Cracking the ROI code: A complete guide to optimising your business SMS investment

Cracking the ROI code: A complete guide to optimising your business SMS investment

3 minute read

Jul 11, 2023

Few channels offer the directness and convenience of SMS. With an impressive average open rate of 98%, SMS marketing presents a fantastic opportunity to swiftly communicate your latest products, offers, or news to your customers.

Once you've executed your campaign, it's important to calculate the return on investment (ROI). This blog helps you to do just that.

We cover:

  1. Establishing clear goals
  2. Defining success indicators
  3. Evaluating cost per conversion
  4. Next steps

Establishing clear goals

Before launching your SMS campaign, it is crucial to establish clear goals that will serve as the basis for measuring success and calculating return on investment (ROI). These goals can be divided into four distinct areas:

  1. Increased Profits: To measure the campaign's impact on profits, you can track the number of downloads, sales, and profit per promotion.
  2. New Customer Acquisition: This goal focuses on acquiring new customers. You can measure it by monitoring the number of leads generated, conversions per lead, and the cost per lead.
  3. Brand Awareness and Loyalty: This goal aims to increase brand awareness and foster customer loyalty. Key metrics to track include the number of new subscribers, page visits, and data collection.
  4. Data Quality: Ensuring the quality of data is essential for a successful campaign. To measure data quality, you can keep track of the number of responses received, the overall data quality, and the number of opt-outs.

Remember to revisit these objectives at a later stage to assess the campaign's progress and make any necessary adjustments.

Defining success indicators

The success of your SMS campaign hinges on accomplishing your business goals. To determine your ROI, you can use these goals to understand what worked well, what could have been improved, and what adjustments are necessary to make your next campaign even more successful.

Having a clear understanding of your campaign's performance is crucial for setting objectives, managing expectations and making improvements to future campaigns.

The following pointers will help you to unlock some of the key metrics you need:

Delivery rate

The delivery rate breaks down the percentage of texts that were successfully delivered compared to the total number sent. It gives you a good indication of how accurate and up to date your data actually is. A low delivery rate may suggest that some housekeeping is needed to update or remove some of your mobile numbers.

After sending your messages, the first step is to determine the success of your delivery. You can calculate the delivery rate using the following formula:

[Delivered ÷ Total Sent ] × 100 = ROI%

Conversion rate

By measuring the conversion rate, you can begin to build up a picture about which offers and promotions worked best for your audience and motivated them to take action. Depending on the goal of your SMS campaign, the conversion rate can be determined by analysing the number of downloads, appointments booked, or offers redeemed in-store.

You can calculate the conversion rate using the following formula:

[Number of people who took action ÷ Number of Recipients] × 100 = ROI%

Cost per conversion

You can track the financial return on your campaign by looking at areas such as active redemption numbers, conversions or call and response rates. This also allows you to compare the performance of SMS marketing against other channels such as email, direct mail, and social media.

To calculate the cost per conversion, divide the number of achieved goals (e.g., appointments booked, items sold, coupons used) by the cost of each delivered text message. The formula looks like this:

[Return ÷ Investment] x 100 = ROI%

What's Next?

An ROI figure is only ever as reliable - or as accurate -  as your data and how well you interpret it.

Remember to:

  • Define your goals and objectives before launching your campaign.
  • Calculate your ROI and present the data.
  • Maintain a detailed and up-to-date database to ensure high delivery rates.
  • Consider utilising this data for A/B tests in future campaigns.

Tip: A/B tests involve splitting your database into two segments and sending each group slightly different messages to determine which one performs best. For instance, one message may contain imagery while the other does not, or the wording may vary slightly. A/B testing is an excellent way to gain insights into customer behaviour and the campaign strategies that work and don't work.

Voodoo: Helping you take your SMS campaigns to the next level

Calculating the true ROI of marketing campaigns remains a significant challenge for many businesses. Whether your campaigns are spontaneous or part of planned monthly initiatives, understanding the value generated from SMS marketing can help you make improvements, increase brand awareness, boost profits, and secure greater investment from stakeholders in future campaigns.

If you have any questions regarding the calculation of your campaign's ROI or if you wish to learn more about maximising your SMS results, don't hesitate to reach out to us today on 01484 599 311.

Do you like this article? Spread the word!