Understanding the Living Standards Measure Segmentation in South Africa

Key Takeaways

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1. Living Standards Measure (LSM) Segmentation:
South Africa employs the LSM marketing tool to divide the population into 10 groups. LSM 10 represents the highest living standard level, while LSM 1 is the lowest. The segmentation is based on living standards criteria such as urbanization, ownership of major appliances, and cars.
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2. LSM Group Divisions:
LSM 1-4: These individuals earn between R1,363 to R3,138 per month (approximately US $85 - $200).
LSM 5-7: These individuals earn between R4,165 to R11,263 per month (approximately US $260 - $700).
LSM 8-10: These individuals earn between R13,210 to R32,521 per month (approximately US $825 - $2,000).

3. Population: 
Statistics South Africa (StatsSA) estimated the 2020 mid-year population at 59.2 million. Gauteng Province has the largest population, representing 26.0% (15.5 million people), followed by Kwa-Zulu Natal with 19.3% (11.5 million people), and the Western Cape with 11.8% (7.0 million people). These three provinces account for 57.1% of the country's population.

4. History of LSMs:
The LSMs were developed by the South African Audience Research Foundation (SAARF) in the late 1980s. Originally, the 1989/90 SAARF reports included 13 key variables chosen from 71 characteristics to differentiate living standards. SAARF updates the LSM statistics annually.

5. Retailer Target Markets: Major South African retailers target specific LSM groups:

1. Shoprite: Targets LSM 1 to 6.
2. Pick n Pay: Targets LSM 1 to 8.
3. Spar: Targets LSM 6 to 10.
4. Woolworths: Targets LSM 6 to 10.
5. Massmart (owned by Walmart): Covers all LSMs, including Cambridge foods targeting the lower end.

Breakdown of the Different LSMs:

LSM 1-4 (Least Access to Wealth)

• Education: Primary to some high school.
• Area: Mostly Urban or Rural.
• Household: Traditional hut, matchbox house, or shack.
• Main Media: Commercial radio (African Languages Services), TV with minimal channels.
• General: Minimal access to services, low income "Mzansi" bank account, some electricity, water on plot or communal, non-flush toilet.

LSM 5-7

• Education: High school and/or some higher education.
• Area: Mostly Urban or Rural.
• Main Media: Wide range of radio and TV channels, newspapers, internet access.
• General: Access to electricity, water, flush toilets, ownership of durables like cellphones, TV set, hi-fi, stove, fridge.

LSM 8-10 (Most Access to Wealth)

• Education: High school and higher schooling.
• Area: Mostly Urban and Suburban.
• Main Media: Wide range of radio, TV, newspapers, magazines, internet.
• General: Full access to services, ownership of durables like cars, furniture, and participation in any leisure activities.