Tel: +27 11 463-5340/1/2 | Fax: 086 635-3592 | Mail: saarf@saarf.co.za  Contact  Map

Living Standards Measure

1. Introduction – as is

The SAARF LSM (Living Standards Measure) has become the most widely used marketing research tool in Southern Africa. 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.

The SAARF LSM is a unique means of segmenting the South African market. It cuts across race and other outmoded techniques of categorising people, and instead groups people according to their living standards using criteria such as degree of urbanisation and ownership of cars and major appliances.

SAARF was awarded the prestigious AAA "Media Innovator of the Year" award in 1993 for its contribution in helping marketers, advertising agencies and media owners define their target markets more precisely using the SAARF LSM groupings.

2. The first SAARF Living Standards Measure (LSM)

In the late 80s, SAARF set out to devise an index using a combination of variables which would be stronger than any single variable and thus more useful to marketers for market segmentation. In conjunction with ACNielsen Media International, and their statistical consultant, Dr Jacky Galpin, they looked for variables already measured in the SAARF AMPS survey that would be strong discriminators which could be used to segment the population.

After considerable testing of an initial list of 71 characteristics, or variables thirteen were finally selected for their combined power in differentiating between respondents. Not only did they differentiate well, but they did so in a consistent way when tested on a second set of SAARF AMPS results. This kind of stability was of course a key requirement, while on the other hand, it should also be sensitive to changes in the market place. The LSMs have already proved in the early years to have this characteristic. In an attempt to improve this measure, an exercise was undertaken to force income and education into the index variables. However, it was found that neither of these two variables contributed sufficiently to warrant inclusion.

Once the cluster of indicator variables had been chosen, the term ‘Living Standards Measure’ was coined to describe the scale they created.

The LSMs were included for the first time in the SAARF AMPS 1989/90 reports.

The original thirteen variables that were used were the following :

1989/90 SAARF LSM’s (The Original SAARF LSM’s)

1. polisher/vacuum cleaner

8. sewing machine

2. fridge / freezer

9. Non-supermarket shopper

3. TV set

10. Rural dweller (Outside PWV & W Cape)

4. water / electricity

11. No domestic servant

5. washing machine

12. No VCR set

6. No car in household

13. No tumble drier

7. Hi-Fi / Music Centre

 

From AMPS 89/90 to AMPS 92 we adjusted the LSM-weights and changed the variables where necessary to provide the best fit to the data. This meant that the results were not comparable year-on-year and trending was impossible. As from AMPS 93, we decided not to adjust the variables annually to overcome the above problems, unless large changes were required.

1993 SAARF LSM’s

1. Fridge/freezer

8. Rural dweller (outside PWV & W Cape)

2. Water or Electricity

9. Hi-fi/music centre

3. Polisher/vacuum cleaner

10. No domestic servant

4. Non-Supermarket shopper

11. Washing machine

5. No Car in household

12. Sewing machine

6. TV set

13. Metropolitan dweller *

7. Microwave oven *

 

* New. VCR and tumble drier no longer used.

Each variable carries a different weight, some positive, others negative, and the respondent’s position on the SAARF LSM scale is arrived at by adding together the weights of the variables that she/he possesses. A constant is also added to the total score to remove negative total scores.

3. Later developments of the LSM concept

In the mid-nineties, the feeling gained ground that the SAARF LSM concept could be improved by increasing the number and range of the variables which went into it. Some users were concerned that there seemed to be too great a reliance on the ownership of certain durables, and too little attention paid to other variables that looked, subjectively, as though they ought to be significant reflections or manifestations of a person’s ‘Living Standard’.

A further 39 variables were ‘added to the pot’ of original characteristics, some of them based on new questions added to the SAARF AMPS questionnaire specifically for this purpose. Analysis of this expanded set of data generated a new list of (this time) 20 indicator variables. Interestingly, eleven of the original thirteen variables reappeared in this new list – striking evidence of the original measure’s fundamental strength and stability.

This extended list was applied for the first time to the 1995 SAARF AMPS survey results. A recheck each year from 1996 to 1999 confirmed its continuing validity.

This table shows the twenty variables, which were first published on the 1996 database, and used up till 1999.

1995 SAARF LSM’

1. Flush toilet ** 11. Dishwashing liquid **
2. Polisher/Vacuum cleaner 12. Household supermarket shopper**
3. Non - supermarket shopper (personal) 13. Hot running water**
4. Fridge/Freezer 14. No credit facility **
5. No car in household 15. TV set
6. No financial services used ** 16. Microwave oven
7. Neither water nor electricity 17. Rural dweller (outside Gauteng & W. Cape)
8. No insurance policy** 18. Washing machine
9. Hi-fi/Music centre 19. Hut dweller **
10. Telephone in home ** 20. No domestic servant

** New. Sewing machine and metropolitan dweller no longer used.

The next market-driven development was to extract more detail at the important ‘top end’ of the market. SAARF LSM segments 7 and 8 were each divided into an upper and lower stratum. These sub-divisions (7L & 7H, and 8L & 8H) were first employed in the late ’97 reports. (‘L’ stands for ‘low’ and ‘H’ for ‘high’).

As customary, the variables analysed for the SAARF LSMs were reviewed for the SAARF AMPS 2000A survey. In addition, a number of new variables were included to assist with top-end differentiation. The result of this exercise is that the SAARF LSMs have changed with 16 variables remaining the same and 4 being replaced by new ones. The following table lists the 2000 SAARF LSM variables which have been created on the 2000A SAARF AMPS database:

2000 SAARF LSM’s

1. Built – in kitchen sink # 11. Stove/Hotplate (Electric) #
2. No car in household 12. Polisher/Vacuum cleaner
3. Flush Toilet 13. No insurance policy
4. Supermarket shopper (Personal) 14. Hi – Fi/ music centre
5. Microwave oven 15. Video cassette recorder #
6. Credit facility including retail card 16. No domestic servant
7. Fridge/Freezer 17. TV Set
8. Washing Machine 18. Car/Sedan/Beach buggy/Hatchback/2 Seater coupe #
9. No financial services used 19. Hot running water
10. Hut 20. Home telephone

# Four new variables included for the first time in the 2000 SAARF LSM’s

Dishwashing liquid, water or electricity, rural dweller and household supermarket shopper no longer used.

See article on LSMs

New LSM Descriptors

 

Sitemap
© 2012 saarf.co.za