SMS marketing has become an increasingly popular and effective way for businesses to reach their customers.
It's a direct and personal channel that allows companies to send targeted messages straight to their audience's mobile phones. With 97% of US adults owning a mobile phone, SMS marketing provides an unparalleled opportunity for businesses to connect with their target audiences quickly and efficiently.
But before diving into any marketing strategy, it's important to consider the return on investment (ROI). In other words, will the money and effort you put into SMS marketing campaigns pay off in the end?
In this blog post, we'll break down what SMS marketing ROI is, how to calculate it, and what steps you can take to maximize your returns. By the end, you'll have a better understanding of whether SMS marketing is worth the investment for your business.
What Is SMS Marketing ROI?
SMS marketing ROI specifically refers to the return on investment for your text message marketing campaigns. It's a way to measure the revenue generated from your SMS efforts compared to the costs associated with running them.
Tracking your ROI is crucial because it helps you assess the profitability of your campaigns. If you're not making more money than you're spending, then your SMS marketing strategy may need some adjustments.
ROI is typically expressed as a percentage. If your ROI is above 100%, that means you're making a profit. But if it's below 100%, you're actually losing money on your campaigns. The higher the percentage, the more profitable your SMS marketing efforts are.
Average ROI for SMS Marketing
It's important to note that the average ROI for SMS marketing can vary widely depending on factors like industry, campaign type, and target audience. Some businesses may see very high returns, while others may struggle to break even.
That being said, SMS marketing ROI figures can be significantly higher compared to other marketing channels like email or social media. This is because text messages have higher open and engagement rates, which can lead to more conversions and sales. In fact, studies show that SMS marketing can deliver an ROI as high as $8.11 per message.
However, it's best not to get too caught up in comparing your ROI to industry averages. Every business is unique, so what works for one company may not work for another. Instead, focus on setting your own benchmarks based on your specific goals and past performance. Then, track your ROI over time to see how you're improving and where you can still optimize.
Costs Associated With SMS Marketing
To accurately calculate your SMS marketing ROI, you need to have a clear understanding of all the costs involved. Here are some of the main expenses to consider:
Cost per Message
One of the biggest costs associated with SMS marketing is the price per message. In the United States, the average cost per SMS typically ranges from $0.01 to $0.05, though this may vary depending on factors like region, platform, message volume, and whether you’re sending a regular SMS (plain text) or an MMS (multimedia message with images or videos). Keep in mind that sending messages internationally or using multimedia content can increase the cost per message.
To budget appropriately, try to estimate how many messages you plan to send based on the size of your contact list and the frequency of your campaigns. If you’re looking to minimize costs while maximizing your reach, Textla offers one of the lowest rates in the field at just $0.005 per text.
Cost per Keyword
If you use custom keywords for your SMS campaigns (like a special word or phrase customers can text to opt-in to your messages), there may be an additional fee for each keyword.
However, standard opt-out keywords like "STOP" usually don't incur any extra costs. Be sure to factor in these expenses when calculating your total SMS marketing budget.
Monthly Platform Fees
Another cost to consider is the monthly fee for your SMS marketing platform. Most providers offer different subscription tiers or pay-as-you-go options.
Generally, higher tiers or plans with advanced features like automation or detailed reporting will come with higher monthly costs. Choose a plan that fits your budget and business needs.
How to Calculate SMS Marketing ROI
Now that you know the main costs involved, let's look at how to actually calculate your SMS marketing ROI. The basic formula is:
(Revenue from SMS − Cost of SMS) ÷ Cost of SMS × 100
Here's a step-by-step breakdown:
- Add up all your SMS marketing costs, including:
- Platform fees
- Cost per message
- Cost per keyword
- Any additional expenses (like design or copywriting)
- Determine the total revenue generated from your SMS campaigns. You can track this by using unique links, promo codes, or other methods to attribute sales directly to your texts.
- Subtract your total costs from your total revenue to get your net profit.
- Divide your net profit by your total costs.
- Multiply the result by 100 to get your ROI percentage.
For example, let's say you spent $500 on an SMS campaign that generated $2,000 in revenue. Your net profit would be $1,500 ($2,000 - $500). To calculate ROI: ($1,500 ÷ $500) × 100 = 300%. In this case, for every dollar you spent on SMS marketing, you earned $3 in return.
Key Metrics to Track
In addition to calculating your overall ROI, there are several other key metrics you should track to get a better understanding of your SMS marketing performance:
Deliverability Rate
Your deliverability rate refers to the percentage of messages that actually reach your subscribers' phones. If your messages aren't getting delivered, that means wasted money and lower ROI.
Aim for a high deliverability rate to ensure your campaigns are actually reaching your audience.
Click-Through Rate (CTR)
CTR measures how many of your recipients click on the links in your text messages. A high CTR indicates that your content is engaging and your audience is interested in your offer.
More clicks can lead to more conversions and sales, so tracking CTR is important for optimizing your ROI. The average click-through rate for SMS marketing campaigns is 18%, significantly higher than email's 2.5%.
Conversion Rate
Conversion rate refers to the percentage of recipients who complete a desired action, like making a purchase or filling out a form, after receiving your text message.
This metric is directly tied to revenue, so a higher conversion rate typically means a better ROI. Focus on creating compelling offers and clear calls-to-action to boost conversions.
Reply Rate
Your SMS reply rate shows how many people are responding to your messages. A high reply rate is a sign that your audience wants to engage in a conversation with your brand.
Two-way communication can help build stronger customer relationships and increase loyalty over time. Plus, replies give you valuable insight into what your audience wants and needs.
Unsubscribe Rate
On the flip side, your unsubscribe rate tells you how many people are opting out of your SMS messages. If this number is high, it could mean your content isn't resonating with your audience or you're sending too many texts.
Keep a close eye on unsubscribes and adjust your strategy if needed to avoid annoying your subscribers and wasting money on messages they don't want.
How to Maximize Your SMS Marketing ROI
If you want to get the most bang for your buck with SMS marketing, here are some tips to help maximize your ROI:
Personalize and Tailor Campaigns
Personalized messages that include details like the recipient's name or past purchases tend to perform better than generic, one-size-fits-all texts. In fact, personalized SMS campaigns can increase open rates by 20% and boost conversions by 10%.
Segment your audience based on factors like demographics, behavior, or purchase history, then tailor your messages to each group's specific interests and needs.
A/B Test Campaigns
To find out what kind of messages resonate best with your audience, try A/B testing different elements of your campaigns. This could include the message copy, offer, call-to-action, or send time.
For each campaign, create two or more variations and send them to different segments of your list. Then, compare the results to see which version performed better. Use these insights to optimize future campaigns for higher engagement and ROI.
Manage Your Contact List
The quality of your contact list can have a big impact on your SMS marketing ROI. Make sure to regularly clean your list by removing inactive or invalid numbers. This will help you avoid wasting money on messages that never reach their intended recipient.
Also, focus on growing your list with high-quality, engaged subscribers. These are the people who are most likely to respond to your campaigns and make a purchase, which means a better return on your investment.
Perfect Your Timing
Sending your messages at the right time can be the difference between a successful campaign and one that falls flat. Test out different send times to see when your audience is most likely to engage.
For example, you might find that your subscribers are more responsive during their lunch break or in the evening after work. Once you find a sweet spot, stick to it for future campaigns.
Choose the Right SMS Platform
Not all SMS marketing platforms are created equal. Some may have higher costs or lack important features that can impact your ROI.
When choosing a platform, consider factors like pricing (subscription tiers vs. pay-as-you-go), ease of use, automation capabilities, and reporting features. Look for a platform that offers the tools and support you need to run successful campaigns at a price point that fits your budget.
Also, make sure the platform you choose is compliant with all relevant regulations, like the TCPA (Telephone Consumer Protection Act). Non-compliance can lead to costly legal fees and damage to your brand's reputation.
Framework For The Best SMS
SMS marketing can be a highly effective way to reach and engage your audience. When done right, it can lead to impressive ROI and long-term business growth. In fact, businesses that text customers are 683% more likely to report digital marketing success than those that don't use text messaging.
But to achieve those results, you need to approach SMS marketing strategically. That means carefully tracking your costs and key performance metrics, then using that data to continually optimize your campaigns.
By personalizing your messages, testing different elements, managing your contact list, perfecting your timing, and choosing the right platform, you can maximize your SMS marketing ROI and get the most value out of every text sent.
So, is SMS marketing worth the investment? For many businesses, the answer is a resounding yes. Just remember to always keep your specific goals and audience in mind, and never stop looking for ways to improve.
With the right strategy and a commitment to ongoing optimization, SMS marketing can be a powerful tool for driving conversions, building customer loyalty, and ultimately growing your bottom line. Ready to build an SMS strategy guided by data?
Textla gives you the tools to track important metrics, understand campaign performance, and make choices that grow your business. Try it free and see how data-driven SMS marketing can work for you. Start your free Textla trial.
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