powder, Tea, Edible Oil,
Toilet Soap, Hair Oil
Table 1.3 & Tables 1.6-1.9 (Pg. 21-24) help in profiling the 8 consumer classes based on
their usage/consumption of various products & demographics, respectively.
Nirdhan: This class comprises about 40% (83 mn households) of India's total
population and is the lowest class in the Great Indian Pyramid. It comprises India's poor,
who live largely in the rural areas (89%). The average number of rooms per person is only
0.5. Only about a third of these households have 'pucca' accommodation. Literacy rate
among housewives is a low 19%. Half of the Nirdhan class is located in Uttar Pradesh,
Bihar, Madhya Pradesh and West Bengal.
The usage of consumer products is limited to basic FMCG products in this class. Over 70%
of these homes use mass products such as Tea or Coffee, Detergent Cake/Bar, Washing
Powder, Hair Oil, Toilet Soap, ete. A little more than half of the Nirdhan class consumes
Biscuits, and around a third use products like Tooth Powder and Shampoo.
Sangharshi: This class, comprising about 35% (71 mn households) of India's total
population, is the second lowest in the Great Indian Pyramid. Its constituents live mostly
in rural areas (70%). The average number of rooms per person in this class is 0.6, higher
than the Nirdhan class, but not by much. Housewife literacy rate however shows a
marked improvement in the Sangharshi class. The number jumps from 19% in Nirdhan
to 60% in this class. More than two-thirds of the Sangharshis stay in 'pucca'
accommodation. A majority of this class resides in Uttar Pradesh, Maharashtra, Andhra
Pradesh and Tamil Nadu.
More than 70% of the Sangharshi class consumes Biscuits and Fresh Milk, a considerable
improvement given only half of the Nirdhan class consumes these goods. More than half
of the Sangharshis use Shampoo, Talcum Powder and Toothpaste and have a TV at
home. Around a third of Sangharshis have a Music System and a Bank Account. This class
has clearly entered the consumer economy, but has a hard balancing act to perform as its
members continue to improve their lot.
Saamaanya: Comprising 10% (21 fill households) of India's population, more than
half (55%) of the Saamaanya class live in rural areas. The average number of rooms per
person is 0.8 - a significant increase from 0.6 observed among Sangharshis. More than
75% of housewives in the Saamaanya class are literate, and over a fifth of households
have at least one member who is a graduate. Thus, education levels show marked
improvement here. Over a third of the Saamaanyas live in Maharashtra, Tamil Nadu andUttar Pradesh.
Around three-fourths of Saamaanya households use Shampoo and Toothpaste and own
TVs. More than half of them have Bank Accounts and use products like Utensil Cleaners
and Pressure Cookers. 85% live in 'pucca' accommodations.
Unmukh: Ascending the pyramid, the next class, Unmukh, comprises about 9% of the
Indian population (19 fill households). It is from this class that the tilt moves towards
Urban - 60%live in Urban India. Ascompared to Saamaanya, the profile does not change
much when it comes to housewife literacy or number of rooms per person. Notably
though, the highest education at home in this category being Graduate+ at 43%, is a
marked improvement from Saamaanya. Over half the Unmukhs live in Maharasthtra,
Tamil Nadu, Uttar Pradesh, Kerala and West Bengal.
Getting richer now, three-fourths of Unmukh households have Bank Accounts and use
Pressure Cookers, Utensil Cleaners and Talcum Powder. 92%own TVs!It is interesting to
note that, thus far, there has been no mention of Communication and Transportation,
two commodities so central to today's consumer population. The Unmukhs introduce
these products, with a third of them owning Telephones or Motorized Transport though
not necessarily Four Wheelers. About the same number of people own Refrigerators.
Siddha: And the tip gets smaller! The Siddha class includes only 3%ofIndia's population
(6 fill households). More than three-fourths of Siddhas live in Urban India; almost
all housewives are literate (95%) and around a third (30%) are graduates. A sizeable
number (42%) bf Siddhas are located in Maharashtra, West Bengal, Tamil Nadu and• Uttar Pradesh.
Around three-fourths of the Siddhas have Bank Accounts and Refrigerators. The
penetration of Refrigerators is one parameter that sees a striking improvement in the
Siddhas- from 46%among the Unmukhs to 75%here. Motorized Transport, Telephones
and Toilet Cleaners see higher penetration at 50%-70%.Around a third of the Siddhas
consume Instant Noodles and Milk Food Drinks, use Floor Cleaners and own
Motorcycles.
Sampanna: The select few, as the Sampanna category includes only 2% of the
population of India (4 mn households). 89% of the Sampanna homes are urban. The
average number of rooms per person exceeds one. More promising, half the housewives
are at least graduates. 82% of households have at least one graduate member and almost
half of them have post graduate degrees.
Around three-fourths of the Sampannas have Motorized Transport and Telephones and
use Mosquito Repellents and Toilet Cleaners. More than half of them own Washing
Machines and use Floor Cleaners. Around a third also own CD Players, use Deodorants
and consume Jams and Ketchup. Afifth of them have FlatTVsat home.
Samriddha II: This class comprises 0.5%ofthe population ofIndia (1 mn households).
Asexpected, 93%of this class lives in urban areas. Around half of these households have
at least one member with a post graduate degree or further. This class is predominant in
Maharashtra, Delhi and Tamil Nadu.
Around three-fourths of the Samriddha II category own Washing Machines and use
Floor Cleaners, a significantly marked improvement over the Sampannas. More than
half of them own Cameras, and over a third own Four Wheelers and PCs.A little above a
fourth of them also have Flat TVs and ACs. More than a third of these households...•..•..•.•.
consume at least three products from the Modern Food Basket'.
'Modern Food Basket comprises 5 products - Jam, Ketchup, Cheese, Instant Noodles
Samriddha I: The most premier class of India - top 0.5% of India's population, the
select few in a country of a billion people, the Samriddha 1.Almost all of them stay in
Urban India (96%).The housewife literacy level is almost perfect at 99%,with two-thirds
of them being graduates. Like Samriddha II, a majority of Samriddha I live in
Maharashtra, Delhi and Tamil Nadu.
Around three-fourths own Four Wheelers and more than half of them have PCs at home,
with most of these computers having an Internet connection. Littleless than a third own
Flat TVs and half of them still do not have ACs at home. I More than half of these
households consume at least three products from the Modern Food Basket' and around a
third of them consume at least four.