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How to compare SMS marketing costs and opportunities

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How to compare SMS marketing costs and opportunities

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As marketers compete for consumers’ hearts and minds in an overcrowded omnichannel world, Short Messaging Service (SMS) has become a popular channel. But low advertised SMS marketing costs and off-the-chart metrics can be misleading to marketing teams who are only aware of SMS’s advantages. 

Why are marketers using SMS?

SMS messages can be used by businesses for everything from appointment reminders and surveys to personalized promotions or sales and remarketing. 

And it’s easy to see why marketers are excited to tap into SMS marketing: consumers are overwhelmed with offers delivered via emails and social media ads, but a simple text message can break through that noise in a way that feels more personalized.

Many see SMS as an alternative to email marketing, and the numbers seem to reflect that. SMS marketing beats email marketing in key metrics like:

  • Average email open rate (28-33%) vs. average SMS open rate (97% within 15 minutes of delivery)
  • Average email click-through rate (6-7%) vs. average SMS click-through rate (36%)

Despite some eye-popping numbers, though, SMS messages aren’t a marketing panacea. For data-driven, efficient marketing teams that provide an app-based experience for customers, the deceptively high price of SMS marketing costs compared to in-app messaging often aren’t worth the results.

7 pitfalls of SMS marketing costs

It’s important to understand the reality behind the rapid growth of SMS marketing. While legitimate businesses tapped into the power of SMS messages to communicate with their customers, not-so-legitimate businesses also joined in. In April of 2021,

Americans got almost 17 spam texts a month; a year later, consumers were receiving up to 41 spam texts a month. For context, 2020 was the first year that Americans received more spam texts than the much-maligned spam calls.

As consumers’ text inboxes slowly turn into their email inboxes, your brand will soon be tuned out along with dozens of others.

Still, you might think that, for the price, which can be pennies or a fraction of a penny for each segment delivered, it’s worth diving headlong into SMS marketing. But the true story of SMS marketing’s costs goes beyond the price-per-message rate.

Let’s dive into the seven pitfalls of SMS marketing costs you need to know before hitting send.

1. Unpredictable pricing

Sending a local number a message with fewer than 160 characters can be an incredibly cost-effective way of marketing. But as the variables change, the costs can be hard to predict.

The more you scale, the higher your SMS marketing costs will climb. Some things that can make it hard to keep costs down — and thus take away a key selling point of SMS marketing — include:

  • Message length: Messages longer than 160 characters will be broken into segments, which each have their own costs. Want to include emojis or one of the 1.1m special characters available to you? The special encoding required for a simple emoji can lower your segment limit to 70 characters per segment; whereas including one special character can triple the number of outgoing messages sent.
  • Media: Sending a text with an image or video — aka Multimedia Messaging Service (MMS) — can be a fun way to stand out, but it can cost 3-5x a standard 160-character SMS message.
  • Carrier variability: Costs can change per wireless carrier and vary widely once you enter other countries. Just this year, companies using “10DLC” or 10 digit long codes for their business’ text number faced new monthly campaign fees of $.75 to $10 per campaign and surcharges of $0.003-0.005 per message on AT&T, Verizon, T-Mobile and U.S. Cellular.

These are just a few of the ways SMS marketing costs can quickly add up. The per-message-price is rarely the true price you pay, as there are many hidden pricing pitfalls in the industry. Other variables include the country you’re sending to/from, the throughput and timing of your messages (high-volume sends may be throttled without paying extra), and whether you’re using short or long code, with a short code costing hundreds per month to lease.

2. Archaic setup and costly onboarding

Like mass email marketing, mass SMS marketing requires you to market to people who have opted in to receive communications from your company. If you haven’t already gotten a list of consumers willing to opt-in to text messages from your company, you’ll need to spend time on campaigns to build that list of subscribers. Once you have a list, you’ll likely need to import that list via a CSV file to get started. It can be a highly manual, tedious process.

On top of that, if you’re using an SMS software or service, you’ll need to register your number(s) with The Campaign Registry. This involves managing compliance here for bulk message sends to ensure the best throughput on your network, otherwise messages might be delayed or may not be sent properly.

Once you’re set up, you’ll also have to consider the cost of compliance. Every SMS marketer is required to send onboarding messages when subscribers sign up that tell them who you are and how to opt out. These additional messages can quickly add up over hundreds or thousands of subscribers before you’ve even run your first campaign.

3. Frustrating data access

With SMS marketing, there are several layers between you and your customer. Those include the aggregator (the service sending the message on your behalf) and the mobile network operator (MNO). This means that some data doesn’t belong to you or can be very difficult to access.

On top of that, SMS messages can operate in a silo of their own. Unlike other marketing channels which are neatly tied together, there’s a lot of work to be done to make SMS campaign data an integrated part of your broader marketing metrics. 

4. Black box reporting

One of the marvels of modern marketing is the amount of data available for analysis, allowing you to optimize and improve your campaigns continually. With SMS marketing, the amount of data available to you can be sparse. At best, reporting on key metrics like delivery rate is limited, with few insights into a customer’s engagement with your message. 

At worst, a lack of insights can hide unscrupulous tactics. Some aggregators have been known to use grey routing—sending international messages through less expensive and less secure countries — in order to cut costs, which can lead to inflated delivery rates and other problems. 

The data behind customer engagement is critical for marketers to measure the ROI of their campaigns. Without more granular data to optimize SMS campaigns, you’re more likely to waste money on unnecessary or underperforming messages. How much money? You may never know. 

5. Increasing security risks for consumers

The increased popularity in SMS marketing is also leading to an increase in SMS scams — known as Smishing — that aim to get people to share sensitive banking or identification information. It’s estimated that Americans lost over $10 billion in 2021 alone to fraudulent text messages. That same year, Smishing rates rose 700% in the first six months.

What was once used for quick messages between friends and family is quickly becoming a new target for scammers — and it’s working. For many people, it can be very hard to tell the difference between an authentic text and a fraudulent one. As more stories come out about SMS scams, expect open and click-through rates to drop and regulatory costs like those associated with 10DLC to increase.

6. Losing brand identity

Alphanumeric sender IDs, or the name/number you receive a mass marketing text message from, allow companies to use a custom, 11-character ID when sending messages. This helps increase brand awareness and instill confidence in consumers that messages are legitimate. 

Not all countries support alphanumeric IDs, however. In these countries, consumers will receive messages from a random long code, short code, or unidentified mobile number. It can make consumers skeptical and might unintentionally lead consumers to associate your brand with suspicious or scam behavior.

7. Limited scalability

Scaling effectively is critical to marketing teams. One common marketing best practice is to try something out in a limited capacity to prove the return-on-investment before expanding further. SMS messages make a lot of sense to scale geographically, as this channel can work for consumers that don’t have smartphones or data. 

But with SMS marketing costs being so variable, what’s cost-effective in one region can vary wildly as you expand outward — especially across geographic lines. A message that costs pennies to send in the US may be as high as ZAR 0.52 in South Africa or MXN $1.09 in Mexico.

The complexity of compliance and managing costs across so many different network operators can diminish the returns of scaling your SMS marketing internationally.

Even if you’re just scaling your volume of messages instead of your geographic coverage, SMS marketing costs can still rise. As you work with an aggregator, the initial setup fees and message costs can be attractively low. But you’ll often pay higher fees for the higher volume of messages you send. Since SMS technology is dependent upon infrastructure that has limited capacity for bulk messaging, it’s common for costs to go up as you scale up. Economies of scale unfortunately don’t apply here.

The advantages of Sendbird’s in-app messaging over SMS

In-app messaging advantages vs SMS

In a world where engagement is king, SMS marketing can seem like capturing lightning in a bottle. But when you compare the advantages of SMS to in-app messaging, despite high open and click-through rates, SMS messages aren’t a sustainable way to build engaging relationships. 

The more you — and your customers — come to rely on SMS for brand engagement, the more the shortcomings of the channel will be exposed. For example: Are SMS messages going to be part of your customer support strategy? Will customers who want to engage with your company from a text need to move to a different channel? Will SMS-based engagement be part of your customer’s record or is that data lost?

In-app messaging, on the other hand, gives you the ability to send (and receive) messages one-to-one and in group chats. At the same time, it solves some of the key shortcomings of SMS marketing:

  • Greater control – Since your message comes from your app, communications are driving engagement with something you control—from user accessibility to access to messages and records.
  • Easier to scale – Messaging through your app works whether you’re marketing just in one location or globally and there are no surprise costs or regulations to manage.
  • Complete experience integrated into the user journey – In-app messaging is the next frontier of relationship building and personalized customer interactions because the conversations are happening where your customers need to be to take action and where your business can measure and optimize it all.

Building authentic relationships with customers in an omnichannel world can feel difficult. SMS marketing is one part of the equation and can supplement your outreach or act as a fallback. In-app communication, however, offers much of the text-message-style experience with a better experience for you and your customers. With Sendbird, you can make your app the go-to engagement hub for your customers.

Get a demo from Sendbird today and see how simple and powerful it can be to turn your SMS messages into engaging, in-app conversations.

Categories: Insights