So who exactly is in the LSM 4-7 market? It is no longer so simple, discovers Melina Meletakos while investigating the benefit of LSMs to the media.
Living Standards Measures (LSMs) have been the key marketing and research currency since they were developed in the late 1980s.
But South African consumers have changed considerably in the last four decades, and many marketers feel that LSMs do not accurately reflect this.
“There aren’t really any benefits in targeting an LSM market anymore,” says Virginia Hollis, the chairperson of the South African Audience Research Foundation (Saarf). “They were developed for a very specific reason but now they are just being abused. They are being used to determine personal purchasing power, which is completely useless.”
This is a problem rooted in the measurement’s history, which makes a brief overview of its inception quite helpful.
According to Saarf, urban and rural differentiators were used to segment consumer markets before LSMs were created. But this method became less useful as the gap between South Africa’s urban and rural communities started closing and their consumption habits became more similar. An index that was both non-racial and included a set of descriptors based on more than one variable was necessary.
Unilever’s Eddie Schulze saw the gap and filled it with what we presently know as LSMs. The metric has gone through several iterations over the years, as the weighting and number of variables have been adjusted on a few occasions and LSM categories 7 and 8 were split into sub-divisions. In 2001, Saarf then launched their Universal LSM. Based on universally applicable variables only, the segmentation tool now has 10 categories and 29 variables to form the LSMs with which we are familiar today.
The dilemma lies in the fact that for such a long time, LSMs have been relied on as the only single-source currency that can segment a demographic target market that they have essentially become a victim of their own success. They are now largely misused to plan a sizeable chunk of ad spend as marketers incorrectly use LSMs as an income metric instead of one that assesses living standards.
Lwandile Qokweni, the managing director of media planning and buying agency Carat in Johannesburg, says LSMs also fall short in measuring consumer behaviour, something reflected in the understanding of their values, attitudes, interests and lifestyles.
“LSMs are a very qualitative measure and do not take any psychographic measurements into account. They, therefore, give us a very one-sided, linear view of a consumer,” says Qokweni.
Psychographic metrics work on the assumption that a person’s characteristics and way of living are reflected in their purchases. Qokweni says that LSMs do not reveal these kinds of insights because a person may have the assets that categorise them as an LSM 10, but this doesn’t necessarily mean that they have the mindset to match their living standards.
Gerard du Plessis, the head of strategy at digital agency Quirk in Cape Town, agrees that LSMs have become an old way of describing an ever-evolving world of marketing and communications.
“Winning now means delivering relevance over your competitors, and marketers need tools to be able to do this. Typical demographic metrics are therefore no longer useful. More and more we are finding that the focus has shifted to psychological and ethnographic tools to deliver this relevance,” says Du Plessis.
Each of Quirk’s briefs includes an LSM indication, but Du Plessis says their
value has become questionable.
“When developing strategy, there are three benchmarks that are useful when we talk about socio-economic status. They are labour, emerging middle class, and affluent. LSMs correlate with these three broad categories in some way but they seem to be a reductionist way of saying that people belong in one of these categories,” he says.
At Mindshare, LSMs are used extensively but Janet Watermeyer, the head of strategy, says that the agency is by no means a slave to the metric. While LSMs can provide a practical way of grouping people with similar lifestyles, she sees them becoming less relevant in the digital space in the future because there are just so many ways to define and group prospects.
“I think they work for now but as investment increasingly moves to digital touch points, all types of media audience measurement will come under scrutiny and the LSM clustering tool will become too blunt to yield rich target market and media insights. The focus will become far more on engaging in conversations with individual consumers or groups in relevant ways, for example, defining target markets via their common passions and interests and via identifiable and reachable networks,” says Watermeyer.
If LSMs have been through a number of incarnations since they were established, is there hope that they may morph into a more germane way of understanding South African media consumers in the future?
Hollis says this is likely, although a new version of the tool depends greatly on the future of South Africa’s audience research, which is currently clouded in uncertainty.
In the meantime, alternative metrics and ways of using LSMs have cropped up to try and solve the questions that LSMs leave unanswered.
Single source marketing and media survey Target Group Index (TGI) has developed Socio-Economic Levels (SELs), for which Ask Afrika holds the South African license.
According to TGI, SELs, with a local sample size of 15 000 respondents and an international one of 800 000 respondents, provide marketers with the ability to understand consumers’ potential to spend as well as the social context in which this potential is held. This, they say, gives marketers valuable information to target their campaign and to talk to people rather than just their wallets.
Qokweni says Carat uses SELs for clients like Nokia, General Motors and consumer product company Procter & Gamble, all of which have a reach in Africa. But, he says, SELs suffer from the same challenges as LSMs. “It is a linear way that demographically describes an audience and does not look at a multi-dimensional view of a segment,” says Qokweni.
Similarly, Hollis says that SELs are only effective in Europe and America because their populations are largely homogenous. “That is not the case in South Africa. SELs also measure the top end of the market and neglect the middle class,” she says.
Watermeyer says that ideally, LSMs should not be used in isolation.
“We test their validity in combination with other demographics in order to build best-case media target market descriptors for our clients,” she says.
“Currently LSMs are a base for segmentation and not a segmentation tool on their own,” says Qokweni. “If we use TGI and other tools at our disposal, we can add some psychographic and attitudinal criteria which would help better describe the segments we choose to target. The key is to use a combination of criteria to describe your brand’s target audiences.”
And all this, says Hollis, comes down to marketers understanding the limitations of LSMs as a living standards metric.
“If you take a top end product and use income as a demographic, it would show that people have the money to make purchases. LSMs, however, give an average,” she says. “Marketers need to be smarter in understanding this.”
This story was first published in the August issue of The Media magazine.
IMAGE: Wikimedia Creative Commons
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