Maximizing SMS Marketing ROI with Data-Driven Insights

As businesses increasingly adopt mobile-first approaches, SMS has become an essential component of their digital marketing strategies. In this blog post we discuss how data-driven insights can help businesses maximize the return on investment (ROI) of their SMS marketing strategy. We’ll start by reviewing the public data that supports our strategic recommendations, then explore how you can leverage your own data for insights, and close with a recently conducted case study.

Maximizing Marketing Value with High Engagement and Low CPM

According to a report by Mobilesquared, SMS has an open rate of 98%, and 90% of text messages are read within the first three minutes. If we were simply making a case for using SMS we could ‘mic drop’ on that alone. Outside of holding down some of the highest engagement rates of any digital marketing channel like a pound-for-pound champion, SMS provides tremendous value. Not only do you get high quality engagement with your audience, you pay significantly less for it.

In fact, one of the main advantages of SMS marketing is its cost-effectiveness. Compared to other marketing channels like email and social media, SMS is relatively inexpensive. According to a study by Gartner, SMS has a cost per impression (CPM) of $0.05, which is significantly lower than other channels like display advertising and paid search.

Targeted Approaches For Audience, Content, and Timing

In addition to its cost-effectiveness, SMS marketing is also highly targeted. Businesses can segment their audience based on demographics, behaviors, and preferences to deliver personalized messages that resonate with their customers. A study by MarketingSherpa found that segmented campaigns can increase click-through rates by 50%, demonstrating the effectiveness of targeting in SMS marketing.

Moreover, SMS marketing has proven to be an effective tool for driving customer loyalty and retention. According to a study by Salesforce, SMS messages sent to customers who opted into the program resulted in a 90% open rate and a 32% click-through rate. These numbers indicate that SMS can help businesses build strong relationships with their customers by delivering relevant and personalized messages.

Another advantage of SMS marketing is its ability to drive revenue growth. A study by Dynamic Yield found that SMS campaigns can increase revenue by up to 46%. And while you probably could have guessed it, SMS has been found to be particularly effective in driving sales during key shopping events like Black Friday and Cyber Monday. According to a report by TextMarks, SMS drove a 305% higher conversion rate than email during the 2018 Black Friday weekend.

Using Data to Drive SMS Marketing Results

To maximize the ROI of their SMS marketing strategy, businesses need to adopt a data-driven approach. By leveraging data and analytics, your business can gain insights into your customers' behavior and preferences, allowing your team to deliver more targeted and personalized messages.

One of the key metrics to track is conversion rate (sometimes displayed as CVR). Analyzing conversion rates helps identify which messages and campaigns are most effective in driving customer action. Conversion data is king to optimizing even your best SMS campaigns, providing a clear winner to AB tests.

Another important metric to track is the unsubscribe rate. High unsubscribe rates can indicate that customers are not finding the messages relevant or valuable, and your team should adjust their strategy accordingly. By analyzing the reasons for unsubscribes, you can identify areas for improvement and develop more effective messaging strategies. Essentially, conversion rate and unsubscribe rate make up the two ends of the spectrum.

And while conversion rate and unsubscribe rate are a great way to get a general understanding, try taking it a step further by tracking engagement metrics like open rate and click-through rate. These metrics can provide valuable insights into how customers are interacting with SMS messages, allowing your team to adjust their approach to improve engagement and drive more conversions. According to industry standards, the average open rate for SMS is around 98% (which is significantly higher than email marketing). Click-through rate for SMS campaigns varies, as do studies, but we’ve seen reports ranging from 30%-40% (also significantly higher than email marketing, which has an average click-through rate of around 4%).

Leveraging data to optimize the timing and frequency of your SMS messages is a great way to boost your click-through rate and conversion rate at the same time. Often overlooked, timing plays a significant role in the success of your business communications. Whether it's a sales campaign, abandoned cart reminder, receipt, appointment reminder, or a live message inquiry, timing is everything. Analyze customer behavior and preferences to identify the best times to send messages and the optimal frequency for each customer segment.

If you’d like, use these numbers as a guidepost and adjust your expectations as you optimize. It's important to note that all of these rates are averages and your results will largely depend on the quality of the messaging, the relevance of the content, and the accurate segmentation of the audience. Our best tip will always remain: strive to optimize all metrics by delivering more targeted and personalized messaging that resonate with your customers.

A Quick Case Study: HBO, Game of Thrones

HBO used SMS marketing to engage fans of the Game of Thrones TV show and build hype leading up to the season five premiere. The text-based service, Three Eyed Raven, sent reminders and links to fans who subscribed to the service for content surrounding the show. Fans received visions from the three-eyed raven via SMS, which foreshadowed the upcoming season. The service had about 70,000 subscribers within the first two months of launching, and the sneak peek video received over 1.5 million views on YouTube.

SMS marketing allowed HBO to engage with fans in a personal, intimate way and create a sense of urgency around the content, which enticed fans to immediately engage. The success of the Three Eyed Raven service demonstrates that SMS marketing can be an effective way to reach a large fan base and generate buzz around a product or service.

Credit where credit is due: this case study was published by Marketing Dive. Read the Marketing Dive study here.

Summary

By now you know that SMS marketing has emerged as a powerful tool for direct customer engagement. Beyond its high engagement rates, there is its cost-effectiveness and the ability to drive loyalty and revenue growth. By adopting a data-driven approach, businesses can maximize the ROI of their SMS marketing strategy by delivering more targeted and personalized messages on their audiences preferred channel.