Kevin Anselmo
Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125
Tel +1.919.660.7722
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A New Way to Define Socioeconomic Classes in Brazil
February 10, 2012
DURHAM, N.C. -- What explains Brazil's rapid growth in sales of fast food, cosmetics, air travel and automobiles? The answer lies in economic and social transformations that have occurred over the past decade, including the emergence of the so-called "new middle class." A significant portion of Brazilian households moved to higher socioeconomic groups between 2003 and 2009. This was especially true with households classified in the middle and lower strata, where more than 20 million people rose above the poverty line.
In a recent study of these changes, Wagner A. Kamakura, a professor at Duke University's Fuqua School of Business, and Jose Afonso Mazzon, a professor at the University of Sao Paulo, say the emergence of a social class requires re-positioning many businesses to better meet consumers' changing needs.
"Despite the acknowledged importance of the relationship between social class - or socioeconomic status - and consumer lifestyle, marketing scholars have lacked a theoretically robust model of social stratification that accurately captures the changes in individuals' socioeconomic statuses in the Brazilian market," said Kamakura.
Their study, which is scheduled to appear in a special issue on emerging markets in the International Journal of Research in Marketing in 2013, focuses on a new model that classifies consumers into social strata based on dozens of variables. This model was validated with data from 104,353 households gathered in two Household Budget Surveys conducted by the Brazilian Institute of Geography and Statistics in 2003 and 2009. The two samples are representative of Brazil's current population of about 196 million people.
The study's authors say this model is a new alternative to the "Criterio Brasil" Socioeconomic Classification, used for decades by media, advertising agencies, advertisers and research institutes.
"This criterion, glorified by some and criticized by others, has been the basis for segmentation studies, analysis of consumption of goods and services, implementation of marketing strategies for consumer goods, financial services, social programs, political and religious research, and education, among other uses," Mazzon said. "The recent growth of the so-called 'middle class' in emerging economies requires a more accurate and valid measure of social classes, different from the criteria provided by Criterio Brasil, which is based on ownership of eight types of durable goods and the education level of the head of the household."
Kamakura and Mazzon recognize the advantages of the "Criterio Brasil", which helps explain the consumption of luxury items such as jewelry, leisure travel, personal services and car maintenance. However, the professors believe that Criterion Brazil has consequently led many companies to focus only on high-income strata at the expense of important emerging market segments.
"Companies that adopt a market positioning directed just to the upper classes are leaving a substantial market share to competitors," said the professors in the study.
The two marketing professors believe that their model has the following innovative features and advantages:
- It is based on the concept of permanent income (which includes financial and real assets) as well as various indicators of wealth and quality of life.
- It accounts for a household's socioeconomic status, even if some data about the household and its members are incomplete, an extremely common situation in marketing research studies.
- It can be used to evaluate how different social classes prioritize the family budget when buying different categories of products and services, and how those priorities affect sales.
- It helps companies focus their consumer marketing activities not only on the higher strata, but also on Brazil's emerging middle class.
"Brazil has become a fantastic laboratory for marketing research, mainly because of the recent sharp changes in income and household consumption," said Kamakura and Mazzon in their study.
"Unlike what happened with several developed countries, which have seen their economic growth slow down in the first decade of this century, Brazil's domestic market expanded at a fast pace. Exports have created millions of new jobs and there was also greater credit supply and implementation of broad social programs by the government."
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Figure 1 shows the important differences between the Criterio Brasil and the model proposed by the authors of the study. First, the distribution of social classes defined by Criterio Brasil is asymmetric. The large majority of households are concentrated in C1, C2 and D and less in classes A1, A2 and B. This distribution helps to separate the wealthy minority from the rest, but tends to put most of the population in very large classes, making it more informative for studies focusing on the rich minority than for studies of most lower-income, including the middle class, which has been the focus of much research marketing in Brazil.
Classes obtained by the application of the Kamakura-Mazzon model have a more symmetrical distribution, with the majority of the population in the central four layers (3-6). This leads to a more balanced population in socioeconomic terms, which helps to highlight the important changes in stratification which occurred between 2003 and 2009.
Thus, the proposed classification produces groups with a more balanced distribution in terms of the size of each stratum and the distribution of consumption expenditures.
Figure 1:
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