From LSM to SEM

Research information stands or falls on its ability to acceptably reflect reality using only a very small part of that reality in order to do so. It would be well-nigh impossible to measure, say, the opinion of every single individual in a country the size of South Africa. So we rely on a sample of respondents – and we use a variety of tools to try to make the sample as representative as we possibly can.

One of the most widely used marketing research tools in South Africa is the LSM (Living Standards Measure) segmentation method. The development of LSM was stimulated by a number of factors, not least that urban vs. rural was losing its power as a differentiator. The gap between the urban and rural markets was narrowing and the habits of both markets were becoming increasingly similar. [Haupt, P.]

The obvious progression was to introduce a new grouping that better described the size and geography of the community. Instead of just “Urban” and “Rural” we now had increments like: Metro, Cities, Large towns, Small towns, and so on. But this was still just a demographic – it didn’t really differentiate lifestyle.

The work of the late Eddie Schulze resulted in the beginnings of a multivariate market segmentation index – a move away from a purely demographical understanding of the market, based on a standard of living rather than only on income. LSM became the key marketing and market research tool, and to some extent has remained so ever since the 1980’s.

The problem is that South African society has changed enormously over the last 30 years or so, and there is a sense that LSM does not reflect the new realities anymore.

Enter the SEM (Socio-Economic Measure) household continuum, developed by Neil Higgs at Kantar TNS.

It seems that this new measuring system has a range of advantages over LSM. In particular, SEMs rely less on durables and more on household structures and community infrastructure.

Simply put, “SEMs speak to how South Africans live and not what they have. This household continuum is a statistically beautiful and technically elegant solution.” – [Peter Storarr – Kantar TNS]

A more accurate reflection of South African Society in terms of how people live?  I hope so.

One thing for sure – when researchers move over to this new tool, we are going to see a very different reflection of the South Africa reality.


[Ref – C Hunter: Shelf Life: “From LSMs to SEMs — a practical solution”. SA Audience Research Foundation – various.]