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The big brands and LSMs
Chart 1 shows the LSM distribution of the population. We have shown (Click Here) that the population has crept up the LSM distribution over time. As this creep up the LSM ladder continues, marketers who were concentrating on a higher LSM would have hoped that people would creep into their target market.
![Chart 1](https://biz-file.com/c/1511/320321.jpg)
LSM 5-7 groups make up 51% of the population. For any big brand, one would expect that LSM 5 to 7 would make up the bulk of the brand's profile.
Definition: we call a brand the preferred brand when people indicate that it is the one they consume most often.
To test whether big brands follow this distribution in the population, we tested 46 brands from AMPS 2014. These are all brands that are among the top three brands in various categories and all with more than a million people stating that the brand is the one they consume most often.
Chart 2 shows a few of the brands. Here we indexed the brand's LSM profile by comparing it to the population LSM profile in Chart 1 - to be clear, we divided the brand's LSM percentage by the corresponding population LSM percentage.
![Chart 2](https://biz-file.com/c/1511/320314.jpg)
It is noteworthy that these brands have clear 'patterns' in their LSM profiles - the indices show much variation from the index figure of around 1.00 for each LSM category that would be expected if the brand followed the population LSM profile. In other words, if brands followed the population profile, the bar graphs above would be much flatter. In marketing terms, this means that LSMs are good discriminators of some brand users and useful for marketing purposes.
Chart 3 shows the eight brands that have the least variation over by LSM. We expected that these would not only have a very flat distribution, but also that this would be random over the LSMs.
![Chart 3](https://biz-file.com/c/1511/320322-700x364.jpg?2)
Even for these brands, while the variation from the universe profile of LSMs is much lower, there are still some patterns in this variation. The implication is that LSMs still play some role in differentiating the people who prefer each brand.
Where are the big brands positioned?
There is a lot to be learned from the big brands' strategies. Chart 4 looks at the averaged index of all 46 brands in our analysis.
![Chart 4](https://biz-file.com/c/1511/320324.jpg)
Big brands not only get fewer of their users from LSM 1-4 because it is a small segment (about 25% of people) and a decreasing market segment, but they get disproportionately less.
Big brands position themselves against LSM 6 and higher. Their strategy is probably to wait for the market to move into these LSM segments.
Marketing Strategy Implications
1. LSMs do differentiate brands
There is a lot of debate around the usefulness (or lack thereof) of LSMs. Much of this debate has to do with a feeling that marketers do not completely understand LSMs and, as a result, abuse them.
The real test for the marketing usefulness of any measure (be it demographic or another segmentation) is whether it differentiates between brand users.
We have shown here that for Big Brands this is indeed true for LSMs as a measure.
2. Big brands seem to position themselves to wait for the market
Since the SA market is moving up the LSM scale, marketers are effectively positioning themselves a little higher up the LSM than where the current market is. [Both of us have some doubts that marketers are this explicit about this]
It is possible that marketers are trying to make their brands aspirational for the lower LSM segments.
3. Attacking the market leader
One of the principles of Marketing Warfare by Trout and Ries is that other brands must attack the brand leader.
One way of directing such an attack is via the LSM positioning of the brand leaders.
4. Reviewing the brand target market
It is important to reconsider a brand's target market every few years. The market is moving and the brand strategy should follow the market.
5. Nobody should target below LSM 5
It is clear that there is not much market in the LSMs below 4 and even those under LSM 5 are moving up the scale. [Neil added: given the population size of these groups, is this not an underserved set of people? it is a quarter of the population]
6. Don't over target
There are very few big brands that sell into fewer than three LSM groups.
The fact that SAARF has increased the number of LSM segments - up to 14 now - allows one the opportunity to target more accurately, but few brands require that a target market of fewer than three LSM groups be specified. It is also a fact that the media cannot isolate such a restricted target audience.
Source: SA Marketing Magazine
![](https://biz-file.com/b/1507/510638.jpg?2)
SA Marketing Magazine is a joint effort by Neil Higgs and Erik du Plessis to provide marketing insights for companies to use as the basis for marketing strategies.
Go to: http://www.samktmag.com/![Erik du Plessis and Neil Higgs](https://biz-file.com/b/1507/510653-140x210.jpg?2)
About Erik du Plessis and Neil Higgs
Erik and Neil are the 'old folk' of marketing, with a mountain of experience between them. They love watching brands grow, have seen brands die and have consulted with nearly every major brand in SA at some stage. They have published papers in accredited journals, won awards and are honorary members of AMASA and SAMRA. They've also talked at major international conferences as well as local keynote talks on the state of the market.![](/res/img/s.gif)