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What Is the ROI for SMS Marketing?

Take the guesswork out of your text marketing campaign with our guide on SMS marketing ROI.

Illustration of people interacting with smartphones with dollar signs
June 11, 2024
Kathleen Crampton
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Reading time about 5 min

In the world of marketing, nothing stands out quite like text messages.

Did you know that 98% of SMS messages are opened, compared to 18% of emails? It’s no surprise, then, that SMS marketing is one of the best ways to grow your customer base, promote sales, and drive traffic. While you’re probably on board with text message marketing for your business, you might be concerned about SMS marketing ROI, or return on investment.

That’s what we’re here to cover. You’ll learn about ROI for SMS marketing, how to calculate it, and what measurements are involved so that your company can grow while boosting its bottom line.

First, you might be thinking, “What’s the difference between SMS vs. text?” SMS (short message service) is a version of a text message, just like MMS (multimedia messaging service). We’ll use “SMS” and “text” interchangeably in this article.

How Much Does it Cost to Send an SMS Message?

Girl on smartphone with dollar sign icon

Before we talk about calculating ROI, it’s important to understand the actual cost of sending text messages — because this directly pertains to your campaign’s SMS ROI:

  • Cost per message. It costs between $0.01 and $0.05 to send an SMS text message. MMS messages cost a bit more because they contain media (like images, gifs, etc.) and allow for more characters. Learn more about SMS vs. MMS.
  • Cost per keyword. Using an SMS keyword (like “text HELLO to 858585”) costs money. This cost ranges from about $15 to $25 per keyword. Many text marketing platforms include keywords in their pricing plans.
  • Cost for a short code. Many businesses buy exclusive short codes to power easy-to-remember text campaigns and enhance throughput to contacts. Costs for random short codes typically start around $1,000/month, while costs for vanity short codes start at $1,500/month.
  • Platform/service cost. Take into account the cost of the text marketing service that your company is using, as that affects your SMS marketing ROI.

How to Calculate ROI in SMS Marketing

roi formula vs roi percentage formula

SMS ROI differs from company to company and depends on the goals of every SMS marketing campaign. For example, what are the objectives of your text marketing campaign? Do you want people to register for an event, purchase a product, donate to a fundraiser, or refer a friend? Make sure the goals are clearly set before launching your campaign so that you know exactly what you’re measuring.

Here is a simple ROI formula to keep in mind:

Return - Investment = ROI

The return is the revenue of the campaign, and the investment is what it cost to run the campaign (including the costs involved in sending text messages that we noted earlier). To determine the ROI percentage and easily compare the success of every campaign, you can use this formula:

(Return / Investment) x 100 = ROI percentage

Measuring the ROI of SMS Marketing

It’s important to analyze marketing metrics as each campaign gets underway—don’t wait until the campaign is over. Tracking data along the way helps businesses understand what’s working and what isn’t and tweak the strategy accordingly. Furthermore, conducting A/B testing is helpful in determining what version works best with specific customer segments. Once you know what works best, you can optimize certain elements to boost ROI.

Smartphone displaying SMS sample message:

Now, here are some common metrics that are used in measuring SMS marketing ROI.

Conversion Rates

Tracking conversion rates is one of the easiest ways to measure SMS ROI because the link between the text campaign and customer interactions is straightforward — in other words, there is a clear cause and effect. Types of conversions could be sales, donations, sign-ups, or referrals (depending on what your campaign goal is) from the text message.

One way that businesses can track sales conversions is by sharing and tracking unique coupon codes to help them determine which customers made purchases with codes from which channel (SMS, email, web, social media). For text list sign-ups, you can use dynamic QR codes to gather data as well as SMS keywords to get an accurate look at your conversions.

Click-Through Rate

Click-through rates apply to SMS marketing ROI if your campaign’s goals are to boost engagement or website visits. Even if these aren’t part of your overall strategy, assessing click-through rates does provide a good look at user interest and can give you more context if your campaign wasn’t as successful as you had hoped.

To track clicks, make sure you implement tracking URLs, which have special tags that allow your business to see where traffic is coming from. For example, if you share a tracking URL in an SMS blast, you’ll be able to monitor its use across your campaign.

 

Cost Per Acquisition

Cost per acquisition includes the costs per message, per keyword, and even per sales or marketing staff members — basically, what it costs to generate leads, get SMS list opt-ins, and help those leads become customers. Naturally, there will be a higher upfront investment when you’re getting started with text marketing and acquiring contacts.

 

Customer Lifetime Value

No business should overlook customer lifetime value (CLV) when determining the ROI of an SMS campaign. CLV is the measure of how much money one customer will bring to a company over the course of their relationship with that company. Part of assessing CLV is the cost per acquisition of SMS subscribers, which we discussed above; the average value of the customer’s purchases; and for how long a customer stays loyal to your brand (in other words, makes repeat purchases).

Now you might be wondering what CLV has to do with ROI. Oftentimes, companies take a short-term perspective when calculating ROI. While this method isn’t necessarily wrong, it doesn’t provide decision-makers with the most accurate information. After all, the cost per acquisition might seem high, but when you take into account the CLV of those potential customers, the return will most likely be even higher.

Analyzing CLV provides organizations with a holistic view of the impact of their SMS campaigns. And with SMS marketing as a trusty sidekick, businesses can start seeing improvements in ROI due to the engaging and nurturing aspects of this channel that keep customers coming back.

Advantages of SMS Marketing: Case Studies

Let’s look at a few examples of how text marketing has helped businesses in different industries. You’ll see that the advantages of SMS marketing differ from company to company based on their specific needs.

 

Dominos Pizza logo

Domino’s Pizza

When a Domino’s Pizza franchise near the University of North Carolina realized that its ads at ball games weren’t increasing social media engagement or sales, it decided to try text marketing. Its initial investment was only $25 and included an SMS message with a keyword and short code; it garnered an increase of 125 orders from this initial text campaign. In subsequent campaigns, the Domino’s Pizza franchise was able to lower its cost per acquisition while adding more text subscribers, proving to be an overall success compared to its ball game ads.

 

Lee & Associates logo

Lee & Associates

The West Los Angeles division of Lee & Associates, a commercial real estate company, found that it needed to use more efficient lead generation to increase sales. With EZ Texting, it was able to garner more buyer interest with simple text messages that assigned unique keywords to specific properties. With detailed lead segmentation based on buyer price points, preferred location, and more, Lee & Associates’ West LA division saw an additional $1 million in fees and was able to close 16 deals in just three years.

How EZ Texting Can Boost Your SMS Marketing ROI

Our guess is that you’re looking for an effective text marketing solution that won’t break the bank. That’s where EZ Texting can help. When you sign up with us, you’ll get:

  • Transparent (and low) pricing because we understand that keeping investment affordable is one of the keys to increasing ROI. Our plans start at $20/month, but the higher your pricing tier, the more messages you can send each month, the higher the delivery speed, and the lower the cost per message.
  • Contact management that makes your life easy. Upload contacts in seconds and then segment them into groups for targeted SMS marketing.
  • Plenty of text messaging tools, like group texting, two-way texting, SMS and MMS texting, and more, reach more people and nurture customer relationships.
  • Textable number options, like local and toll-free numbers, dedicated short codes, and text-enabled landlines, to fit all SMS messaging strategies.
  • Robust analytics that do the number crunching for you. Track interactions and measure the success of a campaign to better understand the ROI for SMS marketing with that specific messaging strategy.

No matter your industry — whether it’s retail, nonprofit, real estate, or beyond — your business will be set up for success with EZ Texting. From measuring enterprise texting ROI to garnering insights on SMS ROI for small businesses, EZ Texting’s text marketing solutions can be tailored to fit any business need. Get started on your next SMS marketing campaign with our 14-day free trial.

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