One year after: Is fund crunch stalling ISEC?

Even after a year of its formal launch, the Indian Socio-Economic Classification (ISEC), which seeks to change the very basics of household classification to better understand consumer behaviours and inform strategy on communication, product and pricing for marketeers, is yet to kick off.

The Market Research Society of India (MRSI) unveiled ISEC on February 21 last year. Over the past year, MRSI has held multiple discussions with advertisers, broadcasters, and media houses.

As previously reported by e4m, broadcasters — especially General Entertainment Channels (GECs) — have been wary of ISEC’s impact and have sought for further study. Industry insiders now suggest that funding shortages have hindered additional research into its effects on television media.

“The full impact of ISEC on media consumption, particularly television, must be thoroughly studied before it replaces the current classification system. However, given the financial constraints this year, stakeholders are reluctant to contribute funds, leaving the research on hold,” an MRSI official told e4m on condition of anonymity.

Notably, advertisers have been enthusiastic about the ISEC since the beginning. They had even issued a support letter for the system to BARC soon after its release.

Advertisers feel that the current classification system is flawed and a significant chunk of their ad money has gone into the waste because of the same. However, ISEC promises a more precise and insightful classification, which should ideally enable sharper targeting and more efficient marketing spends. It can make advertisers more pragmatic towards media investment.

Meanwhile, media houses, particularly broadcasters, are concerned about potential declines in Television Rating Points (TRPs) once ISEC is adopted.

Several advertisers e4m spoke to insist that changing the classification system was never an easy task in India. “In the past, when NCCS was proposed, it took three to four years to get everyone on board,” said a Chief Marketing Officer of a leading FMCG firm.

“Every stakeholder needs to be convinced of the impending impact the new system will have. However, we need to fast track such changes to make marketing spends more efficient and prudent,” an advertiser noted.

However, the Indian Broadcasting Federation (IBDF) is not yet ready to adopt the new system. TV channels, GECs in particular, fear that the new system could reveal a decline in viewership, especially as educated women migrate to OTT platforms. This could lead to a domino effect on their advertising revenue, industry leaders shared.

Broadcasters' apprehension is not misplaced though. MRSI has not conducted any comprehensive research on viewership trends under ISEC—an area where only BARC holds the keys. This gap is a significant stumbling block, stalling any real progress.

Then there are practical issues to tackle. BARC’s existing survey panels are based on the NCCS. Transitioning completely to ISEC panels would not just be a daunting task but will throw weekly TRP data out of gear. This necessitates a slow transition that could stretch on for months.

MRSI president Nitin Kamat’s response was awaited till the time of filing this report. The copy will be updated as and when he responds.

IBDF President Kevin Vaz’s response was also awaited.

How does ISEC differ from the current system?

The socio-economic classification (SEC) was first introduced in the country about four decades ago to classify consumers into different groups. Over time, flaws were noticed in the system and the New Consumer Classification System (NCCS) was brought in.

While the Indian Readership Survey (IRS) adopted NCCS in 2014, BARC implemented it in 2015. Now, ISEC is meant to replace NCCS, which is believed to fall short in capturing the nuanced consumer behaviors of a rapidly evolving market. The primary concern — its reliance on the education level of the 'primary wage earner' and the presence of consumer durables in households.

“Today penetration of consumer durables has witnessed a significant increase making the current socio-economic classification to be less discriminatory and more volatile. Besides, ownership of durable items cannot be the determinant of socio-economic classification in the era of easy EMI and 0 per cent finance schemes,” CMOs shared.

MRSI has conducted a comparative study on NCCS and ISEC panels. When a chief wage earner’s education and consumer durable were used as determinants, over 60 per cent of households got bucketed in just three categories - ABC. In ISEC, the similar category level contributes to merely 15 per cent of the households, a marketer told e4m on the condition of anonymity.

Some marketers argue that NCCS isn’t flawed, it is just outdated. “The penetration of markers advanced rapidly, while the currency lagged behind. Like any currency, it needed a refresh — which is exactly what ISEC provides,” one marketer explained.

Both ISEC and NCCS classify consumers in five broad categories. It is ABCDE in the case of NCCS, and High Class, Upper-Middle Class, Middle Class, Lower-Middle Class and Low Class when it comes to ISEC. They are further divided into 12 sub-categories.

NCCS relies on education of the “primary wage earner” and “consumer durables” in households, while ISEC considers occupation of the “primary earner” and the educational attainment of both the “most educated male and female adults” in the households as key indicators of social capital.