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Return on investment : SMS is ROI
May 30, 2023
There are two essential questions for any company: How much do you make? How much does it cost? ROI(Return On Investment) is the indicator that provides a precise answer to these two questions. It is the benchmark KPI in every sector. SMS is no exception to the rule. What's more, when it comes to ROI, SMS stands out from the crowd. Follow the guide.
What is the ROI of SMS?
On average, €1 spent on SMS generates €50 in sales. The return on SMS investment is therefore 4900%.
It has to be said, however, that this figure is an average. The profitability of this mobile marketing strategy depends on many variable factors:
- The place of SMS in your strategy
- The quality of your mailing list and the type of recipient
- The quality of the message and the relevance of the proposed offer
- Quality of user experience
- Your personalized transmitter
- Your direct URL to your products
- ...
Generally speaking, SMS is the most cost-effective communication medium.
Why is SMS ROI so high?
There are several reasons why SMS is a particularly ROI-producing channel. Firstly, the costs associated with sending an SMS are relatively low compared with most marketing channels (the unit cost of an SMS is between 3 and 7 cents). Secondly, a number of KPIs work in SMS' favor:
- Openness: This is the metric for which SMS is recognized as a marketing must-have. 95% of business SMS messages are opened within 4 minutes of receipt.
- Clicks: Another KPI where SMS dominates other marketing channels, generally ranging from 6% to 16%.
- Conversions: Another metric that favours SMS, with an average of 29%.
SMS is inexpensive yet highly engaging, so it's only logical that it should perform like no other.
How can I accurately calculate the R.O.I. of my shipments?
Calculating SMS ROI is similar to any other ROI calculation. It's a matter of determining how much you've spent (on marketing actions, advertising broadcasts, etc.), so that you can prioritize the most profitable investments in the future.
To do this, subtract the money invested from the profits, then divide the resulting amount by the cost of the investment. The result is then multiplied by 100 to express the ratio as a percentage.
ROI formula: R.O.I = (revenues - costs) / costs x 100.
It's a good idea to monitor the performance of your SMS campaigns using analysis and measurement tools, so you know how profitable your actions are.
Determine, for example, the costs associated with your SMS communication, including sending costs, mailing list management costs, content creation, etc.
Then track conversions and sales generated. This can be done using tools such as Google Analytics, which track link clicks and conversions.
For your SMS marketing strategy, you need at least the following data to calculate your ROI:
- Number of messages sent
- SMS price
- Sales generated.
(The price per SMS multiplied by the number of messages sent gives you the cost of the investment, the sales figure gives you the associated revenue)
Calculation examples :
My SMS campaign costs 1,000 euros and generates 10,000 euros in sales.
(10 000 € - 1 000 €) / 1 000 € x 100 = 900 %
This means that every euro invested in the campaign generated 9 euros in revenue.
It's important to note that ROI should not be considered an absolute measure of the success of a marketing initiative. Other factors such as the reach of your communication, information gathered on the quality of the mailing list, impact on user experience and customer satisfaction must also be taken into account when assessing the overall success of an action.
Case studies : The R.O.I of a "Panda Tea" SMS campaign
Our customer Panda Tea decided to launch an SMS marketing operation. The campaign targeted 20,000 recipients, at a total cost of around €1,000. At the end of the campaign, 2926 customers made one or more purchases, bringing the marketing campaign's profit to €64,372.
(64372 - 1000) / 1000 x 100 = 6337,2%
Every euro spent by Panda Tea on this SMS campaign generated €63.37.
Calculating ROI for a physical store
For a store, the ROI calculation doesn't change. The biggest difference with the web lies in the way you discover the revenue generated by your mailings.
You'll need to be clever, for example, by adding a promo code specific to your action in your text, or by indicating that you need to show the SMS received at the checkout to benefit from your offer.
How can I optimize the ROI of my campaigns?
To improve the profitability of your SMS campaigns, you'll need to take a close look at the various performance indicators at your disposal, so you can determine what can be optimized:
Delivery rate: The percentage of your shipments delivered successfully. It informs you about the quality of the telephone number database used. If it's not satisfactory, clean up your mailing list.
Open rate: The percentage of delivered messages that have been opened. It gives you an idea of the effectiveness of your Sender ID and first line of text. If your openings aren't up to standard, you can choose a more impactful tagline for your next action.
Discover our examples of SMS to boost your sales
Click-through rate The percentage of SMS messages opened that generated a click on a link included in the message. It indicates the effectiveness of your content. To optimize it, look for content that engages your customers and a URL or button that's optimal for generating actions.
Conversion rate The percentage of recipients who carry out the desired action (purchase, registration, contact request, etc.). This is the ultimate indicator of the effectiveness of your communication in generating commercial results.
Cost per conversion: The average cost of each conversion, calculated by dividing the total cost of the campaign by the number of conversions generated. It is useful for observing the profitability of your actions in relation to your margin.
By using these key performance indicators, you can make decisions based on accurate data and really improve results in the future.
smsmode©: the ideal partner to boost your ROI
Calculating ROI isn't difficult. Getting all the information you need to make an accurate calculation, however, can be time-consuming. At smsmode©your enriched campaigns (SMS + URL link with or without landing page) can be precisely monitored!
In your customer area, you have access to all essential data in real time. The number of SMS received, their status, but above all: the number of clicks on each link(s). This information is vital for calculating, for example, your average basket, conversions, clicks... In order to know precisely all the elements that have an impact on ROI.
This integrated solution allows you to calculate your ROI in a simple way, without having to dig through a multitude of different tools to find the data you need to calculate your profitability.
Our team advises you
Are you interested in our services? Our account managers and our technical team are at your disposal to answer all your questions about our SMS solutions and to give you advice on how to set up a campaign.