Socio Economic Classification (SEC)

A common classification that is used by marketers to describe the Indian population is the Socio Economic Classification (SEC). SEC is the classification of Indian consumers on the basis of two parameters: Occupation and Education of the chief wage earner (Head) of the households. The SEC classification, created in 1988, was ratified by Market Research Society of India (MRSI), is used by most media researchers and brand managers to understand the Indian consuming class.

According to the SEC, the Urban Indian households are classified on the basis of the two parameters Education and Occupation into SECA1, A2, B1, B2, C, D, E1, E2.

In urban households, SEC A1 include those with graduation/post graduate holding senior positions like CEO’s and Middle level managers and also those entrepreneurs having some college education and employs more than 10 staffs. The Rural Indian Households are classified into SEC R1, R2, R3, and R4. In the rural classification, the parameters are Education of the Chief wage earner and the type of the house.

The SEC classification helps the marketers to identify segments that have high consuming potential. The high potential types: A1, A2, the medium ones and the bottom of pyramid ones. The SEC classification is used by Media planners to decide the media which gives the client maximum effectiveness. The research team at the media houses uses the NRS and IRS surveys' raw data to identify the reach of the media in these SEC segments and uses this input for pitching their campaign to large advertisers.

Although this classification is popular for over 18 years, the classification has its negatives also since it takes only two parameters: education and occupation .This is based on the assumption that higher education leads to higher income thus higher consuming potential. However, we know that this may not be true always. A trader or a retailer with no qualification can earn more income than a Postgraduate executive, but SEC will categorize the traders/retailers not as SEC A1 or A2.

Hence Market research users council (MRUC) has devised another classification called New Consumer Classification System (NCCS) which calculates a Household Premiumness Index (HPI) which takes parameters like ownership and consumption of media services and products with other demographics.

Core Competency and Competitive Advantage

A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):

1. It provides customer benefits
2. It is hard for competitors to imitate
3. It can be leveraged widely to many products and markets.

A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers (Mascarenhas et al. 1998). It may also include product development or culture such as employee dedication. Modern business theories suggest that most activities that are not part of a company's core competency should be outsourced.

If a core competency yields a long term advantage to the company, it is said to be a sustainable competitive advantage.

As an example they gave Honda's expertise in engines. Honda was able to exploit this core competency to develop a variety of quality products from lawn mowers and snow blowers to trucks and automobiles. To take an example from the automotive industry, it has been claimed that Volvo’s core competency is safety. This however is perhaps the end result of their competency in terms of customer benefit. Their core competency might be more about their ability to source and design high protection components, or to research and respond to market demands concerning safety.

Competitive advantage

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since they describe the firm's position in the industry as a leader in either cost or differentiation. A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately results in superior value creation.

The Competitive Advantage model of Porter learns that competitive strategy is about taking offensive or defensive action to create a defendable position in an industry, in order to cope successfully with competitive forces and generate a superior return on investment. According to Michael Porter, the basis of above-average performance within an industry is sustainable competitive advantage.

There are 2 basics types of CA:

- cost leadership (low cost), and

- differentiation.

Both can be more broadly approached or narrow, which results in the third viable competitive strategy: focus.

Approach 1 to Competitive advantage: Cost leadership.
•a firm sets out to become the low cost producer in its industry.
• Note: a cost leader must achieve parity or at least proximity in the bases of differentiation, even though it relies on cost leadership for it’s CA.
• Note: if more than one company aim for cost leadership, usually this is disastrous.
• Often achieved by economies of scale

Competitive advantage model 2: Differentiation.
•a firm seeks to be unique in it’s industry along some dimensions that are widely valued by buyers.
• Note: a differentiator cannot ignore it’s cost position. In all areas that do not affect it’s differentiation it should try to decrease cost; in the differentiation area the costs should at least be lower than the price premium it receives from the buyers.
• Area’s of differentiation can be: product, distribution, sales, marketing, service, image, etc.

Competitive advantage 3: Focus.
• = a firm sets out to be best in a segment or group of segments.
• 2 variants: cost focus and differentiation focus.

Stuck in the middle:
• Usually a recipe for below-average profitability compared to the industry
• Still attractive profits are possible if and as long as the industry as a whole is very attractive
• Manifestation of lack of choice
• Especially risky for focusers that have been successful and then to loose their focus. They must seek for other niches rather then compromise their focus strategy.

A firm possesses a Sustainable Competitive Advantage (SCA) when it has value-creating processes and positions that cannot be duplicated or imitated by other firms that lead to the production of above normal rents. An SCA is different from a competitive advantage (CA) in that it provides a long-term advantage that is not easily replicated.

Oglivy & Burnett Philosophies

There are two different approaches to an advertisement as can be sen from the illustration.

An ad like Reliance Mobile 'Rang Barse' ad with different people dancing in rain with various colours falls under the Burnett philosophy.

Push and Pull Marketing

What is pull marketing?

Pull marketing is where you develop advertising and promotional strategies that are meant to entice the prospect to buy your product or service. Some classic examples are "half off!" or "bring in this coupon to save 25%" or "buy one get one free", etc.

With pull marketing, you are trying to create a sense of increased, time limited value so that the customer will come into your store to buy.

An example of this is a perfume product. Women do not request to smell a fragrance they never smelled before; it is simply "pushed" at them, through the right advertisement.

• Applied to that portion of the supply chain where demand uncertainty is relatively small
• Production & distribution decisions are based on long term forecasts
• Based on past orders received from retailer’s warehouse (may lead to Bullwhip effect)
• Inability to meet changing demand patterns
• Large and variable production batches
• Unacceptable service levels
• Excessive inventories due to the need for large safety stocks

What is push marketing? Push marketing is where you develop advertising and promotional strategies geared toward your marketing and distribution channels to entice them in promoting your product. As consumers, you rarely see this type of marketing when it is directed to the distributors. It might include wholesale discounts, kickbacks, bonuses, and other types of support. It's all designed to have the retailer promote your product to the end users over a different product.

In recent years, I've seen a nearly exponential increase in the past decade - another type of push marketing is taking over. It's the referral and word of mouth marketing. When companies encourage happy customers to spread the word to their friends and families, that's a type of push marketing. Or, when companies make ads that are controversial, cheeky, or downright shocking, they create a little buzz - that's another type of push marketing.

An example of this is the car manufacturing company Toyota. Toyota only produces cars when they have been ordered by the customers.

• Applied to that portion of the supply chain where demand uncertainty is high
• Production and distribution are demand driven
• No inventory, response to specific orders
• Point of sale (POS) data comes in handy when shared with supply chain partners
• Decrease in lead time
• Difficult to implement

Online

Push/Pull is a newer model for e-business that relates to information delivery. Roughly put, a PUSH is information that is directly delivered to you. Direct Mail and E-Mail are good examples of PUSH information, delivered right to your mailbox. A Web Site is an example of PULL information, for anyone to view as they wish by browsing the address. The Viewer is in control of the PULL.

Combining these two forces is very effective in delivering your marketing message. "PULL" type marketing is LESS effective in originating new business, but is MORE effective in helping to "close" and also helping to "keep in touch."

Above the Line & Below the Line

These terms may have simple definitions as will be given below, but constantly one tends to misinterpret the different forms of promotions and advertising as above-the-line or below-the-line.

In an attempt to try and solve the confusion, let us look at a few different angles.

Above the line-advertising
is allocated to television, radio, press, outdoor and cinema advertising

Below the line-advertising
promotions, direct marketing, sponsorship and public relations

Origins of the term refer back to the balance sheet – Above the Line advertising costs are part of ‘costs of sales’ and are deducted before Gross Profit is determined, non-commission baring advertising is part of the operating expenses and is deducted before Net Profit is determined.

Another way to view it is 'concept' delivery versus 'tactile' delivery.

So a concept media is one where you transmit ideas but nothing concrete ever passes to your audience - radio, tv, billboards and even most newspaper ads.

Tactile delivery is giving the audience something they can actually touch - so coupons, direct mail, product samples.

ATL tends to be visual/auditory where as BTL usually excludes auditory but includes sight, smell, touch, and even taste.

Through the line (TTL) refers to an advertising strategy involving both above and below the line communications in which one form of advertising points the target to another form of advertising thereby crossing the 'line'. An example would be a TV commercial that says 'come into the store to sample XYZ product'. In this example, the TV commercial is a form of 'above the line' advertising and once in the store, the target customer is presented with 'below the line' promotional material such as store banners, competition entry forms etc.

Go through the Wikipedia link, which offers some really good examples:
http://en.wikipedia.org/wiki/Below_the_line_(advertising)

Kisan Seva Kendras: IOC

Indian Oil Corporation, the country’s largest oil marketing company, has decided to step up its presence in the non-oil retail business. The company is slated to add another 1,000-odd rural marketing outlets or ‘Kisan Seva Kendras’ across the country by March 2008.

Each pump has a shopping mall offering a wide range of products including seeds, fertilisers, pesticides, consumables and banking facilities. The average cost of setting up each such outlet is pegged at Rs 10-12 lakh. IOC has tie-ups with a range of corporates both in FMCG and finance sector for these outlets like, Emami, Dabur, IFCI and ICICI Bank.

IOC, which recently tied up with IRCTC for sale of railway tickets through petrol pumps, has covered 250 outlets by virtue of this tie-up in states like Tamil Nadu, Punjab, Gujarat. It has also decided to add 25-30 oil retail outlets across these states.

To promote its branded fuel XtraPremium (petrol) and XtraMile (diesel), IOC has launched a scheme offering instant gifts for purchase of petrol worth Rs 500 and diesel worth Rs 1,000 across 32 select petrol pumps in the city during the festive period.




KSK a one stop center of service(seva) for the farmers at his doorstep making available:
Diesel and Petrol with Q&Q
Seeds, pesticides,fertilisers and other agri needs
Nutan stove, Hurricane lamps
Daily needs such as grocery,personal care
Stationery for children
Tools, auto spares
Location specific value additions

Key features:
low investment- ranging from Rs. 6 to 9 lacs
High returns- a pay back period of 3 to 4 years.
Revenue from non fuel sales reach in new markets
first mover advantage
fast building and retention of new customers
above all a value added service to our old rural customers

Rural Opportunity: Comat Technologies

• Government Services (G2C)
– Pension Schemes
– Scholarship Schemes
– Government Issued papers
• Land Record, Birth Certificate, Marriage Certificate etc.

• Business Services (B2C)
– Credit and loans
– Education and vocational training
– Bill Payment
– Insurance
• Gold, Farm Assets, Crop
– Healthcare

• Business Services (B2B)
– Products/ Services for rural businesses

Comat is setting up the infrastructure in rural communities
– Karnataka: 800
– Haryana: 290
– Uttarakhand: 600
– Tripura: 170
– Sikkim: 45

• Comat has created a “Business API”
– Expand reach many states through single Business API
– Revenue share model
– No business outreach program required for customer access

Kiosks provide the services backbone
– Reliable ICT infrastructure
– Technology enabled Business process re-engineering
• G2C, B2C and B2B service fulfillment

• Kiosks offer a low cost distribution network
– Deliver multiple services through a single Kiosk
– Payment collection, storage and remittance are centralized

•B2B Services
– Order Fulfillment and Supply Chain
• Order placement for farmers and other rural businesses
• Order tracking / confirmation
– Affinity Program Announcements
• Product Launch Announcements
– Rebate Coupons delivered via kiosks
– Citizen Surveys
– Unregulated services
• PDS Allotment via SMS
• Issuance of Ration Cards

•B2C Services
– Mobile Prepaid Top up
• Launch 3 weeks ago; Revenue Rs 100K
– Exam Results via SMS
• Printed results delivered via kiosks

Comat is a Social Enterprise. Our decade of on-ground experience in working for various rural projects across the country makes us a top notch player in the areas of e-Governance, and ICTD (Information and Communication Technologies for Development). Their service offerings enable the Governments and Businesses get closer to the rural milieu. That's how they facilitate social impact and Energize Rural Economies. As a rural empowerment enabler, they continue to walk the talk...