How to Maximize Your SMS Marketing ROI

June 06, 2022
Written by
Twilion
Reviewed by
Twilion

SMS ROI Image

Now that you’ve received stakeholder buy-in for SMS marketing and adopted a tool, it’s time to prove the value of the program and deliver on the SMS marketing ROI expectations you’ve set.

You likely invested in an SMS marketing tool because you know it will help you:

  • Engage with customers in a more meaningful way
  • Stand out from the mass of marketing messages your customers receive daily
  • Deliver meaningful ROI, including
    • Increased sales and revenue
    • Reduced churn
    • Increased customer lifetime value (CLV)

So how do you ensure you’re using the tool in a way that achieves all this? You personalize the communications, you optimize your campaigns, and you measure success to report on ROI. Read on to learn how this all ties together.

Personalized SMS marketing

Investing in truly personalized customer engagement will help you achieve the outcomes above. According to Twilio’s State of Customer Engagement Report 2022, both businesses (98%) and consumers (83%) say that personalization increases brand loyalty. So how do you build personalization into your SMS marketing strategy?

Begin by thinking through the marketing campaigns that you intend to run and the associated conditional statements that would improve the segmentation of your targets. For example:

Campaign: Loyalty Member Bird Feeder Promotion

  • If: Customer has opted in for promotional texts
  • And: Customer has purchased from Patio & Garden department
  • Then: Add to campaign

If securing more data will improve your campaign segmentation, determine if there are opportunities to gather information during the sign-up process and have it added as a field within your customer records or perhaps invest in a Customer Data Platform (CDP).

The next thing you’ll want to do is develop text templates with dynamic fields (e.g. First_Name) for when your promotion is launched. Consider this example of a simple personalized text:

Hi [First_Name]. Loyalty Member promo time! Bird feeders are discounted up to 20% through Apr 30. Visit bit.ly/bird-feeders-lp-1. Text "STOP" to opt-out.

This is a simple example of personalization, but it touches on a few key components. First, it uses the loyalty member’s first name, which in this day and age is a given. Second, the content of the text is relevant because we know the person has purchased from the Patio & Garden department previously. It’s also timely in that the sale for bird feeders is in the spring season. And lastly, it’s short in length, primarily driven by the URL shortener (we’ll talk more about URL shorteners in a bit).

Another important part of personalization is engaging with your customers on the channels they prefer for that type of communication. For example, if a customer prefers SMS for coupons and email for abandoned cart reminders, you should market to them accordingly. SMS marketing is not a replacement for email, but rather a complementary tool and should be used if and when appropriate. Check out our guide “Using SMS and Email to Engage Your Customers” for more on this topic.

Now let’s work on improving the results of the campaign.

Optimize your SMS marketing with A/B Testing

A/B testing is table stakes for marketing in the digital era and our example below provides a simple opportunity for the marketer to test and improve.

In this example, the marketer is wondering which phrasing encourages more clicks from their target audience. Do they prefer discount or sale when it comes to this kind of promotion?

Version 1:

Bird feeders are discounted up to 20% through Apr 30. Visit bit.ly/bird-feeders-lp-1

Version 2:

Bird feeders are on sale for up to 20% off through Apr 30. Visit bit.ly/bird-feeders-lp-2

This is a rudimentary example that may not pass the statistical significance calculator but until it’s tested, nobody really knows what kind of impact it might make. This test can be easily measured through the two separate landing pages for click throughs and conversions.

Another common way to run A/B tests within SMS campaigns is through keywords. Using the above example, Cohort A can be given the option to reply with SALE to receive their discount code while Cohort B can be assigned the keyword PROMO. Once the campaign has ended, the marketer can see which keyword had more responses.

Here’s a fun thought. Have you ever wondered if a billboard by the side of the freeway actually adds value? Or how about a magazine ad? If they had a keyword and textable number on the advertisement, then the marketing campaign manager would know!

Finally, if A/B testing becomes a challenge at scale, there are industry tools and integrations, such as Autopilot, to help run regular experiments and maximize the impact of your marketing spend.

The bottom line, A/B testing is necessary to improve marketing campaigns and is achievable within SMS marketing programs.

Optimize deliverability of messages

Our original example provides another opportunity for optimization through improving the deliverability of messages.

Deliverability is the percentage of messages that reach the intended recipient and it’s one of the most important criteria when deciding on an SMS marketing provider. After all, if your messages don’t reach your customers, you’re losing the revenue, growth, and loyalty that you’ve set out to achieve.

Just imagine the power of conveying this type of information to business leaders in your organization:

In July, we improved our deliverability rate by 8% which equated to 10,000 additional messages received by our customers. With our conversion rate of 1% and average revenue per sale of $90, that’s an increase of 100 sales worth $9,000.

So how can marketers optimize deliverability of text messages? First and foremost, let’s assume that you’ve already partnered with a leading provider of text messaging to benefit from redundancy, uptime, carrier relations, thought leadership, and knowledge transfer (partnering with you to overcome issues).  

The next step for the marketer is to work on reducing filtering. Filtering is when a carrier or provider blocks messages from going through because the content within that message is believed to be against acceptable use policies (e.g. illegal or inappropriate) or is SPAM (unwanted).

Filtering is instrumental to the ongoing value of text messaging by ensuring it remains a trusted channel for you and your customers.

To reduce filtering, be sure to follow the registration guidelines or requirements for the type of number you are using for text messaging.

The next step is to optimize your message structure.  

Recall that our previous example had a shortened URL of bit.ly/bird-feeders-lp-1. To reduce filtering, a marketing message should not use a link shortener that uses a shared public URL such as Bitly or TinyURL. 

Using a branded URL (such as with your domain) will reduce filtering. Alternatively, you may need to include the entire URL in your message and look for other ways to shorten the length. This is a better solution than using shorteners that are filtered. Take this example:

Original message with Bitly shortener:

Hi [First_Name]. Loyalty Member promo time! Bird feeders are discounted up to 20% through Apr 30. Visit bit.ly/bird-feeders-lp-1. Text “STOP” to opt-out.

New message with full URL and fewer characters:

Hi [First_Name]. Loyalty promo time! Bird feeders are up to 20% off until 4/30. Visit www.yourname.com/bird-feeders-lp-1. Text “STOP” to opt-out.

Another key criteria of your SMS marketing program is to keep your opt-out rates low and be sure to include simple and clear instructions for opting out. Carriers will heavily filter or even completely block traffic on phone numbers that receive high opt-out rates or complaints (e.g. because they weren’t given the option to opt-out).

Because of this, it’s really important for marketers to track opt-outs and the rate of messages that are filtered. Ideally, the provider you’ve chosen will offer reporting (like Twilio’s Messaging Insights) that includes real-time analytics and provides the opportunity to troubleshoot issues quickly in order to optimize the effectiveness of your campaigns.

Remember, every company has some messages filtered. Your task is to follow best practices to help you minimize filtering and quickly identify when issues arise for reactive measures. This can be as simple as adjusting the structure of your messages or may require a meeting with your provider to work through a resolution plan.  

Measuring and reporting on SMS marketing ROI

It’s important to  report on the metrics that will highlight the ongoing effectiveness of your marketing efforts and show ROI. A good place to start is to consider the type of metrics that are typical of an email marketing program and apply them to SMS marketing. Here are some examples:

Email MetricSMS Considerations
Subscriber Volumes & Growth Rate (Lead Generation)This is easily trackable and will be a key component of your implementation strategy
Bounce RateThe SMS comparable would be to report on the underlying reasons that messages may have failed. For example, on email you may be familiar with Soft Bounces and Hard Bounces. However, when it comes to SMS, it is likely best to report on Deliverability (see below) as it accounts for message failures and highlights a marketer's efforts to improve.
Deliverability Rate (learn more in our 2022 Email Deliverability Guide)Deliverability is a common metric across SMS and email.  When reporting on deliverability for SMS, be sure to include greater context as necessary. Attempt to identify specific categories that may be hampering your deliverability (such as filtering) and then quantify the results that your efforts for improvement have driven. For example, state: “In April, we identified X,XXX messages that were being filtered due to ABC. Our efforts unlocked these messages which equated to Z,ZZZ additional successful marketing messages in May.”
UnsubscribesSMS comparable are “Opt-outs” and should be carefully evaluated and reported on. They directly correlate to your subscriber volumes (discussed above) and give you a way to measure whether or not your customers found value in your communications. And like we mentioned earlier, high volumes of opt-outs can lead to enhanced filtering by carriers.
Open RateSMS does not have the capability to provide this statistic. Instead, you should look at CTR and Response Rates (See below). The typical open rate for SMS is 98% and in general, marketing messages have an average open rate of 82%.
Click Through Rate (CTR)Comparable options for tracking SMS include linking to custom landing pages, keyword response tracking, or using functionality such as Twilio Link Shortening with built in click tracking to provide the results.
Replies (Response Rate)SMS makes it easy to  track replies and report on response rates. Your reporting mechanism will show volumes as well as opt-outs to determine the proper numbers to consider for your analysis.
Conversion RateSMS can facilitate tracking of conversions although you need to construct your metrics appropriately. Conversion examples may include: text responses, keyword responses, coupon codes redeemed, QR codes scanned, hyperlinks tracked with UTM parameters (be sure to consider link length and shortener implications).
Attributed Pipeline Generation Whether or not you’re able to measure this will depend on the attribution model your company uses. If it’s a first touch model, then SMS will not show attributed pipe from customers who came in via advertising or email. However, you may be able to show attribution when a customer signed up for an in-store loyalty member program, for example. Remember that the SMS channel is intended to drive engagement. So the ROI of your SMS marketing strategy is best tracked using a multi-touch or last-touch attribution model to capture revenue from Keywords, Coupon Codes, etc.
Overall ROIBusinesses calculate ROI in different ways, so it’s important to understand what your business values. Are they interested in top line revenue/volumes or bottom line (profit)? Do they care about payback vs the original expense? What about presenting the Customer Acquisition Cost (CAC) vs Lifetime Value (CLV) or decreases in churn? Whichever method you’re tasked with presenting, do your best to delineate the value specific to SMS.

As you can see, SMS marketing campaigns provide the ability to effectively measure and report on results. Since email reporting has likely been standardized within your organization, it provides a good benchmark for how your new texting program can be presented to peers and leadership.

Build your SMS marketing strategy today

Texting for marketing can undoubtedly help your company build loyalty and growth while providing measurable ROI. If you’re ready to deep dive on SMS marketing, download Twilio’s SMS for Marketing eBook. You’ll learn how to develop an overall SMS marketing strategy, capture consent, and create effective campaigns at each stage of your customer journey.

Bill Higbee is a Sr. Product Marketing Manager, Messaging, at Twilio. Bill has 20+ years experience in technical marketing roles spanning API, SaaS, Telecom, and more. When Bill isn’t helping businesses enhance their customer engagement, he’s most likely skiing, golfing, or finding some other way to have fun outdoors. Feel free to reach out to him at whigbee@twilio.com or linkedin.com/in/billhigbee.