9 things Product Managers need to know about SMS messaging costs and ROI

Inbox overload is a persistent problem—driving down success rates for spendy marketing campaigns. What works better? Messaging consumers on their phones drives quick responses unmatched by other channels.

Yet, SMS—which stands for “short message service,” better known as text messaging—remains underutilized. Here’s our guide to mastering the costs, capabilities, and potential payback of your SMS messages.

9 things you should do before investing in SMS services

Your SMS services must integrate with your existing customer operations, satisfy your business goals, and fit within your budget. Here’s how to make all of this happen:

1. Determine how SMS improves tasks or messaging for your customers

SMS cuts through the noise consumers face in their daily lives—replacing unwanted emails and phone calls, among other distractions. According to TechJury, SMS messages have a 98% open rate, and 90% of them are read within three minutes.

In retail, “SMS has proven efficiency when it comes to abandoned carts, customer service inquiries and promoting new product launches and seasonal sales,” Forbes reports.

Home delivery innovator Budbee sends customers SMS text messages such as web tracking links, texts with options for delivery customization, and more. SMS has created a “frictionless” customer experience that earns them nearly 4.9 out of 5-star service ratings.

The question isn’t whether SMS is right for your customers. Instead, it’s how and when would they prefer to receive messages from your company? SMS notification services present an ideal place to start.

2. Identify all SMS capabilities available to you

An SMS API can be used for more than simply sending messages. SMS-based customer verifications using one-time passwords build trust and fight fraud, while also boosting conversion rates. Product marketing teams can use bulk SMS to send targeted offers, news, and rewards to customers, personalized for their specific needs and past behaviors. Determine your goals, how they align with SMS, and what capabilities are available to help you realize them.

3. Visualize how SMS fits your existing operations

SMS messaging initiatives can align with existing customer operations, often serving as an alternative to those that are underperforming. SMS deployments typically include analytics, providing insights into its performance in targeted campaigns. SMS solution providers often can integrate their tools with email, scheduling, surveying, and other marketing platforms such as CRM or support, which can help boost your productivity and business results.

4. Determine the full extent of SMS costs

SMS messaging is inexpensive but there are variables to consider. As Business News Daily describes, “Pricing for text message marketing services varies depending on several factors: the vendor, how many messages you need to send monthly, how many custom keywords you need, and whether you expect to exceed your monthly limits at all.” Not surprisingly, discounts are usually available for bulk purchases.

Making the right investment can not only reduce SMS costs but also trim your overall communication costs, which can help streamline customer interactions. Budbee cut its overall communication costs by purchasing large volumes of SMS, and it reduced time and money spent on maintenance and customer interactions, too.

As you calculate costs, find out whether the solutions you’re considering include any exorbitant setup fees or hidden, ongoing charges. Is the technology something your team can easily integrate with your measurement tools? These answers may affect your cost savings calculations and, ultimately, your ROI.

5. Compare SMS to existing solutions

SMS can improve your customer response rate and conversions, which is more important to your bottom line than basic cost-per-message calculations. For example, “email messaging is an overall lower cost method of communication for retailers, however, SMS provides a higher return on investment,” Forbes reported. In another example, a healthcare company cut its missed appointments in half each month—the equivalent of £160,000 in annual savings—by adopting SMS appointment reminders in place of email and phone.

There’s an emerging set of alternatives to consider as well. SMS customers will also try WhatsApp or several of its emerging competitors such as Signal, which has strong encryption, or Telegram, designed to thrive in the cloud.

6. Articulate potential business benefits based on your goals

Your internal stakeholders will ask you directly, “What are the benefits of SMS marketing?” Obtain hard numbers to support your case — there are established metrics that justify the investment. For example, in addition to the statistics above:

• “SMS text messaging can create 25 cents per dollar in revenue earned from customers as compared to 5 cents per email,” according to Forbes
• Sending personalized text messages informing retail customers that an item is available for pickup resulted in a 35% reduction in non-pickups
• When making the case for banking, note that 82% of consumers open every text message they receive. By contrast, email open rates vary but you should expect about 20%

7. Calculate potential ROI for stakeholders

If you’re experiencing significant churn (above 7%) in your customer channels, it’s past time to move to SMS, where data shows customers are far less likely to grow restless.

“The return on investment was very high for SMS marketing in 2020 and its future as an increasingly valuable tool for retailers and brands looks very bright,” Forbes reports. With a clear strategy and industry evidence to support your approach, you can identify KPIs, begin projecting results for your SMS campaigns, and share those insights with your company’s decision-makers.

8. Select the SMS solution that will deliver results

Partner with an SMS solution provider that will proactively support your SMS campaigns. Your partner should also help you future proof your marketing product or solution. For example, a powerful SMS API may support future investments, such as conversational messaging, SMS verification, and other tools that SMS can integrate with or support. Without excellent customer service and support, even the best-laid plans can stall.

9. Launch your first SMS campaign

Armed with a clearly articulated strategy, you’re ready to launch your first SMS campaign. Be sure you have clearly defined KPIs in place and methods for measuring the results, including projected ROI with your internal stakeholders. With the right partner and strategy, you will be well equipped to succeed.

The future of customer engagement is mobile.

Your customers love their mobile phones and are more loyal and engaged with their preferred brands via SMS. But SMS is only one step towards a more robust and holistic mobile strategy when building long-term relationships with customers.

Sinch helps you engage, inspire, and sustain conversations with your customers via mobile channels. Sinch technology enables you to protect customer data and communications shared over mobile channels. Discover what easy-to-implement REST or SMPP APIs can do for your marketing and customer engagement with free credits to get you started today. Or contact a Sinch SMS expert to explore your options.  

Learn more about finding the right SMS provider in our Product Manager's guide to SMS messaging.