27 October 2023
For the last few years, the SMS channel has been promoted as one of the most cost-effective ways for marketers to reach their audience and generate higher sales opportunities and ROI at lower costs. But does it actually do so?
Though SMS has one of the highest open rates, does it guarantee higher returns for each buck you spend? How much does SMS marketing cost for your business?
Well, it’s easy to speculate that SMS is taking the marketing world by storm without concrete data. However, SMS marketing has one key advantage and that is the ubiquity of SMS-enabled phones as more than 90% of the world population owns a phone today.
Often compared with email marketing which gives an ROI between $32 to $45 per dollar spent, SMS marketing, on the other hand, is believed to give an ROI of around $5+ for each dollar spent. However, this does not paint the whole picture.
Once reserved for private conversations with family and friends, SMS has a significant role to play in brand marketing today. Introduced in the early 90s, SMS has lately been a ridiculously popular channel that is said to generate seven times more than Instagram ads — said a report by Forbes.
Moreover, the same report explains that text messaging drives around 15% or more revenue for companies that utilize the channel effectively. Whereas, emails have become too easy to ignore as most people receive an average of 100+ emails daily while the same for SMS is around 30+.
Thus, many retailers and businesses are turning to text message marketing to use it as an additional promotional channel. Furthermore, the exceptional deliverability, open rate, response rate, CTR, and others make it hard to overlook this modern mobile marketing channel.
The popularity of SMS sees no bounds as it presents a much better and more effective way to get in touch with customers. However, how much does text message marketing cost? How much does an SMS campaign cost? And what returns can a business expect from these campaigns?
Answers to these questions are not going to be straightforward, but I'll try to come up with as easy explanation as possible.
The cost of SMS marketing for businesses depends on two factors: The price of the A2P tool used for text messaging and the number of messages sent per campaign. Let’s explore the pricing factor first:
As I explained earlier, most A2P SMS marketing software use pay-as-you-go or subscription-based pricing models. Pay-as-you-go or flexible pricing is where you’d pay the cost based on the number of text messages sent.
There’s no cap or limit to how many messages you can send, however, tools with this pricing structure can cost around $0.024 to $0.049 per message. This type of pricing structure is best suited for industries that don’t have predictable messaging requirements.
Subscription-based pricing, on the other hand, requires you to pay an upfront monthly/annual fee and provides you with a fixed quota of messages to send in a month. For instance, it can cost you around $20 to $1250 to send 500 to 50,000 texts per month respectively, while additional message credits cost around $0.02 to $0.055.
Both of these costing structures are often on the pricier side, which makes the tools with hybrid SMS marketing pricing your best bet. For example, Textdrip offers hybrid pricing where you pay a small subscription fee while retaining the benefits of the pay-as-you-go model.
It only costs you around $0.012 per text message, which is somewhere 2 to 4 times more affordable than the rest of the tools. Additionally, you can avail 20% discount on the purchase value of over $100, which effectively reduces the price per text to $0.0096.
In general, SMS marketing costs you around $0.01 to $0.055 per text or more depending on your choice of A2P text messaging software.
The second important factor to consider while calculating the cost of SMS marketing is the number of text messages you send per campaign. Let’s say, you want to do SMS for real estate and have approx 5790 subscribers, which are divided into two drip campaigns each consisting of an equal number of subscribers. Thus, 2895 per campaign.
Now let’s say, you are required to send 2 texts of 160 characters per week to subscribers in one campaign and 1 SMS and 1 MMS to subscribers in the 2nd campaign.
This would require you to purchase (2898*2) + (2895*1 + 2895*5) = 23,160 credits that cost around $222.34 (with 20% off from Textdrip). This seems straightforward. Right?
Well, what if you have to send multiple MMS messages to each group or additional messages when your users reply to your previous message?
In such cases, you’d be required to purchase additional credits. Let’s say you send 1 normal text and 1 MMS message to one group and 2 MMS messages to the other group per week. This would require, (2895*1) + (2895*5) + (2895*2*5) = 46,320 credits.
Additionally, say 580 users have replied to your message and you want to send a follow-up message to each. Thus, your total credit requirements would be 46,320+580 = 46,900. With Textdrip, it would cost you around $450.24 to purchase 46,900 credits.
However, purchasing the same amount of credits with other tools would cost you anywhere between $938 and $2298.1.
Mind you, this is just for a week. Now imagine how much would it cost you to send the same amount of messages for the next four weeks. Let me answer that too. With Textdrip, it’d cost you around $1800.96, and $3752 to $9192.4 with other tools.
Your text message marketing cost would almost double or quadruple depending on your choice of business text messaging tool other than Textdrip. Now let’s see how it impacts your ROI.
Continuing from the above example, let’s imagine that out of 580 users, who replied to your texts, around 120+ booked a visit to your real estate properties and 2 subscribers made a purchase within the next 30 days that amounts to 250,000 in total value.
Now, calculate the ROI using the following formula,
ROI = [(Total revenue generated - Total costs/investment) / Total costs/investment] * 100
Your SMS marketing ROI with Textdrip would become 13781.48% or $137.81 per dollar spent. This essentially means for each dollar you spend on real estate SMS marketing, you earn around $137.8 in return. The same with other tools with high SMS charges would generate anywhere from $65.63 to $26.2 in returns per dollar spent.
Now the decision is yours, would you want to choose a tool that costs more and offers lower text message ROI or a tool like Textdrip that costs less to send each text message and helps you generate higher ROI opportunities?
The key thing to remember is that the actual data may vary from the example I presented here, however, the basic process of calculating the cost and ROI of your text message campaigns will remain the same.
Also, keep in mind that the SMS marketing ROI for your specific industry may differ depending on the average purchase value of your industry. Since real estate has a higher purchase value, the ROI may seem higher.
Additionally, there are several forces that can influence your outcomes such as your messaging copy, CTA, tone, frequency, etc. Try to optimize your SMS marketing strategy with the best practices to see higher returns. In some cases, you may even get higher ROI with SMS marketing than with email marketing.
While SMS marketing is considered a modern tool for marketers to generate high returns, there’s a fine line between being promotional and spamming customers with offers they haven't signed up for. And as they say, with great marketing channels, comes the great responsibility to use it wisely.
Want to start your journey with SMS marketing? Textdrip is one of the most cost-effective text message automation tools available in the market to start your journey. As explained, there’s a high probability that you’d gain high returns compared to other tools depending on your credit consumption rate.
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