LSM

(Living Standard Measurement)

The LSM is a one of a kind method for sectioning the business sector. It cuts crosswise over
race and other outdated methods of arranging individuals, and rather gatherings individuals
as per their living benchmarks utilizing criteria, for example, level of urbanization and
responsibility for and significant apparatuses. It divides the population into 10 LSM groups,
10 (highest) to 1 (lowest). Previously eight groups were used but this changed in 2001 when
the new SAARF Universal LSM consisting of 10 groups was introduced.

To comprehend what can be attained to by utilizing the SAARF LSM as a promoting division
device, you have to know why it was made. At the point when considering any populace, it is
imperative to comprehend that despite the fact that individuals are exceptionally various,
they do have specific shared characteristics. What is needed from a business division device
is to make a record that will separate between individuals with distinctive conduct examples
and gathering together those individuals with comparable conduct. There was an increase in
the similarity between the choices of urban and rural. So to differentiate between the two
LSM was born. The first grouping was based on community size namely "metropolitan",
"cities/large towns", "small towns/villages" and "rural". However it was soon realised that this
was only one variable and for proper functioning of this segmentation tool more than one
variable were required which would be co-dependent. At the time, the late Eddie Schulze
had been working on a system of classification for Unilever, based on whether people
shopped at a supermarket or not, and then going further, to split the supermarket shoppers
into those who owned commodities such as cars, television sets and radios. This got the
LSM developers thinking and they decided to use multivariate market segmentation index.
Now, the LSM was purely based on the concept which differentiated people on the terms of
their living standards. Living standard was measured by different criteria such as cars
owned, radio owned or how much assets were owned. Sometimes these groups overlapped
since there were multiple owners of some assets. LSM purely functioned on wealth
measurement and did not focus on the income part. It is clear though that after every decade
or so there were changes in the descriptors because of the change in the environment and
culture. The above can be verified by looking at the example. These are the determinants of
the 1989/90 first LSM- polisher/vacuum cleaner, sewing machine, fridge / freezer, Nonsupermarket shopper, TV set, No domestic servant, water / electricity, No VCR set,
washing machine, No car in household. Now if we look at the 2004 determinants- Hot
running water, Fridge/freezer, Microwave oven ,Flush toilet in house or on plot, VCR in
household , Vacuum cleaner/floor polisher ,Have a washing machine ,Have a computer at
home, Have an electric stove , Have TV set(s) , Have a tumble dryer , Have a Telkom
telephone , Hi-fi or music centre , Built-in kitchen sink ,Home security service, Have a deep

freeze ,Water in home or on stand , Have MNet and/or DStv , Have a dishwasher,
Metropolitan dweller, Have a sewing machine , DVD player , House/cluster/ town house ,
1/more motor vehicles , No domestic worker, No cell phone in household, Cell phone in
household, None or only one radio, Living in a non-urban area.

Some people still think that LSM uses race as a tool. They base these allegations on the
results of LSM which shows that black people fall into 1-6 groups. Now, 1 is ranked as the
lowest group and 10 is the highest. Previously there were only eight groups but recently it
has been changed into 10. Another fault which is pointed out by people is that LSMs can tell
a marketer that those in LSM 10 for example, have more commodities than others. It doesn't
tell you their income, or whether they are predisposed towards spending money. To say that
a product is being targeted at LSM 10 is to miss the point. There are often complaints of
groups being too large, what they dont realise is that groups can be modified according to
their wish and requirements. SAARF universal LSM is used throughout the globe which
includes more than 10 groups. It can be extended depending upon the country.

So, LSM is used for categorizing a person into a group based on different variables which
are related to their living standards and not on how much they earn. For a company, to use
this data they need to integrate this data with other marketing differentiations such as
income, life stages etc. Last but very important point is that LSM is not the only way to
determine your target market. It is just one of the various ways of segmenting a market.