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Page 1: Indian Pyramid

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

Page 2: Indian Pyramid

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).

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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

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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.

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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.

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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

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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.

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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.

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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

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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.


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