The Missing Link that completes the Social Economic Classification. Edward Ihaji Market Science - Kenya Ipsos LTD

Transcription

1 The Missing Link that completes the Social Economic Classification Edward Ihaji Market Science - Kenya Ipsos LTD

2 Contents Background and Ipsos PoV Methodology Findings Conclusions and way forward 2

3 Background and Ipsos PoV

4 How many LSM/SES classifications are currently available in SSA? Region specific PA-LSMs PA-SES Country/Industry Specific KARF LSMs (Kenya) Ghana LSMs Nigeria LSMs Client Specific P&G Africa 1-4 Unilever LSM2.0 GSK LSM DHS Wealth Index Why so many? 4

5 What have been the client s issues with current LSM/SES measures? Are outdated i.e. have been there for a very long time 12+ years Are heavily based on HH assets e.g. very urbanized Too many categories e.g. 17 LSMs are too many to target Are not properly differentiated. Groups are not meaningfully differentiated for client 5 Cross country comparisons are not meaningful Current systems (living standards) do not entirely provide what clients want Consumer Purchase Power

6 The dilemma Generally, by the current SES/LSM classification, all would fall into the highest category: the differentiation is the Consumer Purchase Power FATHER Wealthy Big SUV, palatial home, expensive. SON 2 working, relatively nice home (middleclass), nice car Subaru, 3 screen user, has some money (wallet with disposable income) SON 1 University Graduate, 3 screen user (laptop, phone and tablet), resides in a Varsity Hostels 65 The tale of a father and his 2 sons

7 Why is including Consumer Purchase Power important in LSM/SES classification? MONEY, is an important resource to achieving higher living standards and thus greater well-being. Higher economic wealth may also improve access to quality education, healthcare and housing The relationship between LSM/SES and Consumer Purchase Power is not direct. Our R&D work has shown that even for people with the same LSM/SES score, their purchase power could be different You don t have to be rich to be in a higher LSM/SES class, but you have to be have more money to have a higher Consumer Purchase Power 7

8 Therefore, Ipsos contribution to the PA SES debate is to suggest a unified classification system that combines PA SES and Consumer Purchase Power 8

9 The purpose of this presentation today is to.present the Ipsos R&D findings on the relationship between SES and Consumer Purchase Power in a bid to develop a more consistent socio-economic classification (SEC) across Sub-Saharan Africa countries This is the missing link! Ipsos.

10 Methodology

11 Methodology Ipsos Omnibus Surveys done in 2015 Kenya: n=2,000 Uganda: n=2000 Nigeria: n=2000 Zambia: n=2000 Rwanda: n=1700 National representative surveys Ipsos.

12 The instrument Relative Income Size Q. Please, tell me what is your family financial situation? Choose the answer that best describes how you feel. PA SES (PAMRO) individual measure Roof Material Type of Shelter Source of Water Cell phone Frequency Computer Frequency Internet Frequency Education 12 Consumer Purchase Power (Relative Purchase Power Potential) Don t have enough money even for food Have enough money for food, but not clothing Have enough money for food and clothing, but cannot afford expensive things Can afford expensive things, but not everything we would like Not limited financially Q. Receive money from relatives + friends (Y/N) Proportion of the main Expenditures vs Income Q. Please, tell me what proportion of your monthly household income your family spends on housing and utilities. Less than a quarter (25%) of the monthly family income From quarter to half (25% - 50%) of the monthly family income From half to two thirds of the monthly family income More than three-quarters (75%) of the monthly family income Q. Have debts to pay / loans to return (Y/N) Q. Do you, yourself, send any money on a regular basis to your family / household? (Y/N)

13 Analytics SES Based: Grouping the 10 SES into manageable groups SES1 SES2 SES3 SES4 SES5 SES6 SES7 SES8 SES9 SES10 E D C B A RPPP based: Consumer Purchase Power using Rasch Analysis Eventually classified as A/B/C/D E Weighted SEC: Getting a composite of RPPP based * SES Based W.SEC= 67% SES + 33% RPPP It was in our intention to favorite the SES weight since it was built on Pan-African level while RPPP is mostly influenced by the local economic reality of each country. Increasing the proportion of the SES will yield into neglecting the purchase power and it's economical dimension. 13

14 Findings

15 Similar distribution as to the PA-SES PA SES frequency distribution The distribution of the SES classes across all countries is suggesting the following : The sizes of the SES classes are comparable with those suggested by the original classification. This confirms a good reliability of the construct. Source data: Ipsos Omnibus

16 Majority of the population (80%) lie below SES 5 PA SES cumulative frequency distribution In four out of five countries about 80% of the population is concentrated in the first half of the SES spectrum This might limit the usage of the SES in terms of interpretation from a strategic marketing perspective at the country level Source data: Ipsos Omnibus

17 Nigeria case study The SES and the RPPP distributions are somehow similar and, as a result, the SEC weighted distribution is only a small adjustment 17

18 Uganda case study The analysis suggests some differentiation between SES and RPPP and the Weighted SEC provides a more balanced view 18

19 All 5 countries A global look at all the 5 markets combined shows the discrepancies between SES and RPPP 19

20 Looking at GDP ranking vs Av. SES ranking the correlation is low Source: International Monetary Fund (2014) ** All figures are in current Geary Khamis dollars, more commonly known as international dollars (Int$). 20

21 Looking at GDP ranking vs RPPP ranking the correlation is higher Source: International Monetary Fund (2014) ** All figures are in current Geary Khamis dollars, more commonly known as international dollars (Int$). 21

22 Conclusions

23 Conclusions RPPP provides further information that clients may find useful when segmenting consumers into affluence/wealth groups While PA SES and RPPP may be similar in some countries, majority of the countries in SSA may benefit from an RPPP adjusted PA SES With the ongoing work on PA SES, it would be important to also consider the integration of RPPP thinking in its refinement process 23

24 Way forward Testing the RPPP in more markets + collaborate with all stakeholders Dissemination of the findings Integration of the RPPP + other ideas in PA SES 24

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