Is SMS marketing worth it? As per the 2023 Mobile Consumer Trends report, more than 2 in 5 users want to hear from brands via both SMS and push notifications. Based on this data, there’s definitely good traction for SMS marketing. But is it generating the right amount of returns for businesses? You have to find out by calculating the return on investment (ROI) on SMS campaigns.

Let’s dive into what SMS marketing ROI is, how you can calculate it for your campaigns, and how you can  optimize it using a tool like Plivo CX.

What is SMS Marketing ROI and what are the factors that influence it?

SMS marketing ROI is a metric that  measures the profitability of SMS campaigns, essentially showing whether you’re achieving the   right returns on your investment  in  these campaigns. 

Top factors that influence SMS marketing ROI include:

• Relevant and concise content
• Appropriate timing
• Personalized messaging
• Frequency of messages

What is an average SMS marketing ROI?

Figuring out the average SMS marketing ROI can be tricky because it varies a lot depending on the brand, industry, campaign, and what you're trying to achieve. 

Upcity surveyed 300 digital marketing professionals on the effectiveness of SMS marketing campaigns, and the results were impressive:  51% of small and medium business marketers reported an average ROI of $21 to $40 for every dollar spent on their SMS marketing efforts.

The higher your ROI is above 100%, the better. A 100% ROI means you broke even — essentially, you earned back exactly what you spent. But when your ROI exceeds 100 percent, that means you’ve made a profit.

Why SMS marketing ROI matters

 Monitoring SMS marketing ROI is crucial for several  reasons: 

1. Optimizes budget

Knowing what works and what doesn’t allows you to allocate your budget more effectively to maximize ROI. You can spend more on  high-performing campaigns  and reduce spending   on underperforming ones.  

2. Improves performance

Calculating SMS marketing ROI helps in optimizing campaigns.  Since marketing is often a process of trial and error, regularly assessing ROI on your SMS marketing lets you determine if an idea is successful or needs adjustment.

By allocating a small budget to new ideas and measuring their ROI, you can iterate until achieving optimal performance.

3. Builds long-term strategy

 Tracking the SMS marketing ROI of different campaigns   provides valuable insights into   customer behavior and preferences. This information  helps you plan more effective future campaigns and build a robust long-term strategy.

Steps to calculate ROI on SMS marketing campaigns

Measuring SMS marketing ROI means  assessing how much profit you gain from your  investment. 

Here’s a step-by-step guide for calculating SMS marketing ROI:

1. Determine total revenue

Find the total revenue generated by the campaign, such as from conversions, purchases, etc. 

2. Define campaign cost

Add  up all the costs associated with creating the SMS campaign, including SMS marketing platform fees and any other  expenses.

3. Determine net profit

Calculate your profit by subtracting total campaign cost from the revenue.   

Net profit = Total revenue - Total campaign cost

4. Calculate ROI

You can calculate ROI with a simple formula:

ROI percentage = (Net profit/Campaign cost)*100

Let's look at  an example. Suppose you planned an SMS marketing campaign where  you sent promotional emails to 15,000 contacts using the Plivo CX Growth plan (priced at $99 per month). Out of 15,000 contacts, 800 customers  made a purchase of $50 each.

Total revenue = 800 * $50 = $4,000

Campaign cost = $99

Net profit = Total revenue - Campaign cost = $4,000 - $99 = $3,901

ROI = (Net profit/Campaign cost)*100 = (3,901/99)*100 = 3940.40%

How you can improve SMS marketing ROI

Implement the following tips to boost SMS marketing ROI:

1. Segment audience

One of the simplest SMS marketing best practices is to segment your  audience so that subscribers  receive only the messages that are most relevant to them. Segmentation enables you to send  targeted messages to specific subscriber groups based on their interests, demographics, behaviors, or other characteristics, increasing engagement and conversion rates. 

Tip: Use an SMS marketing automation platform like Plivo CX for SMS marketing that automates the segmentation process by automatically categorizing users into segments based on key characteristics like demographics, browsing activity, online behavior, etc. With Plivo CX, you can run well-targeted campaigns tailored to specific  user segments. 

2. Optimize messages

Another important step to increase the ROI of SMS campaigns is to optimize your  messages by making the following changes:

• Keep  messages concise
• Make them engaging by using graphics
• Personalize messages based on customer data
• Add a clear, strong call to action
• Include social proof (if relevant)

Tip: Creating and optimizing  multiple campaigns is time-consuming. Simplify this with  AI. 

Plivo CX includes an AI assistant that helps create optimized campaigns with a single click. Once you determine the goal, parameters, timing, urgency, and even voice of the message, Copywriter AI will instantly craft options for you and even fine-tune the messages before sending. 

3. Optimize timing and frequency

Optimizing messages alone isn’t enough; finding the right timing and frequency is also essential. 

Bombarding customers with too many messages is the top reason consumers opt out of SMS marketing — nearly 60% of smartphone users cite excessive updates as the main reason for turning off notifications or unsubscribing from SMS messages. 

Finding the ideal timing and frequency often involves a process of trial and error.

Tip: 

Instead of testing times randomly, leverage past data to identify the best times to send messages. AI can make this process easier by analyzing historical data and spotting trends. Plivo CX’s AI assistant can help pinpoint optimal message timing.

4. Test campaigns

Segmenting users and optimizing messages are effective steps, but testing is crucial to know what works best.  

Run test campaigns and  analyze metrics regularly to understand what’s working well. 

Testing variations of messages on a smaller budget can provide insights before committing to larger investments. 

Tip: Track all the key metrics of all campaigns to assess effectiveness. Plivo CX automatically tracks important metrics such as open rate, click rate, converted rate, and revenue. 

Plivo CX also integrates seamlessly with Shopify, allowing you to track both SMS marketing campaigns alongside  order data for more accurate  conversion insights. 

Just remember, optimizing your SMS marketing ROI isn’t something you do once and forget about — it’s an ongoing process. 

Make it a habit to regularly check your data and tweak your strategy as you go. By staying on top of the key metrics and always looking for ways to improve, you’ll be well on your way to getting the most out of your SMS marketing efforts.

Run SMS marketing campaigns with Plivo CX

Plivo CX is a robust SMS marketing platform designed to help your Shopify brand drive real success with SMS marketing. 

By partnering with Plivo CX, you’ll effectively communicate with your existing customers, expand your marketing list, optimize lead generation cycles, and more.

Currently tailored for e-commerce businesses, Plivo CX helps you engage with customers across SMS, MMS, WhatsApp, and email . It offers all the key features required to boost your SMS marketing ROI:

✅Segmentation

✅AI assistant

✅Reporting and analytics

Plivo CX also leverages  Plivo’s premium carrier network, enabling you  to send personalized messages to over 220 countries and territories.

Ready to optimize your SMS marketing ROI? Schedule a demo today to explore the powerful features and capabilities of Plivo CX Engage.

 By reducing external dependence, Plivo assures high SMS deliverability and affordability. You can send a text message in the US for as little as $0.0065 via Plivo compared to the $0.0150/SMS cost of competitors. 

“I could tell from the get-go that Plivo was going to offer outstanding service compared to some of the other SMS providers. ​Anytime we've ever reached out to Plivo for any questions, we get responses quickly and with answers that make sense.” ~ Jacob Martinez, Product Owner, Deckers.

FAQs

1. What is the formula for SMS ROI?

SMS ROI is calculated by dividing the profit of the campaign against the total investment. A simple SMS marketing ROI formula for a marketing campaign is: ROI percentage = ((Total revenue - Campaign cost)/Campaign cost)*100.

2. What factors influence SMS marketing ROI?

The primary factors that influence SMS marketing ROI include:

• Relevant and concise content
• Appropriate timing
• Personalized messages
• Frequency of messages

3. What kind of messages can I send in my SMS marketing campaign?

The most common examples of SMS marketing are:

• Welcome messages
• Flash deals
• Personalized updates
• Product order and shipping updates
• Festive offers
• Personalized offers

4. What is a good SMS marketing ROI?

Companies are experiencing a positive SMS marketing ROI of  $21 to $40 for every dollar spent on their SMS marketing campaigns.

5. Can SMS marketing ROI fluctuate over time?

Yes, SMS marketing ROI can fluctuate over time depending on market dynamics, consumer demands, competition, and campaigns. It's important to optimize  SMS campaigns regularly for  best performance.