Strategic Segmentation: Targeting Diverse Markets in BPO

Effective market segmentation is crucial to tailor products and services to satisfy client needs, foster long-term partnerships, and grow client bases. In the business process outsourcing (BPO) market, service providers take critical measures to understand and categorize their key clients.

Continue reading to learn how BPO companies can leverage robust market segmentation strategies to meet client demands and respond to industry shifts. This article also details how advanced technology contributes to curating service offerings and reaching the right clientele.

Key BPO market segments to remember

Businesses entrust their back- and front-office functions to third-party providers for increased cost savings, enhanced flexibility, and improved service quality. The approach also allows them to optimize specialized skills and emerging technologies without significant investments.

As a result, the global BPO sector earned $280.64 billion in revenue in 2023. Grand View Research projects that the industry will expand at a compound annual growth rate (CAGR) of 9.6% by 2030.

The outsourcing market’s growth is also due to its ability to cater to different business segments. Below are common industries and functions BPO companies serve:

As companies and industries increasingly seek third-party support, BPO providers also expand their services. Their offerings now go beyond the usual market segments to cater to their clients’ diverse needs.

Statista’s latest data reflects such expansion. As the outsourcing sector continuously meets enterprise demands, the research organization expects the worldwide industry to reach $0.39 trillion in 2024 or $0.49 trillion by 2029. 

The BPO industry also serves the following business segments and functions:

Targeting BPO clients with market segmentation strategies

BPO companies follow robust measures to identify clients and successfully deliver business offerings. They develop and implement practical market segmentation strategies to understand and satisfy clients’ unique needs. 

The list of techniques below is what BPO providers do to effectively target a wide range of niche markets and attain a competitive advantage:

Understand specific client bases

BPO firms perform comprehensive market research to collect data on trends, client needs, and technological advancements shaping operations. This effort involves studying industry reports, demand patterns, and competitor movements. The findings give insights into client organizations, consumers, and service preferences.

For instance, analyzing CRM transaction history helps BPO call centers identify the communication channels consumers use most. They can then assist client organizations in tailoring solutions to personalize support.

Adopting personalization gives BPO clients an advantage. According to Salesforce’s latest State of the Connected Customer, nearly two-thirds of consumers expect brands to adapt experiences to satisfy their changing needs and inclinations. Businesses capable of realizing this gain a competitive edge.

Besides optimizing CRM systems, BPO providers determine whether clients need to provide voice or non-voice support through these data collection techniques. The outlined strategies also apply to other market segments:

• Website analytics
• Targeted market surveys and interviews
• Social media monitoring
• Customer feedback and rating reviews
• Focus group discussions
• Client profiling

BPO companies benchmark themselves against competitors as part of their market segmentation strategies. This approach enables them to understand and comply with their industry ranks, differentiation approaches, and client choices.

Define criteria for target markets

Defining criteria for target markets helps BPO providers prioritize segments that offer the highest potential for client satisfaction, profitability, and business growth. This client-centric approach enables them to optimize resources and customize their offerings.

BPO vendors stand out in a competitive market by identifying critical factors that help them develop segmentation strategies:

• Specific industry verticals reflect unique business processes, BPO needs, and regulatory requirements. The table in the previous section shows the common examples of industry verticals.
• The company size influences a client’s outsourcing requirements, budget allocations, and service preferences. BPO companies might focus on small- and medium-sized enterprises (SMEs), large corporations, government institutions, or multinational companies.
• Support vendors target clients in specific locations based on legal, cultural, and linguistic considerations. It allows them to understand domestic and international market dynamics and tailor their services to meet regional needs.
• Providers consider clients’ revenue levels and budgets when segmenting markets. This factor tells them whether a client has a larger BPO budget and more complex requirements or seeks cost-effective, value-added services.
• Third-party vendors might categorize clients according to their outsourcing maturity levels. BPO firms formulate market segmentation strategies by noting the different levels of support required based on clients’ experience in the field.
• Technology adoption also affects how BPO firms specify and serve clients. They develop and implement services that match a client’s technological capabilities and goals, such as when rolling out digital transformation efforts.
• Service vendors evaluate the strategic fit between their capabilities and clients’ business priorities. They align goals and value propositions for a mutually beneficial partnership.
• BPO firms assess the long-term potential of target clients regarding revenue growth and relationship longevity so they can prioritize supporting scalable and stable organizations aligned with their growth initiatives.
• Analyzing the competitive landscape enables providers to pinpoint underserved or niche market segments. The findings guide them in differentiating their services to accommodate potential clients and capture market share.

Choose the right market segmentation techniques

BPO firms ensure their market segmentation strategies correspond with their overall business targets. Different goals might require distinct segmentation approaches to attain desired outcomes.

For example, a healthcare provider is launching a new BPO service in fitness and wellness. The vendor wants to customize its offerings based on lifestyle preferences using psychographic segmentation to reach the right audience.

This technique helps the contractor determine clients serving customers with varied lifestyles, such as fitness enthusiasts, busy professionals, or stay-at-home parents. Recognizing these unique needs assists the provider in personalizing fitness-related marketing messages and support services.

Here are other market segmentation techniques that providers consider to understand client organizations, their industry verticals, and customers:

• Demographic segmentation divides the market based on age, gender, income, education, occupation, marital status, family size, and ethnicity.
• Geographic segmentation sorts the client bases according to region, country, city, climate, population density, and urban-rural classification.
• Behavioral segmentation categorizes client organizations depending on consumers’ buying behavior, purchase history, and brand loyalty.
• Firmographic segmentation classifies the client business landscape based on industry vertical, company size, revenue, location, ownership structure, and enterprise age.
• Usage segmentation groups the market according to how frequently clients use BPO products and services (e.g., heavy users, moderate users, or occasional users).
• Benefit segmentation tags clients based on their sought benefits, urgent needs, or outsourcing requirements.
• Occasion segmentation breaks down the market depending on BPO procurement behavior during specific events, such as holidays, celebrations, or seasons.
• Technographic segmentation catalogs clients based on their digital literacy, preferred technology, device usage, and online behavior.

BPO companies also use Hooley’s Segment Attractiveness and Resource Strength Framework to identify the best method for market targeting. This approach helps assess the opportunity available in a specific segment and the provider’s ability to compete in that sector. 

Measure market segmentation outcomes

BPO contractors measure the effectiveness of their market segmentation strategies by setting key performance indicators (KPIs). They use these metrics to assess segment penetration rates and the technique’s contribution to their bottom line:

• Customer satisfaction (CSAT) rates and net promoter scores (NPS) enable providers to determine how their segmentation techniques help meet client needs and understand their sentiments.
• Customer lifetime value (CLV) informs BPO companies on the long-term profitability of segment-specific client relationships. This metric guides them in verifying the return on investment (ROI) of market segmentation strategies.
• Market share and competitive positioning give vendors insights into their relative strength and performance compared to competitors in the same segment. They study competitor benchmarks and marketing trends to explore opportunities for differentiation.
• Customer retention and churn rates allow BPO firms to validate customer loyalty and satisfaction. These KPIs assist them in identifying segments with high customer retention potential and developing methods for improved support services.

Technology’s role in BPO market segmentation strategies

Emerging technologies are critical in developing and implementing a BPO provider’s market segmentation strategies. Artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA) automate repetitive data collection and analysis.

These solutions power analytics tools that extract insights from big data gathered from CRMs, website traffic, and market research. They enable a more data-driven strategy for targeting BPO clients based on personalized needs and service demands.

Because the advanced tech does not require massive equipment, it minimizes overhead costs and lets providers offer services at competitive pricing. Additionally, AI allows BPO companies to focus on building long-term client relationships. It gives actionable data to help them create robust measures to deliver a positive client experience.

In fact, the CMO Survey said in its 2023 study that AI increased customer satisfaction by 7%. More than half of polled companies also reported using the modern solution to boost customer segmentation and targeting decisions. 

The bottom line

BPO companies deal with diverse markets and varying needs and service preferences. Understanding each sector and its related functions is crucial to meeting these requirements.

Meanwhile, segmenting the business landscape allows providers to achieve optimum client satisfaction and retention. Thus, they develop and implement market segmentation strategies to target the right audience effectively and use advanced technologies to speed up the process.

Let’s connect if you want to know how BPO companies utilize market segmentation strategies to divide their client bases for faster, more cost-effective support. We can also discuss a potential deal to resolve your marketing challenges.