NCCS vs ISEC: Industry experts navigate the new Indian socio-economic classification system

With time, ways and marketing methods expanded the way industry experts knew around 10 years before. Brands always use innovative marketing tactics to reach their target audience using the New Consumer Classification System (NCCS) or the New Socio-Economic Classification (SEC) system to classify households in India.

Traditionally, SEC was classified under two parameters - the urban grid was classified based on education and occupation of the chief wage earner and the rural grid was classified based on occupation and type of house of the chief wage earner. The types of houses included katcha, semi-pucca, and pucca houses.

The revised SEC was introduced on May 3, 2011, where NCCS classified Indian households by using two parameters - the educational qualification of the chief wage earner (head of the household) and the number of assets owned from a pre-specified list. There are 11 items specified in the list and they are:

• Electricity connection

• Ceiling fan

• LPG stove

• Two-wheeler vehicles

• Colour TV

• Refrigerator

• Washing Machine

• Personal computer or laptop

• Four-wheeler vehicles

• Air conditioner

• Agricultural land

On February 21, 2024, the Market Research Society of India (MRSI), India’s autonomous market research industry body announced the adoption and implementation of its latest Socio-economic Classification System, ‘ISEC’, also known as Indian Socio-Economic Classification. The current Socio-economic Classification (SEC) being followed in India is based on ownership of consumer durables and vehicles.

ISEC suits both urban and rural areas, with a user-friendly, non-intrusive approach. It features a 12-tier classification system, accessible to industry stakeholders, researchers, advertisers, and measurement bodies for household targeting.

India saw the evolution of consumer durable goods and pre-specified items they own as mentioned in NCCS. This resulted in the dilution of discrimination with brands finding it difficult to make marketing decisions. The shift in upper-class consumer behaviour and the unclear statistics of the lower strata did not imply a change in the marketing behaviour with NCCS becoming less relevant.

Therefore, the data for the new construct was needed with no frequent updates, a shelf-life of at least five years, each class behaving differently, working for both urban and rural grids, and a simple, quick and non-intrusive classification.

Initially, it was considered that ISEC would be measuring the household size, number of working members, ratio of working to non-working, and number of working women. The occupation will also be taken into consideration and can be in various forms as well like for chief wage earner or the one with highest income.

Arriving at the conclusion, the most optimum construct for ISEC classifying households will be the chief wage earner’s occupation, education of the highest educated male adult, and education of the highest educated female adult. In contrast, NCCS only asks about the education of the chief wage earner and the number of consumer durable items available in households.

Considering these approaches, ISEC appears to be more stable as proportions are stable compared to NCCS. The digital behaviour of ISEC shows higher usage of web streaming apps among higher strata.

In terms of stability and discrimination among classes, ISEC is steady and displays better discrimination compared to NCCS. With regard to maintaining one definition and clarity, both ISEC and NCCS are at par.

Discussing the increased need for a deeper understanding of consumer behaviour, media targeting, and challenges the industry is faced with given the existing NCCS construct, MRSI organised a panel discussion on the topic, Targeting and ISEC - Socio-Economic Classification.

The session was chaired by Shuvadip Banerjee, chief digital marketing officer, ITC, and general secretary, MRSI, with panellists comprising Amit Adarkar, CEO, IPSOS India; Jasmine Sachdeva, managing partner, Wavemaker India; Muralidhar Salvateeswaran, chief operations officer - insights, APAC, Kantar; ⁠Rajiv Dubey, head of media, Dabur India; Vivek Malhotra, group CMO, India Today Group and Vinay Virwani, head - consumer insights, Dabur India.

Banerjee opened the discussion by mentioning how marketing has become complex yet exciting as time evolved. Talking about her perspective on traversing the complex space, Sachdeva said, “Marketing has definitely become more complex as getting the same person, and growth are not providing the same parameters that we were able to target or meet. If somebody has several choices, we have to reach them uniquely. Consumers’ media consumption and advertising receptiveness have changed dramatically.”

With numerous alternatives of products and services, consumers have gotten into the habit of choosing various brands and not sticking to one and this has made it difficult for brands to keep their consumers in a segment. Therefore, the process of segmenting consumers and identifying growth profits is essential.

Talking about how brands are segmenting consumers to get success, Virwani said, “We have various ways to segment our consumers, the classic ones being on the affluence, the propensity to buy, and how much they can afford. Apart from these, we observed that behaviour segmentation is something that works well with consumers. We tend to see that if a consumer is living a certain lifestyle, for example, a fitness lifestyle, then they are likely to buy nutritional products. That helps us target the right consumers. So, behavioural targeting is significant for us.”

Adding to what Virwani explained, Salvateeswaran said, “When you talk about profitable growth segment, I think it is also important to perhaps look at it and ask what this new space is. Consumer behaviour gives a very clear picture, for instance, relating to health activities, and can predicate something that I, as a brand, would be working on.”

With the implementation of phasing out of third-party data cookies, brands are focussing on increased reliance on first-party data, thus translating into some form of issue concerning how they can target going forward.

Sharing his observation on cookie deprecation and addressing targeting issues as an organisation, Dubey said, “Most of the companies are working in the same direction, which is, getting your own stack of time, trying to create cohorts and try to collect as much data as possible. However, you cannot leave behaviour-based targeting. We have observed that Indians are good at providing information making it a very significant step in getting the data from people who are willing to provide us with it.”

Malhotra added, “In this current perspective, the role of media becomes very important because of the amount of data we hold from the various verticals we operate. It is not the ability, but the propensity to consume that agencies and buyers need from me (media) and there is no other way for me to deliver that unless I look at data. What I have to do is to have a far deeper engagement with the consumer. It does not end at getting their email ID or mobile number, but to know about what they are reading and consuming.”

Adarkar shares his experience in the space of the current socio-cultural and economic classification that brands are currently utilising and a set of challenges that he realised.

He said, “Over time, the system does not discriminate enough or not in a meaningful way. India is certainly a market in flux with the kind of growth that we have which means that if you have a system that becomes not actionable, discriminating, or not developing after two years, then we have a problem. So, I think we also need a system which is a bit more stable.”