When launching a new SMS marketing campaign, you want to understand how it performed. One of the most popular metrics to determine the efficacy of any marketing campaign is ROI, or return on investment.
In this article, we’ll discuss SMS marketing ROI. You’ll walk away knowing how to calculate it, maximize it, and what’s considered a good ROI.
Jump right to:
- What is SMS marketing ROI?
- Average ROI of SMS marketing
- How to calculate your SMS marketing ROI
- How to maximize your text marketing ROI
<h2 id="What">What is SMS marketing ROI?</h2>
SMS marketing ROI is a financial metric used to evaluate the effectiveness of SMS marketing campaigns. It measures the return generated from SMS marketing efforts relative to the costs of executing these campaigns.
The outcome is expressed as a percentage, indicating how much return the business earned for every dollar spent on the SMS campaign. A positive ROI means the campaigns were profitable, while a negative ROI suggests that the costs outstripped the returns. It's a crucial metric for businesses to assess the effectiveness and efficiency of their SMS marketing strategies.
<h2 id="Average">Average ROI for SMS marketing</h2>
It isn’t easy to find the average SMS marketing ROI. That's because it differs significantly by brand, industry, campaign, and use case. For example, abandoned cart reminders generate more revenue than product launch campaigns. Additionally, ecommerce brands may drive more sales per message than a B2B company working to nurture a lead.
However, 73 percent of marketers using SMS reported that it drives “incremental revenue.” Plus, another industry report says it can drive as much as $71 per $1 spent, which would put SMS marketing ROI at 7,000 percent.
What is considered a good ROI?
The higher your ROI is over 100 percent, the better. If your ROI is 100 percent, that means you broke even. However, once that number increases above 100 percent, that means you made a profit.
Across industries, a good marketing ROI for a campaign is about $5 generated for every $1 spent. This would result in a marketing ROI of 400 percent.
An excellent marketing campaign may result in $10 generated for every $1 spent. That means a marketing ROI of 900 percent.
<h2 id="How">How to calculate your SMS marketing ROI</h2>
To calculate SMS marketing ROI, you need to determine the total cost of your SMS marketing campaign and the amount you made from the campaign. Here are some expenses that go into the total cost of SMS marketing:
- SMS platform fees. SMS marketing platforms enable businesses to text at scale with proper safeguards. Each SMS platform will have a different pricing structure. For example, some have pay-as-you-go models, while others offer subscription pricing.
- Number of messages sent. Each SMS costs money to send. In the U.S., one SMS message costs a little over 1 cent. This means that the more texts you send, the higher the cost.
- Type of message. MMS messages cost more than a standard SMS, including attachments like photos, videos, or audio. This will affect your cost at the end of a campaign.
- Phone number type. There are three phone numbers approved for SMS marketing: Toll-free, 10DLC, and shortcode. Each one will differ in cost, but shortcodes are the most expensive.
To determine the amount you made from the campaign, you should understand how many sales were driven by your embedded SMS link or unique discount code.
Now that you have those two key numbers it’s time to plug those into the formula.
The SMS marketing ROI formula
The most basic formula for SMS marketing ROI is the amount of sales your campaign drove minus what you spent, divided by what you spent. This number is multiplied by 100 to get a percentage.
Here’s the ROI calculation:
Let’s look at an example of using the calculation. Let’s say your business generated $1,500 in monthly sales from your promotional texts and you spent $100. Here’s how you’d calculate the ROI of that month’s SMS marketing campaign:
<h2 id="Maximize">How to maximize your ROI</h2>
Any campaign's ROI can differ significantly based on the amount you spend and how you attribute text-driven sales. The good news is that there are proven methods to help improve ROI. Let’s look at some of them.
Personalize and tailor campaigns
One of the best ways to improve the success of any marketing campaign, including SMS, is to personalize and tailor content for each individual. McKinsey research finds that companies that incorporate personalization drive 40 percent more revenue from campaigns than those that don’t.
Additionally, PwC article found that customers want personalized offers, discounts on the products they regularly use, and unique loyalty program rewards.
This data proves that tailoring your SMS marketing campaigns to each individual can improve the sales you get from each campaign. For example, you’ll want to offer discounts and share products related to past purchase behavior.
Track and analyze other metrics
Other metrics can help you understand why ROI is up or down for a particular campaign. You should track these metrics and analyze data to make tweaks.
These metrics include:
- Deliverability rate. This is the percentage of text messages that reach your contacts. You want this metric to be high. If your messages aren’t getting delivered to contacts, you will not see optimal results. Be sure to partner with a reliable SMS platform that helps you register your phone number appropriately to improve the delivery rate and prevent carrier filtering.
- Click-through rate. This is the number of clicks your embedded SMS link receives. The more people that click on your campaign, the more likely they will make a purchase. A solid click-through rate also shows that your content and CTA resonate with your target audience.
- Conversion rate. This is the number of users who took your desired action, such as booking, purchasing, scheduling a demo, etc. Your campaigns are on the right track if this conversion rate is high.
- Reply rate. Another metric to keep tabs on is your reply rate. This can help marketers understand if campaigns are engaging. Replies signal people are interested or want to learn more.
- Unsubscribe rate. Always understand your unsubscribe rate. This metric helps you measure how many people no longer want to get SMS marketing texts. If your unsubscribe rate is high, you’ll want to analyze the content, timing, and CTA to understand why.
Get a more in-depth look at additional SMS analytics in this blog.
A/B test campaigns
One of the best ways to improve your ROI is to run experiments with A/B testing. This can help your business understand what content works and what CTAs drive better results. You should track the above metrics for the different campaigns to make data-informed decisions.
Let’s take two examples of texts with different wording and CTAs.
With this A/B test, you could analyze the promo code results to see which content and CTA drove more conversions.
Manage your contact list
Just like for email marketing, you’ll want to manage your SMS contact list effectively. List management helps brands achieve better results from SMS marketing.
To effectively manage your SMS subscriber list:
- Update tags and segmentation regularly
- Remove unsubscribed contacts
- Nix unengaged contacts
SMS list management can help you save money as the right people get your messages.
Get the timing right
When it comes to improving metrics like ROI, pay attention to message send time. The timing of a message can make or break the success of your campaigns.
The optimal time for each business will differ based on factors like audience preference, campaign type, industry, and more. For example, a lunch restaurant may want to send their discount promo to customers right before lunchtime, while ecommerce businesses may want to reach customers in the morning
To find the best time for your business, you can test different send times, observe competitors' actions, and work to understand your audience.
Choose the right SMS platform
A significant factor in the SMS marketing ROI calculation is the total cost. Your chosen SMS platform largely determines the amount you spend on SMS marketing. Be mindful of this while selecting an SMS provider. You want to understand the cost and ensure the platform has the right features, integrations, and support for your business needs.
Look at the platform’s pricing structure, cost per message, registration fees, and other charges to help you understand its associated costs.
Start your SMS marketing journey on the right foot
Text message marketing can generate strong ROI for your business when you choose the right platform. Textline’s SMS marketing platform is built for teams who care about security and results. Textline has built-in metrics, so your business can track the performance of SMS campaigns and improve.But, don’t just take our word for it. Take it out for a spin. Sign up for a Textline account today and try it free for 14 days.
