Strength in numbers

Strength in Numbers Published: Mint dated 28 th December 2009 This is the third part in a series on 33 distinct consumer segments, categorized on the basis of stage of life and occupation, expenditure and savings propensity, family structure and psychographics. This week’s focus is on the G4 and G5 segments comprising older workers with low levels of education and skills Indicus Consumer Segment

Last week, we discussed segment A1, straddling the younger years (single alone or staying with family, or married but still young) and comprising self-employed chief wage earners only. This week, we look at segments G4 and G5, diagonally opposite A1 in the spectrum—older in age, singles or married with grown-up children. The defining feature for these two segments is low level of education and skills.. Indicus Consumer Segment G4 and G5: low-level skills The G4 segment comprises middle or older years, married with grown-up children who may or may not be married themselves. The G5 group has older people, singles or married couples whose children have left the home, with very low levels of education and skills. Urban India has attracted migrants with low skills over the years, as cities have offered diverse opportunities for employment and income generation. The two segments under review this week cover those people who, in all probability, have migrated from rural areas more than two decades back, at a time when India was in its pre-emerging economy status.Without a chance to augment their education or skill sets in their early years, the chief wage earners of these households are predominantly illiterate. Interestingly, contrasting the education profile of these two segments, we find that G4, with a relatively younger population, has an improved, albeit low, level of schooling, reflecting the higher access to schooling over the years.Income-wise, however, these two segments are constrained by their skills and age. With a median age of 50 years (G4) and 59 years (G5), these segments represent people whose earning power is on the decline. G4 is obviously in a higher income bracket, with median annual income of Rs1.92 lakh; median annual income in G5 is a low Rs87,000. Since these two segments together make up close to 24% of India’s urban households, with G4 segment dominating at around 20% of households, they represent a significant part of the urban consumer spectrum

As is clear from the graphs, the G4 segment, being younger and slightly more educated, has better income generation. Some 78% of these households have two or more than two members working. The main occupations represented are manufacturing (22%), wholesale and retail trade (22%), construction (13%), transport, storage and communication (12%). In the G5 segment, however, construction does not feature as a major occupation, a reflection on the age of the chief wage earner; agriculture and related work (18%) and household service work (10%) are among the major occupations of these households. Household sizes vary dramatically across these two segments; 52% of the households in the G5 segment represent those with no spouse, the household size is, therefore, mainly made up of just one or two members. Households in G4 are of much larger size—45% are made up of at least five members. Clearly, the households in G4 that still have their grown-up children living with them earn and spend much more as a unit. Indicus Consumer Segment G4 and G5

The savings rate, at 16%, though lower than the average urban savings rate, is higher than the 11% rate of the G5 segment, where older people consume more in accordance with their life stage. The consumption patterns and asset ownership profile also reflect the difference in life stages, age and household composition; for instance, medical expenses take up a higher share of expenses for G5 and TV ownership is much lower in this segment, etc. Going forward The story of economic growth has already had a positive impact on these segments. As the economy has shifted to a higher growth path and is likely to continue for an extended period, these segments (and the population naturally getting here in the process of ageing), will rapidly move towards a higher standard of living and a better quality of life. Many would move towards E6, E7 and E8. In some cases, the baton of chief wage earner will be transferred to the next generation which may shift the households to F1, E1, D1 and C1, depending on the skills acquired by the next generation torchbearers. In fact, with nearly one-fourth of the urban population being in this segment, the segment is a significant and representative face of the India growth story—more representative than most other groups. Also as urbanization increases rapidly and migration from villages to cities continues, this group is likely to expand further. Indicus Consumer Segment G4 and G5

Why would marketers be interested in G4 and G5? While the headline story is in the consumption of branded goods and luxury items, the big push to the economy will come from the group which moves from subsistence or basic consumption to consumption of value-added products. More than 80% of the G4 households have minors, whose aspirations will be to match the consumer trends around them. The highest share of consumption baskets in the G4 segment is on services—education, medical and conveyance, etc. In the G5 segment, where food dominates the consumption basket, households spend 16% of their budget on high-value foods and 6% on processed foods. Clearly, these groups are where mass marketeers will train their focus— simple old-fashioned refrigerators, basic television sets, motorcycles, kitchen appliances, even toys and educational products. Most of the households will be making their first purchases in this category of goods. The good news for marketeers is that there are 18 million such households already, and the numbers are set to rise. Indicus Consumer Segment G4 and G5

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Strength in numbers

by Indicus Analytics Private Limited on Jan 03, 2010

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Strength in numbers — Presentation Transcript