Investing in SMS marketing yields an incredible Return on Investment (ROI) unmatched by other digital strategies. Nearly all recipients open their messages within minutes of receiving them, making this channel highly effective and powerful – yet also easily abused if you are too aggressive or irrelevant with your messaging to customers. Businesses need to understand what SMS marketing ROI is and how it is calculated to reap this powerful marketing tool’s benefits fully.
To calculate the ROI of SMS marketing campaigns, you must first understand the costs associated with running a campaign and the income generated from it. You can uncover your text marketing campaigns’ return on investment (ROI) with the right tools. Let’s explore how to calculate ROI for SMS marketing and discover some helpful best practices that will help you maximize success. By understanding past campaigns’ averages, we can better anticipate possible outcomes using this powerful digital tool.
What is SMS Marketing ROI?
SMS marketing ROI measures the financial return on investment (ROI) generated from an organization’s SMS marketing campaigns. It includes all costs associated with running a campaign, such as labor and materials, along with any income generated from the campaign, such as sales or leads.
Running a successful, targeted text marketing campaign will likely provide an impressive return on investment of up to 500%. Customers can expect the monetary value they receive to be five times their original input. This type of return is far higher than the returns other marketing channels can offer.
Monitoring and assessing the efficiency of your text campaigns is essential for enhancing cost efficiency. Calculating campaign ROI is the perfect way to measure progress and evaluate your strategies’ effectiveness at reaching customers.
How Is SMS Marketing ROI Is Calculated?
Several factors affect SMS marketing ROI. To calculate, a business must look at the messages received, click-through rate, opt-out rate, conversion rate, and growth rate.
Delivery receipts can be misleading in identifying technical or logistical problems with your SMS marketing campaigns, resulting in undelivered messages. Even though the delivery reports may appear normal to you, some subscribers still don’t receive your text messages – this is mainly due to certain carriers using content filters to prevent spam and inappropriate material.
Here are some formulas businesses use to calculate ROI.
Growth Rate – Calculating your growth rate is incredibly simple: subtract the number of existing subscribers from the total amount of current ones, then multiply that number by 100. This figure reflects how many new supporters have been acquired during a given time and serves as an effective Key Performance Indicator (KPI).
- Growth Rate Percentage = (Number of Current Subscribers – Number of Previous Subscribers) x 100
Conversion Rate – To determine your conversion rate, divide the number of users who completed a desired action by the total amount of subscribers you had in that particular campaign.
- Conversion Rate = Total Number of Subscribers / Number of Conversions
Click-Through Rate – To precisely calculate your CTR, take the amount of SMS clicks you received and divide it by the total number of texts delivered. Subsequently, multiply that answer by 100 to get a percentage.
- CTR Percentage = (Number of SMS Clicks / Number of Delivered Texts) x 100
When it comes to opt-out rates, you should anticipate a few subscribers opting out every time you send an SMS. Subscribers may have opted out for several reasons that are entirely unconnected to the excellence of your campaign: It’s possible they inadvertently subscribed while registering for another one of your services or just decided that they want fewer messages entering their phones daily.
Lastly, the attrition rate measures how many individuals withdraw in a given period, such as one month or quarter. This key performance indicator aids in discerning trends that have nothing to do with your marketing efforts.
Learn more about What is SMS Marketing? Guide and Benefits and why many businesses are using it for their campaign.
How Does SMS Marketing Compare to Other Marketing Channels in Terms of ROI?
Regarding ROI, SMS marketing stands out from other email and social media channels. According to studies, SMS has a higher open rate than email (98% compared to 20%) and boasts an impressive average ROI of 45%. Additionally, it takes customers 90 seconds on average to read and respond to text messages, meaning that brands can expect quick responses.
When assessing the value of your SMS campaigns against other marketing channels, it is vital to consider the associated costs. SMS marketing requires minimal resources, including creating a system and creating content. This makes it an attractive option for businesses with limited budgets.
Although SMS messages may appear pricier than emails due to their shorter length, many organizations experience higher ROI when they opt for text marketing. According to a recent study, SMS advertising yields an impressive return on investment of around $71 for every dollar spent; in contrast, the estimated ROI from email marketing is only about $36 per dollar invested.
Aside from these benefits mentioned, there are 13 Benefits of SMS Marketing that you must read about to understand how you can take advantage of this tool for your business.
What Are the Key Factors that Impact the ROI of SMS Marketing Campaigns?
The key factors influencing the ROI of SMS campaigns are segmentation and personalization, timing and frequency, message content, and analytics. Let’s take a closer look at each factor:
- Segmentation & Personalization – Segmentation allows you to target the right audience with relevant messages. By segmenting your customer base into different groups based on demographics, location, or preferences, you can ensure that each recipient receives tailored content that resonates with them. Personalization is also a great way to increase your campaigns’ ROI by providing customers feel like they are getting something explicitly designed for them.
- Timing & Frequency – Timing and frequency also play an essential role in SMS marketing success. Messages sent too frequently or at the wrong times can quickly lead to customers unsubscribing. Finding the right balance here is important to maximize engagement and ROI.
- Message Content – The quality of your message content is also critical for campaign success and should be creative and engaging rather than too salesy. Offering incentives, discounts, and deals can help boost engagement and encourage customers to take action.
- Analytics – Finally, businesses should also track their campaigns using analytics tools to measure and assess the effectiveness of their messages. It will allow you to gain valuable insight into what works and what doesn’t so that you can adjust your strategy accordingly.
What Are Some Best Practices for Optimizing SMS Marketing ROI?
There are seven easy ways to help you make the most of your SMS marketing efforts and maximize ROI. You must adhere to these seven best practices. Implementing them will help ensure a greater return on investment for your business.
- Maximize your savings; keep your texts concise and to the point – Remember that it’s limited to 160 characters when crafting an SMS message. Otherwise, you’ll be charged for more than one – costing your business extra money. To ensure this doesn’t happen and that your audience will read and act on the message, keep it short yet powerful enough to leave a lasting impression! Doing so also helps minimize costs associated with sending out texts.
- Craft customized messages – Heighten involvement and boost conversion rates. Deliver a more personalized experience to your customers with tailored messaging. By leveraging your data on each recipient, you can create more relevant messages and make them feel like their message was written just for them. This kind of personalization will foster greater engagement and boost conversion rates!
- Remember to make actionable CTAs – Utilizing a clear call-to-action in your text messages is vital, as it will simplify your customers’ conversion and purchasing process.
- Timing is everything – Maximize your campaign’s productivity by scheduling your messages for when you know your audience is most engaged and receptive. During business hours, after work, or even on the weekends – tailor it to what works best for who you are targeting.
- Segment your audience – Segment your audience into different categories, such as age, behavior, or purchase history, to ensure that each segment receives personalized messages. It will make the message more compelling and consequently drive higher conversion rates.
- Fail fast – Experimenting with different SMS copy versions is a great way to reach your audience and maximize conversion rates. Meticulously testing message variations will help you identify the most effective communication strategies with potential customers.
- Use an SMS marketing platform to analyze your performance – An SMS marketing platform can give you the power to monitor and evaluate how your messages are performing, allowing you to optimize your campaigns. With this data-driven insight into what is working and areas of improvement, making decisions that maximize ROI becomes simple.
How Can Businesses Measure and Track the ROI of Their SMS Marketing Campaigns?
There are several effective methods of calculating SMS marketing ROI. But, when assessing the return on investment of SMS marketing campaigns, only some formulas work for all brands. Each company and campaign has its objectives, which must be considered when measuring ROI. Here are some methods you can use:
- Click-through rate – Gaining insight into how many clicks a link earns in your campaigns is an easy route to evaluate the level of interest your subscribers have for your products, offers, and content.
- Conversion rate – For most eCommerce brands, conversion rate indicates sales, yet, conversions can be any action you want a visitor to take – from suggesting a friend, registering for an email newsletter, or experimenting with an exclusive interactive feature on your website.
- Cost per subscriber – Like any other marketing channel, it’s essential to know how much it costs to send a text message before you determine the ROI of your campaign. Examine your customer’s entire lifecycle to decide on their actual cost. Observe how many subscribers buy, their spending, and the purchase frequency. Through this calculation, you’ll understand precisely what it costs to acquire each subscriber.
- Opt-Out Rate – It’s critical to contemplate your opt-out rate as well. If you observe many subscribers abandoning each month, it might be the right moment to reconsider your entire strategy and test distinct approaches to minimize subscriber loss.
What Are Some Common Challenges Businesses Face When Trying to Improve Their SMS Marketing ROI?
SMS marketing is crucial for spreading the word about your product and services. All companies can benefit from leveraging this powerful medium regardless of size or sector. Despite many benefits, small and mid-sized businesses must consider multiple factors to tackle the obstacles of SMS marketing efficiently. To gain insight into potential challenges, consider the following challenges:
- Lack of Reply Features – Most businesses need to respond to their customers’ messages, which decreases engagement and customer satisfaction. Adding a reply system to your SMS marketing platform can help you foster customer relationships.
- Improper Timing – Many marketers need to gain knowledge of marketing fundamentals to send the right message at the right time. You must use marketing automation to ensure customers receive the right message at the right time.
- Lack of Personalization – A lack of personalization in SMS campaigns can lead to low engagement rates as customers cannot connect with your message. Focus on personalized messages that resonate with customers’ needs to increase engagement and conversion rates.
- Limited Message Length – The character limit of SMS messages makes it challenging to communicate the right message with clarity and persuasion. You must be creative to ensure every message is concise, clear, and persuasive enough to capture your customer’s attention.
- No Integration With Other Platforms – Integrating SMS campaigns with other communication platforms, such as email and social media, can maximize ROI by leveraging existing customers. You must connect your SMS campaigns with other marketing channels to optimize ROI and customer engagement.
How Can Businesses Use Segmentation and Personalization To Increase the ROI of Their SMS Marketing?
Segmentation and personalization are effective methods for increasing the ROI of SMS marketing campaigns. Utilizing customer segmentation to direct targeted text messages toward your subscribers can significantly increase the return on investment of your SMS campaigns. Studies have shown that 76% of consumers are more likely to purchase from companies personalize their messaging, and an additional 71% anticipate tailored communication in some form or another. Directly targeting audiences through personalized messaging is essential for any successful business today.
Examples are segmenting customers based on purchase history, engagement levels, and demographics.
Utilize your customers’ purchase history to develop various SMS campaigns for those who have and haven’t purchased from you. It allows you to establish two models tailored to their unique needs. By segmenting this way, you can create a more meaningful experience with each customer while increasing conversions.
You can also segment customers according to their engagement level. By sending promotions or discounts only to those that have engaged with your business in the past, you can increase your conversion rate and reduce churn.
Additionally, segmenting by demographics allows you to craft specific messages tailored to each group based on age, gender, location, and more. Utilizing demographic segmentation in your SMS marketing campaigns will enable you to better target specific groups for higher ROI.
Finally, integrating personalized messages into your campaigns can help improve engagement and conversion rates. Personalized text messages are far more likely to be opened and read than generic messages, so make sure your messaging is tailored to each customer’s needs.
Examples of personalization include using the customer’s name, acknowledging their past transactions, or including a special offer just for them. By utilizing segmentation and personalization in your SMS campaigns, you can craft targeted messages that will resonate with your customers and boost ROI.
What Role Do Timing and Frequency Play in Determining the ROI of SMS Marketing Campaigns?
Timing and frequency are essential factors in determining the ROI of SMS campaigns. Customers may become annoyed and unsubscribe from your list if you send messages at the wrong time or too frequently. On the other hand, if you send more messages, customers could remember your business altogether.
Finding the ideal balance between frequency and timing is essential to maximize ROI. Generally speaking, businesses should aim for a maximum of two text messages per week as a general rule of thumb. It’s also essential to ensure your messages are sent at the right time when customers will most likely see them. For example, if you run an e-commerce store, it might be a good idea to send messages during the afternoon when most people are wrapping up their workday.
Overall, timing and frequency are important factors to consider when determining the ROI of SMS campaigns. Finding the right balance between frequency and timing can help ensure your campaigns remain effective and engaging for customers.
How Can Businesses Integrate SMS Marketing Strategy to Maximize ROI?
Businesses can integrate SMS marketing strategies to maximize ROI by doing three things: personalizing communications, optimizing campaigns, and measuring campaign success.
Investing in genuinely personalized customer engagement will help you achieve the outcomes you want from your SMS campaign. Businesses and customers both agree that personalization increases brand loyalty. It is done by segmenting customers based on their demographics, engagement levels, and purchase histories. It can help you craft messages tailored to customers’ needs for higher ROI.
Optimizing your SMS campaigns is vital to maximizing ROI, and the best way to do it is with A/B testing. A/B testing allows you to test two different pieces of creative against each other. You can then compare results and choose the version that performs best. It will help you optimize your campaigns for better performance quickly and easily.
Finally, measuring campaign success is essential to understanding which strategies are working and where improvements can be made. Businesses should track metrics such as open rate, click-through rate, and conversion rate to gain insights into their campaigns. You can tweak messaging, timing, and frequency for higher ROI in the future.
What Are Some Real-Life Examples of Businesses that Have Achieved High ROI Through SMS Marketing
Many businesses have achieved high ROI with their SMS marketing campaign. Some examples are the following:
Princess Polly – The Australian clothing brand started SMS marketing to increase engagement with Gen Z audiences. The brand used SMS blasts to help with revenue goals, flash sale campaigns to increase conversion, and 73x their ROI from the non-engaged segment. Utilizing this channel has allowed the brand to build a strong connection with its target audience in an extraordinary and impactful manner.
Beast and Buckle – The dog harness brand started with SMS marketing in 2019 to connect with more audiences. Since its launch, Beast & Buckle—known for their reversible dog harnesses, collars, and leashes—has cemented SMS as its number-one marketing channel. With an incredible click-through rate of 21%, they used Postscript’s Okendo integration to post reviews with a submission rate of 21.8% while maintaining an average star rating of 4.91 – this is almost unheard of.
REDCON1 – After expanding its list growth strategy using SMS, the sports supplement brand REDCON1 achieved an average open rate of 99.93% and doubled its subscriber list in one year. Their SMS campaigns have delivered a massive 113x ROI and helped the organization reach over 2 million people in two months.
You can read more about SMS Marketing Success Stories to help you plan a strategy that works for your business.
Is SMS Marketing Profitable?
Yes. SMS marketing is a highly profitable channel for businesses of all sizes. It can lead to higher engagement rates, increased revenue, and better campaign ROI when done correctly. With the right strategies and proper metrics tracking, businesses can use SMS campaigns to reach their goals quickly and cost-effectively.
The key to unlocking the potential of SMS marketing is to personalize customer engagement, optimize campaigns with A/B testing, and track metrics to understand what works best. By using these strategies effectively, businesses can see higher ROI and better results from their marketing efforts.
Is SMS Marketing Affordable?
Yes. SMS marketing is a cost-effective marketing method that businesses should explore. It offers a great return on investment and can be tailored to fit any budget. SMS marketing prices vary depending on the SMS marketing platform that you will use. Generally, the marketing costs range from $0.01 to $0.50 per message delivered, depending on the context of the message and whether it is sent or received in bulk. It is more affordable than other marketing channels, making it perfect for businesses on a budget.
Is SMS Marketing Growing?
Yes. SMS marketing is one of the fastest-growing digital marketing channels today. It is estimated that more than 8 billion text messages are sent daily, which continues to grow. In 2020, the global mobile messaging market was valued at $73.4 billion, and this number is expected to continue growing in the years to come. This growth is driven by businesses leveraging SMS marketing for customer engagement, loyalty programs, promotions, and discounts.
Is SMS Marketing an Excellent Marketing Channel?
Yes. SMS marketing is a highly effective marketing channel that can provide up to 7,000% ROIs. It is one of the most direct methods to reach customers and can be used for various marketing goals such as customer acquisition, lead generation, and sales. The engagement rate on SMS messages is much higher than other digital channels like email or social media. Additionally, it offers a great way to personalize customer experiences in timely and relevant ways. These factors make SMS marketing an excellent choice for businesses looking to increase reach, build customer loyalty, and boost sales.