SMS marketing has proven to be one of the most cost-effective and impactful options among many marketing channels. But how do you make sure each message you send delivers maximum value?
In this blog, we will explore key strategies for achieving the highest SMS marketing ROI so you can make the most effective investment of your marketing resources.
Key takeaways
By the end of this guide, you will gain valuable insights into:
- ROI formula: Learn how to calculate your SMS marketing ROI using a simple formula.
- High returns: Discover how SMS marketing can generate up to $71 for every $1 spent, positioning it as one of the most profitable marketing channels.
- Optimization strategies: Maximize your ROI by implementing personalization, segmentation, A/B testing, and effective message timing.
- Key metrics to track: Learn how to monitor delivery rates, click-through rates, and conversion rates to optimize campaign performance and boost results.
- Proven results: See how SMS marketing consistently drives high engagement and delivers exceptional SMS marketing ROI across industries like e-commerce, healthcare and finance.
At the end, evaluate your SMS marketing strategy with a simple quiz and receive actionable tips to enhance your ROI.
What is SMS marketing ROI?
- SMS marketing ROI (return on investment) measures the profitability of SMS campaigns by comparing revenue generated to the cost of running the campaign. A high SMS ROI means your text message marketing efforts are cost-effective and deliver significant returns.
- Calculating ROI helps determine whether your campaigns are worth the investment and highlights areas for optimization to drive even greater profitability.
How to calculate your SMS marketing ROI
To calculate ROI, use the following formula:
ROI = (Revenue from SMS Campaign ā Cost of SMS Campaign) / Cost of SMS Campaign Ć 100
Example: A retail store spends $500 on an SMS campaign and generates $5,000 in revenue. The ROI can be calculated using the following formula:
ROI = (5000 ā 500) / 500 Ć 100 = 900% ROI
This means for every $1 spent, the store earned $9 in return. Now that is a campaign worth investing in.
Why calculating ROI matters
Calculating ROI after every campaign ensures that your investments are paying off. Comparing actual results to your initial budget helps you make smarter decisions for future campaigns.
Your turn: Try calculating your SMS ROI
Weāve walked you through the formula, now itās your turn to apply it.
Hereās a scenario for you to calculate: You spent $400 on an SMS campaign. The campaign generated $2,800 in revenue. What is the SMS marketing ROI for this campaign?
Use the formula and calculate it before moving on to the next section to see if you truly understand the process. Try entering different values and experiment with the calculator to see how changes impact the results.
Your ROI is: 0%.
Key metrics to track for SMS marketing ROI
To fully understand how SMS campaigns impact your bottom line, you need to monitor key performance indicators (KPIs). Letās look at the most important metrics you should be tracking:
Delivery rate
- What it is: The percentage of SMS messages successfully delivered to recipients.
Why it matters: Ensuring your messages reach the intended audience is the first step in driving engagement and maximizing ROI.
Open rate
- What it is: The percentage of recipients who open or read the SMS message.
Why it matters: SMS has an industry-leading 98% open rate, significantly higher than email. This means recipients are more likely to see and act on your messages.
Click-through rate (CTR)
- What it is: The percentage of recipients who click on a link within the SMS message.
Why it matters: Indicates that the content is engaging enough to prompt further action, such as visiting a website or purchasing.
Conversion rate
- What it is: The percentage of recipients who take a desired action (e.g., make a purchase, sign up, etc.) after receiving an SMS.
Why it matters: Directly impacts revenue. A high conversion rate shows that the SMS campaign effectively drives customers to act.
Cost per acquisition (CPA)
- What it is: The cost spent to acquire a new customer through SMS marketing.
Why it matters: Helps measure the efficiency of your SMS campaigns. A lower CPA means better profitability and a higher ROI.
Opt-out rate
- What it is: The percentage of recipients who unsubscribe or opt out of future SMS messages.
Why it matters: A high opt-out rate could indicate that messages are too frequent, irrelevant, or not properly targeted, which can harm long-term engagement and ROI.
Now, letās see how these key metrics translate into success across different industries.
Industry-specific SMS ROI benchmarks: Real-world success
eCommerce: 2x conversion rates and cost reduced by 30%
Dahmakan, a Southeast Asian food delivery service, significantly improved their marketing ROI by making SMS their primary communication channel. Previously relying on email and push notifications, Dahmakan found SMS generated the highest conversion rates for promotional messages after running a test across all channels.
Using Infobipās SMS solution, Dahmakan doubled its conversion rates while cutting costs by 30%. SMS proved effective for customer loyalty messages like cashback offers and referral incentives, resulting in higher engagement and satisfaction. SMS remains a key part of their growth strategy as they expand, enabling better communication and service delivery.
Finance: 20% higher open rates and 15% increase in response rates
Management Financial Group (MFG) faced challenges in managing communications for its diverse brand portfolio. Previously relying on multiple SMS providers, they struggled with high costs and fragmented customer engagement. MFG aimed for a more efficient, centralized communication strategy to boost customer interactions and optimize their SMS marketing ROI.
A shift to Infobipās omnichannel platform led to a 20% increase in message open rates and a 15% increase in response rates. Overall, MFG saw a 30% rise in customer interactions, with a streamlined platform providing an effective solution for their global expansion plans.
Telco: 20% increase in revenue and 10% increase in customer interactions
Hrvatski Telekom partnered with Infobip to provide A2P SMS messaging services, allowing them to offer a comprehensive SMS marketing solution to major Croatian enterprises. This streamlined approach helped clients engage directly with customers via SMS, driving higher response rates and customer satisfaction.
The partnership delivered a 20% year-on-year revenue increase and a 10% rise in customer interactions, showcasing the effectiveness of SMS marketing in driving engagement and ROI for enterprise clients.
SMS marketing ROI optimization strategies
Now that you know the key metrics and benchmarks, letās dive into how you can optimize your SMS campaigns for maximum ROI. These strategies are designed to help you get the most out of every message you send.
Personalization for higher engagement
Personalization strengthens your connection with your audience, making them more likely to engage and act on your messages.
Take the example of digital healthcare platform Oladoc, which transformed its patient communication strategy by integrating personalized SMS solutions, leading to significant cost savings and revenue growth. By improving SMS delivery rates to 90%, patients received timely appointment confirmations and reminders, reducing no-show rates. The shift to personalized and easy-to-understand SMS messages made communication more effective, particularly in a market where literacy challenges affected message comprehension.
As a result, Oladoc saw a 25% reduction in operational costs and a 5% increase in revenue.
A/B testing for better performance
A/B testing allows you to optimize your SMS campaigns by comparing different subject lines, CTAs, and message timing variations.
Test ideas:
- Message length: Try sending a short and direct message (āSale! 50% off today only.ā) versus a more detailed one (āHurry! Get 50% off on your favorite items today only! Click here to shop now.ā).
- Call-to-action (CTA): Test different CTAs, such as āClick here to claim your discountā or āUse code SAVE50 for 50% off,ā to see which one generates more clicks and conversions.
- Timing: Experiment with sending messages at different times of the day, such as mid-morning vs. late afternoon or weekdays vs. weekends, to see which timing gets the most engagement.
Why it matters: Testing helps you improve your messaging, optimize content, and find the most effective strategies for your audience. Continuous testing drives better results over time.
SMS A/B testing example:
Optimize SMS timing for maximum ROI
Sending messages at the right time can increase engagement and conversions significantly.
Best time to send SMS marketing messages: Research shows that the best times for SMS campaigns are between 9 AM and 12 PM, and 5 PM to 9 PM on weekdays. On weekends, aim for between 10 AM and 12 PM and 4 PM to 7 PM on Sundays.
Why it matters: Timing can make or break an SMS campaign. Well-timed messages are more likely to be opened, read, and acted upon. Testing different times helps you identify when your audience is most receptive to SMS.
Use strong calls-to-action (CTAs)
Your CTA determines the next step you want your recipients to take. A strong, clear CTA will guide them toward conversion.
Examples of effective CTAs:
Urgency:
āOnly 2 hours left! Donāt miss out, shop now!ā
Exclusivity:
āVIP offer just for you! 20% off ā use code VIP20 at checkout.ā
Action:
āTap here to get started: shop.com/20!ā
Why it matters: A compelling CTA can significantly increase click-through and conversion rates. To improve its effectiveness, make sure the CTA is actionable, clear, and directly related to the messageās content. Plus, with URL shortening, you can create shorter, more reliable-looking URL in your SMS content.
Track and analyze key metrics
Monitor critical metrics to understand performance and continuously improve your SMS marketing strategy.
Key metrics to monitor:
- Click-through rate (CTR): Measures how many recipients clicked on links within the SMS.
- Conversion rate: Measures how many recipients completed the desired action (e.g., purchase or sign-up).
- Opt-out rate: Indicates how many recipients unsubscribed after receiving a message. A high opt-out rate signals that the messages might be too frequent or irrelevant.
Why it matters: Tracking and analyzing these metrics helps you optimize your campaigns for better performance. If you see low engagement, test different content, timing, or offers to improve results.
- PRO TIP ā Adjust frequency or message relevance if your opt-out rate is high:
1. Message frequency ā If you send SMS messages too often, subscribers may feel overwhelmed or annoyed, prompting them to opt out.
Fix: Reduce the number of messages and focus on quality over quantity. For example, try weekly updates or every two weeks instead of sending daily promotions.
2. Message relevance ā If your texts arenāt helpful or personalized, recipients may not see the value in staying subscribed.
Fix: Use segmentation and personalization to ensure each message is relevant to the recipient. For instance, an online store can send personalized discounts based on previous purchases rather than generic promotions.
Maximize your SMS marketing ROI with Infobip
Infobipās Moments helps you optimize SMS campaigns by using customer data from People CDP for personalized messages and at the right time. With automation of customer journeys, you can send targeted SMS campaigns that drive higher engagement, increase conversions, and boost SMS marketing ROI. The easy-to-use, code-free interface allows you to create sophisticated campaigns without needing IT support.
Whether itās sending appointment reminders, order updates, or special offers, Moments helps you create targeted SMS messages that drive higher engagement and improve ROI.
Assess your SMS marketing ROI strategy
Having explored the strategies to calculate and optimize your SMS marketing ROI, itās time to evaluate the effectiveness of your current approach. Through 5 simple questions you can assess your SMS marketing expertise and provide valuable insights on improving your ROI with a closer look at your strategies and practices.
Your score is: 0
SMS marketing beginner
Youāre just starting your SMS marketing journey. Now is the time to focus on personalization, experimenting with message timing, and implementing A/B testing. Tracking essential metrics like conversion rates will help you increase engagement and maximize ROI. Keep learning and donāt hesitate to try new strategies.
Optimization enthusiast
You have a solid understanding of SMS marketing, but there is potential for improvement. Focus on consistent A/B testing and a more in-depth analysis of metrics such as conversion rates and ROI. Enhancing these elements will allow you to boost your SMS marketing performance and ROI.
ROI expert
You deeply understand SMS marketing and have effectively optimized your campaigns. Your use of personalization, timing, and A/B testing shows a sophisticated approach to maximizing ROI. Keep improving your strategy for even greater returns. Increase your ROI with advanced strategies like segmentation and personalized automation.
Based on your answers, you now have a clearer insight into the performance of your SMS marketing strategy. For personalized advice on maximizing your ROI with the right messaging approach, feel free to contact our Infobip experts.
Your path to higher SMS marketing ROI begins here
Now that youāve assessed your SMS marketing strategy, itās time to take your campaigns to the next level. Achieving a high SMS marketing ROI requires a strategic approach that includes personalization, data-driven timing, A/B testing, and continuous performance tracking. By implementing these best practices, you can optimize engagement, reduce costs, and drive significant returns.
FAQs about SMS marketing ROI
SMS marketing delivers an average ROI of $45-$71 for every $1 spent, though this can vary depending on your industry, campaign type, and execution strategy.
SMS marketing achieves 98% open rate and over 35% click-through rate.
Track KPIs like CTR, conversion rates, revenue per SMS, and opt-out rates. Using advanced analytics tools, you can gain insights into how well your messages are performing, identify areas for improvement, and optimize your strategy for better results. By continuously monitoring these metrics, you can improve your approach and ensure that your campaigns are driving high engagement and SMS marketing ROI.
SMS boosts customer engagement and conversions by leveraging personalization, segmentation, A/B testing, and optimized timing.
- Instant reach (98% open rate)
- High engagement (35%+ CTR)
- Cost-effective compared to other channels and paid ads
- Personalized and direct communication
SMS marketing achieves an impressive ROI of up to $71 for every $1 spent, while email marketing delivers a solid ROI of around $42 per $1 spent. SMS open rates lead with a remarkable 98%, compared to email average open rate of 20%. Regarding click-through rates (CTR), SMS performs at around 35% or higher, while email generally sees a CTR of approximately 3%.
SMS and email marketing are effective channels, but SMS tends to have higher engagement and ROI metrics overall.
