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SMS Marketing Part III: Optimizing SMS ROI

Toss your marketing cap off to the side for a second. You’re just a customer now. You’ve been here before, you have your favorite brands, you’ve used promo codes—the works. But now, you’re shopping with a new brand online. You notice if you sign up for email you get 10% off. Then, after you sign up for email, you see that if you sign up to receive marketing text messages, it’s an additional 10% off. Why wouldn’t you sign up? 

Okay, pick up your marketing cap, dust it off, and put it back on. Look at this scenario through a marketer’s lens. Now you have a customer signed up for SMS. What do you do next? How can you ensure not only that the customer converts through this channel, but stays engaged and doesn’t opt-out?

In the first two installments of this SMS marketing series, we covered opting in and opting out and SMS keywords. Now, we want to take a look at the value of sending SMS marketing messages and break down how brands can optimize SMS ROI.

First, to give SMS ROI some context, let’s take a look at how ROI is measured for another powerful marketing channel: email.

Measuring Channel ROI

Before we look at SMS ROI, it’s helpful to understand how ROI is measured for other marketing channels. Email, in particular, has been touted as the marketing channel with the highest return on investment. The numbers speak for themselves. For every $1 spent on email marketing efforts, brands get $36 dollars back

To calculate any ROI, as a percentage, you would take the amount gained and subtract the amount spent. Then, divide this total by the amount spent. So, if you spent $50k on an email campaign and the campaign brought in $100k in sales, the ROI would be 100%. Or, for every $1 spent, you get $2 back. This is why email marketing ROI is so impressive. 

Now, with that in mind, let’s flip to the real focus of this article, SMS ROI.

Optimizing SMS ROI

To calculate SMS ROI, yes, you can absolutely use the same formula we used for email marketing: (total gained-total spent)/total spent. But, with SMS marketing there are more nuances to pay attention to that can help inform your marketing team and improve your ROI. These include clickthrough rate (CTR), conversion rate, and opt-out rate. 

Clickthrough Rate

SMS has a 98% open rate when used as a marketing channel. To compare, a good email open rate is between 17% and 28%. It’s sort of the nature of the beast. Customers are programmed to use SMS for more urgent, personal conversations. Therefore, texts are more likely to be opened than emails.  

Opens aren’t clicks, though. Think about how many texts you open, read, and ignore—especially from brands. SMS CTR measures at 45%. When compared to email’s CTR of 6-7%, 45% seems high, but when compared to SMS open rate, it’s easy to see where there’s a drop off in engagement. Almost every text message is opened, but less than half are clicked. 

Higher clickthrough rate means higher SMS ROI. So the trick, then, is getting customers to actually click through. It’s on you, as a marketer, to provide an experience that leads customers to your mobile site or app.

Conversion Rate

After clicking through your text, customers are led either to a mobile site or app. Once there, your objective is to get them to make a purchase, download content, or whatever other goal your business may have. 

The average conversion rate for SMS marketing is 29% and, to compare, the average conversion rate for email marketing is around 18%. So, almost every text message is opened, and a little less than half are clicked, but more than half of those clicked become conversions. From click to conversion is a crucial point in the customer’s journey, so it’s vital that you optimize the experience where and when you can. 

By viewing results at a campaign level you can see what language is performing best, which audience is more engaged, even which geographical region is most receptive. You can also A/B test campaigns to see which is the top performer and then, in real-time, pivot to ensure all customers are receiving that SMS marketing campaign. 

At any point in this journey, however, customers can opt-out, meaning they can choose to stop receiving your marketing texts. But, this is just another learning opportunity.

Opt-Out Rate

Providing opt-out messaging is both scary and required. It’s scary because you’re giving customers an easy way to cut off an entire marketing channel. But, like we mentioned in the first installment of this series, the TCPA requires brands to get consent, in writing, before sending any marketing communications via text. 

Instead of thinking about opt-out rate as scary, think of it as a way to inform your next move. Understanding where and when customers are opting out in their journeys can help you tweak your campaigns to prevent opt-outs in the future. Remember, just because a customer can easily opt-out, doesn’t mean they always will. Not if you can provide an experience worth sticking around for. In fact, the average SMS opt-out rate across all campaigns is 5%.

By understanding why customers opt-out, you can adjust your campaigns. Maybe the content isn’t resonating. Maybe you need to segment your audiences more narrowly to capture the right users. Whatever the reasoning is, having that opt-out information can only improve your campaigns going forward.

Even More SMS Nuances

If you’ve learned nothing else from this article, one takeaway is that SMS is a powerhouse of a marketing channel. It’s extremely effective, especially when blended into a broader cross-channel strategy. Maybe not immediately, but eventually, once your strategy is refined, SMS marketing messages have high open rates, clickthrough rates, and conversion rates, and very low opt-out rates. But, it’s what you do with this data that will help improve SMS ROI.

Plus, there are even more SMS nuances marketers should consider when developing their campaigns. How you use SMS messages, could impact your SMS ROI. For example, if you have an SMS sweepstakes campaign, you may see a higher-than-average opt-in rate, but also a higher-than-average opt-out rate once the sweepstakes ends. 

These metrics could also look very different when considering which generation you’re sending them to. Do Millennials prefer email? Does Gen-Z only use SMS? Our next installment in this SMS marketing series will dive into the strategies for using SMS marketing with different generations. 

Already an Iterable customer? Reach out to your CSM to learn more about Iterable’s Strategic Services offerings.

Not a customer yet but curious about how Iterable can enable your brand’s SMS marketing strategy? Schedule a demo today.

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