How South Africa Segments Its Consumers: From LSM to Multi-Dimensional Profiling

The Living Standards Measure (LSM) remains the most widely recognised system for segmenting South African consumers, despite institutional and methodological changes in the industry. Developed by the South African Advertising Research Foundation (SAARF) in the 1980s, LSM has been a cornerstone of marketing and media planning in the country for decades, grouping households into 10 categories (LSM 1 to LSM 10) based on access to services, durable goods and geographic indicators.

How LSM Became South Africa's Default Consumer Segmentation

SAARF introduced the LSM as a unique way of profiling the South African population, focusing on living standards rather than direct income. In a country with high income inequality and unreliable income data, SAARF's approach was to use a basket of observable household assets and living conditions as proxies for economic status.

SAARF's LSM became the dominant industry standard as it was used to segment consumers across the 10 groups from the 1980s onward. [1][3] Over the following decades, LSM was embedded in marketing and media planning discourse, with marketers, research agencies and media owners standardising the LSM terminology, motivating the availability of comparative data across different studies, enabling cross-media comparison, and facilitating the industry's categorisation of respondents for targeting and segment selection. [11]

While LSM was anchored in SAARF during the industry's earlier years, the LSM concept has lived on under the new institutions formed after industry changes. [13]

Inside the SAARF Universal LSM: Variables, Scoring and Groups

The SAARF Universal LSM classifies South African households into 10 groups (1 to 10, with 10 being the highest standard of living) based on the presence or absence of 29 weighted household-level variables. [15] These variables cover access to services, durable goods and geographic indicators. [6]

The variables are selected to capture the core dimensions of living standards, including housing, communications, appliances and services. SAARF scores the presence of each variable in a household and sums the scores, creating a summed score which is then used to allocate respondents to one of the 10 LSM groups. [15]

The variables, and the groupings, evolved over time. An earlier formulation used 20 variables and created 8 groups, from LSM 8 to 1, where 8 was the highest living standard and LSM 1 the lowest.[10]

The way each variable contributes to the LSM calculation is weighted, with variables that are more indicative of higher living standards scoring more heavily. The variables have been selected, defined and weighted using statistical research.

Why LSM Groups Matter Beyond Demographics

LSM stands apart from simple demographic or income band segmentation because it is a standard of living measure that was designed for South Africans only, based on concrete data from their country. SAARF developed the concept of categorising people based on what they owned, not what they earned, because income questions are considered unreliable in South African surveys. People tend to be more accurate about what they own than what they earn, so assets serve as proxies for economic status. [11]

The broad appeal of LSM segmentation is that it helps marketers and media planners understand the relative purchasing power of a prospective target group as well as the standard of living, according to a USDA Foreign Agricultural Service GAIN report. [4] However, academics also note that the measure has a perceptual and experiential component beyond physical wealth, recognising that living-standard levels reflect more than physical wealth. [2]

Media consumption and channel preferences are inextricably linked to a consumer’s lifestyle. Understanding their reasons for using a product or service is essential for developing a message and using the right medium to deliver it, and since the total spend in an LSM is a rare shared factor, it is easier to get this right.

This combination of lifestyle with purchasing power makes LSM relevant to marketers in that they have a clearer picture of who they’re targeting. They know what they can afford, and how they live their lives. This allows them to target media and messaging clearly, and effectively.

From SAARF to the Marketing Research Foundation : New Data, Old Measures

The LSM methodology is described as a universal, publicly available tool rather than proprietary intellectual property.

SAARF has since fallen away, and the Marketing Research Foundation (MRF) has stepped in. The MRF runs the Marketing All Product Survey (MAPS), which it describes as a continuous marketing and media survey. [13] MAPS variables can be cross-tabulated to create rich consumer segments and profiles. [9]

MAPS data are geo-codable, so that variables can be cross-tabulated to create consumer segments.

The MRF works with the Bureau of Market Research (BMR) on a transition to what it describes as "a multi-dimensional consumer segmentation tool for South Africa". [7] It is envisaged that this will include:

• Detailed psychological and behavioural insights according to segments
• Attitudinal constructs for demographics, shopping and usage, including media usage and behaviours
• Segmentation at regional and municipal area levels, mapped, to provide spatial distribution of population and money spent
• Differentiation by LSM as well as other segment dimensions
• Potential for additional insights about segment origins, impulse type, shopping drivers and significant influencers for each

The Move Toward Segmenting Based on Multi-Dimensional Data, Continued

While the MRF is working on a multi-dimensional segmentation tool, what we don’t know is how it will relate to LSM, which has been a marketing and media segmentation tool and framework for several decades. This uncertainty relates to how in today’s market, media and marketing are increasingly multi-dimensional, with new opportunities for segmentation.

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