The death of LSM 18 July , 2016

The Death of LSM (Living Standards Measure)

What is LSM and what is its purpose? Well, LSM (Living Standards Measure) is, in its purest sense, a segmentation tool. In fact, it’s the most used tool in South Africa across all business segments, digital included.

Essentially, the tool tells you, the brand or agency, which standard of living different groups of people fall into. The range runs from group 1 to 10, and each of them shows various indications of a household’s income and likely possessions.

So, an LSM status of 1 indicates that the household has an average income of R1 909 per month, with radio being the major channel of media communication. An LSM status of 5 (midway) would indicate an average household income of R4 550 per month, with access to electricity, water on the plot and a TV set. Lastly, an LSM status of 10 (high) would indicate an average household income of R34 332 per month, with access to Pay-TV services, the internet and full ownership of durables.

Nothing is as black and white as it was, though. Because in today’s world, with changing political and socio-economic climates, the emergence of many blended LSM groups has had a negative impact on LSM targeting.

An example of a blended LSM group would be someone like User A. He has a combined household income of R35 000 per month (LSM 10). But, he doesn’t have any interest in owning property, and prefers to rent from his parent’s home in Alexandria until it becomes family inheritance. User A also has no interest in TV or the internet, and would rather read. Lastly, User A only has access to an outside toilet. Based on some of the facts of his life, User A would automatically be classed as LSM 5. Confusing, isn’t it?

The LSM tool can’t measure what we do, when we do it, and how long we do it for in the digital sphere. It can’t be used to segment users’ online behaviour, nor can it be used to target users based on what types of sites they visit. It’s also unable to tell you, the brand or agency, whether users are in the market for new cars, houses, or new TV sets.

All things considered, LSM would be a fantastic tool to use within GEO descriptions and probably brick and mortar stores. But, as far as online is concerned, where the only way to label websites is by labelling users based on their online habits, LSM falls short.

And make no mistake, labelling users is the best way to “package” audiences. Gone are the days when you could target specific sections of your site – like having Mercedes equal motoring sections. Having a big website with 200 000 unique visitors and not linking it to a data management platform (DMP) is futile, as within the next couple of years, Big Data is going to be the new digital currency.

So, having a rate card stating the amount of “Motoring Enthusiasts”, “In-Market travellers” and “Online Shoppers” is going to give your clients the audience to whom they want to deliver the right message, at the right time.

Automatically, your ROI is going to triple, your CTR quadruple and your CPM rate become the most competitive. The possibilities are limitless. You will have brands knocking at your digital door.

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