SMS Marketing ROI: How to Measure and Improve It

SMS marketing is one of the most powerful, result-driven, cost-effective, and impactful marketing channels. But how do you ensure each SMS you send delivers maximum value? To do that, you need to measure SMS marketing ROI. The ROI of SMS marketing is the heart and soul of your text marketing campaign. When it is high, it indicates your SMS marketing campaign is doing well. When it’s low, it indicates you need to identify what’s lacking in your campaign and start addressing it.

This blog will shed light on what SMS marketing ROI is, how to calculate it, and how to improve it.

TL;DR

• SMS marketing ROI is the return on investment for your SMS marketing efforts. Simply put, it measures how much you get back compared to what you’ve invested.
• You can calculate the ROI of an SMS marketing campaign using this formula. ROI = (Revenue from SMS campaign – Cost of SMS campaign) / Cost of SMS campaign × 100
• Calculating SMS marketing ROI is important because it shows whether your investments are paying off and helps you make smarter decisions in the future.
• It also gives you clear insight into which SMS campaigns are underperforming at the moment.
• Automated SMS marketing platforms like Textdrip offer seamless integrations, A/B testing tools, analytics, and more to help improve SMS marketing ROI.

What is SMS Marketing ROI?

SMS marketing ROI (return on investment) measures your SMS campaign’s profitability by comparing the revenue generated by the total investment you’ve made to run the SMS campaign. A higher SMS marketing ROI means your campaign is performing well, is cost-effective, and delivers significant returns.

When you calculate the SMS ROI, it helps you find out whether your SMS campaigns are worth the investment and highlights areas for optimization. So, you can drive greater profitability.

How do you calculate the ROI of SMS Marketing?

You can calculate the SMS marketing ROI by finding the difference between how much profit you’ve earned and how much you’ve spent on your SMS marketing efforts.

SMS Marketing ROI = (Your SMS campaign revenue – Your SMS campaign cost) / SMS campaign cost × 100.

For example:

If an eCommerce store spent $1,000 revenue on an SMS campaign and generated $6,000 in revenue, the ROI of the SMS campaign is:

(6,000 – 1,000) / 1,000 × 100 = 500% ROI.

This means that for every $1 spent, the store earned $5. So, it’s worth the investment.

Why is SMS Marketing ROI Important?

It is crucial to calculate SMS marketing ROI because a positive SMS ROI indicates that your SMS campaign is profitable and your investments are paying off. It also gives you clear, actionable insight into which of your SMS marketing campaigns are underperforming, allowing you to make informed decisions based on these insights. When you know which of your strategies is working well and growing your revenue, you can double down on that and optimize the ones that are not working.

This valuable insight can help you build a more profitable future for your business.

A high ROI = More money for you without requiring additional investment.

Key Metrics of Positive SMS Marketing ROI

If you want to understand how SMS campaigns impact your bottom line, you need to monitor the following key performance indicators.

1. SMS Delivery Rate

SMS delivery rate refers to the percentage of SMS messages successfully delivered to recipients. It shows whether your messages are being sent successfully. Obviously, your customers can’t act on what they never see, so a high delivery rate gives your text messages the best chance to do their work.

A high delivery rate ensures your messages reach the right audience at the right time, driving engagement and maximizing SMS marketing ROI.

2. Open Rate

Usually, text messages offer high open rates (approximately 98%). This means your audience not only received your text message but also viewed it. Open rate refers to the percentage of recipients who open or read the SMS message.

Open rate is an excellent indicator of SMS marketing ROI because it is essential for your SMS campaign to drive profitable customer activities. If you had to look at just a single metric, open rate would be the best one.

3. Click-Through Rate

Your SMS campaign’s click-through rate (CTR) tells you the percentage of people who clicked on a link within the SMS message. It’s a great metric for measuring and monitoring whether people are engaging with your texts and following your calls to action, such as visiting a website or making a purchase.

A high CTR means more customers are moving further down the sales funnel, which leads to a higher ROI.

4. Conversion Rate

Conversion rate refers to the percentage of recipients who took the desired action you asked them to take, compared to the total number of subscribers who received your text message. Desired actions include signing up, making a purchase, and more. Conversion rate directly affects revenue. A high conversion rate indicates that your SMS campaign is effectively driving customers to act.

A high conversion rate also indicates that customers recognize your brand value, take advantage of your offers or requests, and that your SMS campaign is on the right track.

5. Cost Per Acquisition

Cost Per Acquisition (CPA) refers to the total cost spent to acquire a new customer through SMS marketing.

CPA helps you measure the efficiency of your SMS campaigns.

Key Metrics of Low SMS Marketing ROI

Here are some key metrics that tell you where your SMS campaign is lacking and how to fix it.

1. Opt-Out Rate

Opt-outs discourage you, but the reality is they happen. Opt-out rate refers to the percentage of recipients who unsubscribe or opt out of future SMS messages. Only when you see a high opt-out rate within a short period should you be concerned.

A high opt-out rate indicates your SMS campaign is not performing well, and you need to make changes to content, message frequency, call to action, or other variables. Otherwise, it can harm long-term engagement and ROI.

2. Low Response Rate

You need to measure how frequently you get a response for every message you send. It may happen that even if your messages are delivered successfully, and subscribers are opening them, you’re not getting the response you want.

Find out the reason behind the low response rate because it can adversely affect the ROI of the SMS campaign. Therefore, you should keep motivating and engaging your audience if you experience a low response rate.

3. Slow Opt-ins

Of course, you want to keep the opt-out rate of your SMS campaign low, but at the same time, you need to ensure plenty of new subscribers opt in.

So, if your opt-in method is not working well, you should try switching your method or promoting your SMS campaign more actively.

How to Increase SMS Marketing ROI

Now that you have a clear picture of why a positive SMS marketing ROI is essential, let’s understand how you can improve the ROI of your SMS campaign.

1. Personalization

Personalized text messages help you build and maintain strong relationships with your customers. According to a study by McKinsey & Company, personalization can increase ROI by 10% to 30%. Customers prefer brands that understand their needs and treat them like individuals. These days, customers don’t want to waste their time reading messages that are not relevant to them or their interests. Personalization also lets you enjoy a more positive and convenient customer experience.

You can personalize text messages by including your brand name, customer name, birthday, zip code, past purchases, product preferences, and more.

Tools like Textdrip offer features such as contact segmentation and custom fields that help you personalize your text messages.

2. A/B Testing

You should A/B test your SMS campaign to see what is working and what is not. Try different CTAs, experiment with sending messages at different times, use different greetings, and include emojis in one message while omitting them in others.

You can also include rich media in one version but not in another, then analyze which version performs better. You can try different message lengths, too, to see which one is driving more revenue.

A/B testing helps you improve your messaging, optimize content, and find out the most effective strategies for your audience.

3. Analytics

You should monitor critical metrics to understand performance and continuously improve your SMS marketing strategy. Focus on measuring delivery rate, click-through rate, opt-out rate, and open rate.

When you track and analyze these metrics, it helps you optimize your SMS campaign for better performance, which increases SMS marketing ROI. If you see a low response rate and engagement, you can test different content, timing, or offers to improve results.

4. Compliance

Following SMS marketing compliance rules helps ensure your messages are delivered consistently, builds customer trust in your brand and messages,, and encourages them to engage with your text messages. Here is how you can stay legally safe in SMS marketing. If you want to learn about the SMS compliance best practices, we’ve covered them in detail.

However, a few basics include:

• Take express written consent before sending messages to your customers.
• Clearly mention how to opt out in each message.
• Clearly identify your business name and let your subscribers know how often you plan to message them in your first message.

5. Timing

Sending messages at the right time to the right audience can increase conversion and engagement specifically. Remember, timing can make or break your SMS campaign. When you test different timings, it helps you decide when your audience is most receptive to SMS.

Another important strategy that you need to keep in mind.

• If you send messages too frequently, your subscribers might feel annoyed, which can increase the opt-out rate. So, you should reduce the message frequency and focus on quality over quantity. For example, you can send a weekly update instead of sending messages daily.
• Your messages should be personalized. If they’re not, your subscribers won’t see value in staying subscribed. So, use contact segmentation and personalization to ensure message relevance. For example, an online store can send personalized product suggestions based on past purchases.

Maximize Your SMS Marketing ROI With Textdrip

Achieving higher SMS ROI requires a strategic approach that includes personalization, A/B testing, continuous performance tracking, and more. While most SMS tools give you a way to send messages, Textdrip gives you a way to grow revenue. Textdrip comes with impressive features like SMS drip campaigns that work even while you sleep, contact segmentation to reach the right people at the right time, and built-in analytics to track SMS marketing ROI. By implementing the best practices discussed above, you can optimize your SMS marketing campaign, drive engagement, reduce costs, and enjoy significant returns.

The good news is that no matter which industry you work in, Textdrip helps you maximize the ROI of your SMS marketing campaign. So, start Textdrip’s FREE trial today to experience the power of its advanced SMS marketing features.