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How to Calculate Your SMS Marketing ROI

How to Calculate Your SMS Marketing ROI

As a marketer, you’ve likely heard that SMS marketing is one of the most effective ways to reach your target audience. Text messages are much more likely to be opened, read, and responded to than emails, and your customers—especially millennials—prefer SMS communications over any other method of contact. 

However, if you’re new to the SMS marketing world, you may not know how to track and measure the success of your campaigns to ensure you’re getting your money’s worth.

To ensure your campaigns are cost-effective, you need to measure your SMS marketing ROI (return on investment) by comparing your text campaign expenses to the revenue brought in. Here are some of the key performance indicators ( KPIs) that will help you calculate your true SMS marketing ROI.  

7 KPIs Affecting Your SMS Marketing ROI

A simple way to calculate your ROI is by subtracting the cost of your SMS campaign from the total revenue that the campaign brought in. However, savvy marketers know that the value of a marketing campaign isn’t always measured in dollars. You should also consider factors like customer engagement, social media shares, and new SMS subscribers. These KPIs will provide a much more accurate evaluation of your SMS marketing ROI.

Messages Received

One of the first KPIs marketers like to measure after sending an SMS marketing message is how many subscribers successfully received their text. You can generally do this by looking at your delivery receipts, which will tell you whether or not your SMS was successfully handed off to your subscriber’s carrier – meaning the message left your system and was received by AT&T or Sprint or whoever your subscriber uses. 

You should be able to use delivery receipts to identify technical or logistical issues with your SMS marketing campaigns that could lead to undelivered messages, but unfortunately, those receipts are frequently misleading. You may be surprised to find that, even though your delivery receipts look normal, some of your subscribers don’t receive your marketing text messages. One of the biggest reasons for that is because certain carriers use content filters to prevent spam or illicit content.

Here are a couple of tips to ensure your SMS messages make it to all of your recipients and you’re able to more accurately calculate your SMS marketing ROI:

Avoid URL shorteners – Many cell carriers automatically filter out shortened URLs because they’re so frequently used for phishing and other scams. You may be tempted to use a bit.ly link so you don’t hit your SMS character limit, but you’re better off using your full URL and keeping the rest of your message short or using a service that gives you a higher SMS character limit.

Avoid restricted content – Carriers follow a set of guidelines for what kind of content can be sent in marketing texts, and they’ll block or filter your messages if they contain any of this restricted content. This hits certain industries – like alcohol and legal cannabis – especially hard. You should avoid using any keywords that could trigger carrier filters so that you can fully benefit from SMS marketing even if your business falls into a semi-restricted category.

Click-Through Rate

As a marketer, you’re likely already tracking the click-through rate (or CTR) of your email or social media campaigns. Your SMS marketing CTR is the percentage of subscribers who take action by clicking a link in your text message. Generally, this link will direct users to your website, so you can use web tools like Google Analytics to measure how much traffic is coming to your website as a result of mobile links. 

You can then manually calculate your CTR by taking the number of SMS clicks and dividing it by the total number of delivered texts, then multiplying it by 100 to get a percentage. 

  • CTR Percentage = (Number of SMS Clicks / Number of Delivered Texts) x 100

The higher your click-through rate percentage, the higher your ROI should be. If you want to be able to track your CTR more granularly, you should look for an SMS delivery platform that provides audience segmentation tools and detailed analytics so you can measure the success of individual campaigns.

Opt-Out Rate

No matter how relevant and interesting your SMS campaigns are, you’re bound to get a few opt-outs every time you send a text to your subscriber lists. There are a variety of reasons someone may opt-out that have nothing to do with the quality of your campaign: They could have subscribed by mistake while signing up for your services or they’re simply cutting down on the number of SMS messages they receive every day. 

There’s also the chance that you’re sending text messages too frequently, your SMS campaigns aren’t as relevant as they should be, or there’s something else you need to improve on. This is why it’s crucial to keep track of your campaign’s opt-out rate so you see which marketing strategies are working and which ones aren’t which will allow you to adapt and improve your SMS campaigns.

Attrition Rate

While the opt-out rate measures the total number of people who unsubscribe with each text message, your attrition rate calculates how many people are leaving within a specific time frame (e.g, the month of June or the first quarter of the year). This KPI helps determine attrition patterns that may be unrelated to your specific messaging.

For example, you may find that your customers are more likely to subscribe to your SMS communications around the holidays when they’re looking for deals on Christmas gifts and then tend to unsubscribe in January. This information can help you develop new campaign strategies for keeping subscribers interested and engaged during these lulls as well as calculate your SMS marketing ROI.

Growth Rate

Your growth rate refers to the number of new subscribers you’ve gained within a specified time period. This KPI is easy to measure—simply subtract the number of previous subscribers from the number of current subscribers then multiply the result by 100 to get a percentage. 

  • Growth Rate Percentage = (Number of Current Subscribers - Number of Previous Subscribers) x 100

Your goal is for your growth rate to be as high as possible and for it to keep increasing over time. The higher your growth rate, the more likely you are to see conversions which increases your overall SMS marketing ROI.

Conversion Rate

Your conversion rate tracks how many users took action based on your SMS marketing campaign. For some organizations, the conversion rate is measured by the number of people who complete a sale while others count any form of engagement such as clicking links, requesting information, or commenting on social media. 

You can calculate your conversion rate by dividing the number of users who took action by the total number of subscribers in that campaign. 

  • Conversion Rate = Total Number of Subscribers / Number of Conversions

The conversion rate will help you measure the success of individual SMS campaigns and determine which strategies are working best for your target audience. 

Cost Per Redeeming Subscriber

The final KPI you need to measure to calculate your ROI is the cost per redeeming subscriber. This refers to the amount of money you spend on each SMS user that converts to a sale. You need this information to determine whether or not the cost of your SMS marketing campaigns is justified. 

You calculate the cost per redeeming subscriber by dividing the cost of each SMS sent by your conversion rate for the campaign. 

  • Cost Per Redeeming Subscriber = SMS Cost / Conversion Rate

The lower this number is the higher your overall SMS marketing ROI will be because you’re spending less money to get more conversions. On the other hand, if this number gets too high, that’s an indication that your current SMS marketing strategies are costing more money than they’re worth and need to be revamped.

Finding the Right SMS Marketing Partner

Analyzing KPIs and calculating your SMS marketing ROI is much easier if you use an enterprise platform to manage your text message communications. While there are manual methods for collecting and tracking this information, you could end up with misleading numbers due to missing or incomplete data. 

If you’re serious about analyzing your SMS marketing ROI, you should look for a platform that provides robust analytics, auditing, and reporting features as well as powerful marketing tools like audience segmentation, SMS keywords, and video messaging. Using a feature-rich text messaging platform to manage your communications and track KPIs will ensure that you get the best possible SMS marketing ROI.

NorthText provides all the features and analytics you need to ensure the best SMS marketing ROI. Our real-time dashboard and two-way gateway integration make it easy to track KPIs and expand your SMS marketing audience. Contact us online or call or text us anytime at (312) 869-9070 to learn more.

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