While SMS marketing typically boasts an impressive 98% open rate, there is currently no universally accepted ROI benchmark for text message marketing. After all, SMS spans a wide variety of uses—from appointment reminders to flash sales—making it difficult to establish an industry-wide standard against which to compare your own success. Though a single, definitive ROI stat for SMS may not exist, this doesn’t prevent you from estimating your own returns. Whether you’re curious about the cost of SMS marketing or calculating its potential returns, here’s a comprehensive breakdown to help you maximize the value of your SMS campaigns.
Understanding the Cost of SMS Marketing
Before you can figure out how well your SMS campaigns are performing, you need to understand what they’re costing you. The expense of SMS marketing involves more than just paying per message, as that’s merely the tip of the iceberg with a significant portion tucked below the surface.
Direct SMS Platform Costs: The Basics
Most reputable SMS platforms won’t offer simplistic packages at a flat rate, as associated costs are dependent upon the size of the subscriber list, the intended usage, your location, and more. Some software is pricier than others, but here’s a quick look at what you can expect:
- SMS costs: Platforms like Voxie charge around $0.015 per text message.
- MMS costs: Sending an MMS (think images or videos) typically bumps the price to about $0.03.
Software Subscription Models: Flexible or Committed?
When it comes to paying for texts, you have options:
- Pay-as-you-go: If you’re commitment-shy, this model gives you flexibility—no pre-set amounts, no worries. But with that freedom comes higher per-message costs.
- Minimum commitment: Locking in a monthly message volume typically reduces the per-message rate, making it more cost-effective for high-volume campaigns.
The trick is choosing the model that fits your budget and campaign needs. If you’re sending high volumes, a minimum-commitment plan will ultimately improve your SMS marketing ROI over time by reducing management costs.
Understanding the Cost Drivers in SMS Marketing Strategy
When planning an SMS marketing strategy, understanding the factors that drive costs is essential for optimizing budget and maximizing ROI. Each element—from message type to delivery logistics—plays a significant role in determining the final costs of an SMS campaign.
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The Nature of the Text Messages
The characteristics of each message significantly affect costs:
- Number of Recipients: As campaigns grow to reach larger audiences, so does the cost. Sending messages to a vast audience will increase expenses proportionally.
- Keyword and Short-Code Usage: Using keywords for audience engagement or specific short codes for direct messaging may incur additional charges. Short codes can simplify interaction but come with setup and monthly maintenance fees.
- SMS vs. MMS: Standard SMS messages, limited to 160 characters per “segment”, tend to be less expensive. In contrast, MMS messages, which support multimedia content like images or video, can be more engaging but usually cost more due to the larger data requirements.
- You can send SMS messages longer than 160 characters, but each message will be divided into multiple segments, with each segment incurring an additional charge.
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Carrier Fees
Carrier fees vary by provider and are a key element in the overall cost structure. Different carriers apply distinct fees for SMS and MMS delivery, often based on factors like message type and data volume. In addition, some carriers apply additional charges for high-volume campaigns or specific use cases, such as marketing and promotions.
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The Country of the SMS Recipients
The geographic location of recipients can substantially impact costs. Messaging fees differ worldwide due to carrier agreements and international rates. Regions with less developed infrastructure or higher international connectivity fees generally have higher associated costs for SMS delivery, making it vital for brands to consider these factors when planning international campaigns.
Beyond the Basics: Often Forgotten SMS Marketing Costs
SMS marketing expenses go beyond just the cost of sending messages. Building your subscriber list can incur both direct and indirect expenses, which may include:
Building Your Subscriber List
First things first—getting people to opt-in to your messages isn’t always free. You might have to invest in:
- In-store signage - Those “Text JOIN to 12345” signs? Someone’s gotta design and print them.
- Incentives People love discounts, so offering exclusive deals for signing up can work wonders. But giving away freebies can add up and is something that you should budget for.
- Loyalty programs - Running a loyalty program to capture phone numbers is another potential cost you’ll need to factor in.
Campaign Management: Time Is Money
Crafting engaging texts, designing visuals, and tracking performance data all require time and resources. It’s easy to overlook these tasks, but they play a crucial role in the effectiveness of your campaigns. Whether you’re managing your SMS efforts in-house on our platform or collaborating with an agency, these activities come with associated costs that impact your overall investment.
By accounting for these expenses upfront, you’ll be better equipped to forecast your SMS marketing budget accurately and truly understand the ROI. This way, every dollar spent aligns with measurable outcomes that drive growth and engagement.
How to Calculate SMS Marketing ROI
Alright, now that you know your costs, it’s time to talk ROI. You’re spending money, so how much are you getting back? While there’s no magical formula that works for every business, there are key metrics you should track to get a clearer picture of your SMS marketing ROI.
Metrics to Track to Improve ROI Accuracy
Number of (Engaged) Subscribers
This one’s obvious: the more subscribers you have, the more potential reach your messages have. But don’t get too fixated on the length of your subscriber lists; what matters most is whether recipients engage with your marketing messaging. A list of 1,000 people who love your brand is far more valuable than a list of 10,000 people who never interact with your messages.
Open Rates
Here’s the good news: SMS boasts open rates that other marketing channels can only dream of. But, not every message will hit the mark. Monitoring variations in open rates between different campaigns will help you see what types of messages resonate with your audience—and which ones fall flat.
Click-through Rates and Conversions
If you’re including links in your messages (and you should be), track how many people click through and—more importantly—how many convert into customers. A high click-through rate is great, but a sale at the end of that click is even better.
Attributed RevenueAttributed revenue is a vital component of your marketing strategy, representing the total income generated directly from your text campaigns. By tracking revenue linked to discount codes or exclusive offers, you can gain valuable insights into the effectiveness of your texts and accurately assess your SMS marketing’s ROI.
The Challenge of Measuring SMS ROI: What Happens Offline?
Calculating the ROI of SMS marketing efforts can be more complex than it may seem. While accurately determining costs is straightforward, tracking conversions with complete confidence can be much more challenging—especially if your business conducts a substantial number of transactions offline.
Consider this scenario: You send a text promoting discounted tacos, and a customer clicks the link to make an online purchase, resulting in an easily trackable conversion. But what if they instead visit your store and buy the bundle in person? And how do you account for their return three days later to buy the same taco at full price?
Moreover, the soft value of effective SMS marketing plays a crucial role in shaping overall brand perception. For example, during a health scare linked to lunch meat, PrimoHoagies swiftly sent a reassuring text to their customers, confirming that their food was unaffected. This built customer trust, but it’s challenging to quantify the “peace of mind” in financial terms.
Overcoming the Challenges of Measuring SMS Marketing ROI
Bridging In-Person Shopping and SMS Marketing for Deeper Insights
To create a seamless connection between in-person shopping experiences and SMS marketing efforts, it’s crucial to link customer transactions with their SMS subscriptions. By gathering key customer information and analyzing purchase behaviors, brands can craft more impactful SMS campaigns and refine their understanding of buying patterns.
1. Collecting Customer Information at Checkout
Encouraging customers to share their phone numbers during in-store purchases is a valuable way to build a database of SMS subscribers who are actively shopping in person. Some effective methods include:
- Incentivizing with Loyalty Rewards: Many retailers and quick-service restaurants (QSRs) offer loyalty points or discounts to shoppers who provide their contact information at checkout, creating an immediate benefit for the customer.
- Integrating with Payment Systems: Connecting payment providers, like Stripe, to SMS marketing platforms helps streamline the process. This integration enables automatic association of in-store transactions with SMS subscriptions, enhancing the accuracy of customer data.
2. Analyzing SMS Campaigns and Purchase Behavior
Tracking the influence of SMS campaigns on customer purchasing decisions allows brands to see which promotions resonate most:
- Measuring Campaign Impact: For instance, if an SMS campaign promotes 50% off cookies, observing an increase in cookie sales following the message demonstrates the effectiveness of that particular offer. Monitoring these trends provides valuable insights into customer preferences, enabling brands to fine-tune future campaigns.
By linking in-person transactions with SMS marketing and examining purchasing patterns, brands can develop a more holistic view of their customers, boosting engagement and optimizing marketing strategies.
Using ROI Data to Improve Your SMS Campaigns
No solution for measuring and attributing non-digital transactions is flawless. This challenge is not unique to SMS; it also applies to email marketing, social promotions, and traditional advertising. Therefore, consider SMS marketing ROI as a source of directional data rather than absolute certainty. This metric is particularly valuable for assessing comparisons—whether you’re contrasting two campaigns, evaluating performance across different channels, or tracking changes over time.
For instance, suppose you launched a major campaign to expand your SMS subscriber list, incurring costs for product discounts and promotional materials. At first glance, the growth in your list might suggest that the campaign was a resounding success. However, a closer analysis of the list’s engagement, attributed sales, and subsequent unsubscribe rates—when weighed against the campaign costs—may reveal that your strategy did not ultimately deliver a desirable ROI when compared to past SMS efforts.
Strategies to Improve the ROI of Your SMS Marketing
- Segment Your Audience Not every message needs to reach your entire list. SMS segmentation allows you to target specific subscriber groups, making each message more relevant and improving engagement, while avoiding wasted costs.
- Vary Your Messaging and Frequency -. Every marketer knows the threat of ad fatigue, in which audiences become desensitized or annoyed upon seeing the same marketing message too many times. This risk can apply your SMS strategies as well, in which each repetitive text results in diminishing returns. Therefore, diversify your marketing messaging, and don’t overdo it—sometimes, less is more. For fresh inspiration, read 9 Creative Marketing Text Message (SMS) Ideas & Examples.
- Build SMS Drip Campaigns - SMS drip campaigns allow you to engage subscribers over time with a series of messages that progressively build on each other, often branching into different paths based on individual behaviors. This helps your brand tell a more nuanced marketing story and provide a more tailored text experience, ultimately improving SMS engagement and ROI.
- Take an Omnichannel Approach - Integrate SMS with other channels, such as email, social media, and in-store promotions, for a unified customer experience. For instance, you might follow up an email campaign with an SMS to reinforce urgency around a sale.
- Test and Optimize Your Campaigns - It’s unlikely everything will work perfectly on the first try, and that’s fine. Use A/B testing to refine your messages, offers, and timing, continuously improving your approach and maximizing results.
TL;DR
SMS marketing offers sky-high open rates (around 98%), but calculating ROI can be tricky. The cost of SMS marketing depends on factors like platform fees, message type (SMS vs. MMS), and subscriber list size. Lesser known costs include building your subscriber list and time spent developing and managing campaigns.
To measure SMS marketing ROI, track metrics like subscriber count, open rates, conversions, and attributed revenue. Offline sales and soft benefits like brand trust can complicate ROI calculations, but strategies like using trackable links and unique discount codes help. To boost your ROI, segment your audience, vary your messaging, build SMS drip campaigns, and A/B test for optimization.
About Voxie
Voxie is an innovative SMS marketing platform designed to help franchises engage their customers more effectively through personalized and impactful text message campaigns. With features that allow businesses to track metrics, segment audiences, and create customized SMS experiences, Voxie enables franchises to harness the power of SMS marketing while optimizing ROI. From cost-effective messaging options to advanced analytics, Voxie provides the tools needed to turn SMS into a key driver of growth and customer engagement.