During the late 1980s, the South African Audience Research Foundation (or SAARF) created the Living Standards Measure (LSM); a novel approach to classify and segment the South African consumer market. A rather intuitive concept for its time, its creation has given rise to many other mass market brands to develop their own bespoke segmentation models in recent years, to better categorise and understand their customers.

 

For those not familiar with LSM, it’s a segmentation model exclusive to the South African market, and takes 29 different factors into account to classify consumers. Its focus is predominantly on the ownership of major appliances, and the degree of urbanisation. The resulting classification distinguishes between 10 levels of consumer living standards, LSM 1 being the lowest and LSM 10 the highest. Since its development it has grown to be a regular way of describing target markets, as frequently referenced as sociodemographic attributes like age, race, income and location. The success with which the measure has assimilated into marketing strategies appears to be testament to a robust and useful tool.

 

However, there are a number of problems with the nature and use of this segmentation model that necessitates a reconsideration of its usefulness.

 

  1. LSM is not related to any specific brand or category

A general “one-size-fits-all” segmentation can never be as accurate as one designed for a given brand or category, and examples of better measures are plentiful. For instance, financial service providers would be better served orienting the segments around income or financial product holdings. Media owners would be better served by evaluating income, including the range and amount of media consumed.

These custom segmentations are much more predictive of category behaviours, perceptions and attitudes than LSM, and requires FAR LESS EFFORT for the respondent and researcher to derive.

 

  1. LSM cannot accurately determine spending power

A further drawback is the fact that LSM cannot accurately determine spending power, even though it is all too often confused with something that can. The LSM measure does not include income as an attribute in the calculation. Let’s say that again: “LSM does not include income as an attribute!”. This leads to situations where those with high spending power and few commodities will end up on the lower end on the LSM scale. Similarly, those with many commodities but little access to disposable income (like pensioners) are classified as LSM 9 or 10. Additionally, if you have access to an internet connection, you automatically join the LSM 8+ elites. In other words, a resident of a rural area with minimal to no income, who owns even the most basic of feature phones is now considered, according to the LSM categorisation, a highly desirable target market for premium brands.

 

  1. Consumers changed, LSM hasn’t

The South African consumer landscape has changed dramatically since the inception of LSMs, but the measure hasn’t kept apace, and doesn’t accurately reflect these changes in our society. Psychographic metrics work on the presumption that a human’s characteristics and way of living are reflected in their purchases, but LSM clearly doesn’t support, attribute, or provide these kinds of insights.

LSM is an old school way of “describing” the evolving South African consumer landscape, but also the rapidly changing realm of marketing and communication. LSM is a reductionist way of forcing consumers into a category they, more often than not, don’t belong in. And while it was a great practical way of grouping people with “similar” lifestyles three decades ago, it’s almost completely irrelevant in the digital space.

 

BONUS BUMMER: The Media, Marketing, and Market Research Fraternities agree – The value of LSM is questionable at best

When you have a moment, ask Google more about LSM. You will find numerous articles written over the course of the last decade from members of the media, media buyers, public relations consultants, marketing specialists and fellow market researchers, who agree that LSM as a measure on its own is questionable at best. To their credit, SAARF have admitted to the measure’s shortcomings when used carelessly. In an article on their website, former SAARF CEO Paul Haupt states “Unfortunately, it has become so relied upon that it’s very often being misused and has therefore become the victim of its own success”. As a remedy, SAARF suggests it should be used alongside other tools to better describe target markets.

 

That being said though, if there are better tools to get the job done, we’re left wondering where LSM would fit into the picture? Determining level of access to disposable income and propensity to spend is easy to do and more relevant than using LSM; It’s hard to justify the use of a measure that is often used incorrectly, especially when superior tools are available.