If you’re wondering how to get the most out of your SMS marketing efforts, you’re in the right place. This strategy isn’t just effective—it’s like the Swiss Army knife of customer engagement: versatile and surprisingly cost-effective.
But here’s the million-dollar question: Is it truly delivering the results you’re after? Can you confidently justify your marketing spend to stakeholders? If you’re unsure, it might be time to measure your return on investment (ROI).
For those already using SMS marketing platforms, understanding ROI will help you assess how well your SMS marketing efforts are performing. ROI is your ticket to understanding whether your SMS marketing is hitting the mark compared to other marketing channels. By revealing how much value your campaigns generate, ROI helps you make smarter, data-driven decisions.
In this SMS marketing guide, we’ll walk you through how to measure your campaign’s ROI and share tips for improving it. Let’s turn those text messages into valuable returns.
What is ROI in SMS marketing?
ROI is your go-to metric for evaluating the success of your SMS marketing. It provides a clear view of how your campaign’s returns compared to the costs, helping you determine if your efforts are worth the investment.
In a time when marketing budgets are tightening—dropping from 9.1% of business revenue in 2023 to 7.7% in 2024—it’s crucial to assess how your spending stacks up against your returns and refine your SMS strategies. Your ROI will guide you in fine-tuning your SMS marketing strategies or exploring other channels to ensure every dollar counts.
ROI is typically expressed as a percentage, revealing how much you earn from every dollar spent on your text message campaign. Here’s the formula to keep in your toolkit:
ROI = [Net Return on Investment (Sales − Cost of Investment) / Cost of Investment] x 100
A positive ROI indicates profitability, while a negative ROI indicates losses, signaling a need for reevaluation.
Metrics to track when measuring SMS marketing ROI
Tracking the right KPIs (key performance indicators) is key to understanding the effectiveness of your SMS marketing, much like how email marketing metrics reveal what’s working in your email campaign. Here are some metrics to keep an eye on:
Cost per message
Tracking your cost per message helps you see how much you’re spending on each SMS.
To calculate this metric, add all relevant charges together—like platform fees, your cost for SMS messages, and extras such as link shortening or tracking services—and divide by the number of messages sent.
Conversion rate (CVR)
Your conversion rate tells you how many recipients take the desired action after receiving your SMS, such as making a purchase or signing up for a service. This metric is crucial as it provides insights into how well your text messages resonate with your audience.
Monitor conversions through trackable links, response rates to SMS messages, or unique promo codes. Simply divide the number of people who complete desired actions by the number of message recipients and multiply that figure by 100.
Conversion Rate = [Number of desired actions / Number of messages sent] x 100
The desired action could be anything from clicking a link to using a sales code or replying to a text message. Typically, a good CVR ranges from 2% to 5%, but don’t shy away from aiming higher!
Customer lifetime value (CLV)
Customer lifetime value represents the total revenue your business stands to earn from a customer throughout your relationship. It’s a valuable metric for assessing the long-term impact of your SMS marketing strategy.
To calculate your CLV, use the following formula:
Customer Lifetime Value = Customer Value (Average Purchase Value x Average Purchase Frequency) x Average Customer Lifespan
Typically, a high CLV reflects strong customer loyalty, indicating a positive ROI as effective SMS marketing encourages repeat purchases and ongoing engagement. This is particularly beneficial for small businesses aiming to build lasting customer relationships.
Click-through rate (CTR)
The click-through rate measures how effective your messages and included links are. A high CTR suggests that your SMS marketing efforts are succeeding.
To calculate this metric, divide the number of clicks registered by the total number of SMS subscribers you contact and multiply that by 100.
CTR = [Number of clicks / Total number of SMS subscribers] x 100
Depending on your industry, a good CTR ranges from 19 to 32%, but aim to exceed these benchmarks for optimal results.
Opt-out rate
While a high opt-in rate shows interest in your brand, monitoring your opt-out rate is even more crucial. This metric helps ensure your campaigns aren’t driving customers away or negatively impacting your ROI.
To calculate your opt-out rate, divide the number of recipients who unsubscribe from your messages by the total number of recipients and multiply that by 100.
Opt-out rate = [Number of unsubscribes / Total number of recipients] x 100
If your rate is high, it’s time to reassess your strategy. Consider personalizing messages, testing different send times, or offering deals to keep audiences engaged. Look at the SMS marketing mistakes you might be making and adjust your campaigns accordingly.
Step-by-step guide to calculating the ROI of SMS marketing
Calculating ROI doesn’t have to be complex. Follow this step-by-step guide to simplify the process:
1. Determine total revenue generated
ROI calculations rely on understanding both revenue generated and costs incurred. Start by calculating the total revenue generated from your SMS campaigns.
To differentiate this revenue from other marketing efforts, specifically attribute sales and conversions to your text campaigns. Use trackable links or unique promo codes to monitor engagement and isolate the impact of your efforts.
2. Calculate total costs incurred
Add up all costs associated with your SMS marketing, including the campaign cost, platform fees, messaging costs, and any additional expenses for content creation, link tracking, and data analysis. Don’t forget to consider the pricing of your SMS platform when calculating costs. Keeping an accurate record of all expenses is crucial to avoid overlooking any elements.
3. Apply the ROI formula
With your total revenue and costs in hand, use the ROI formula to determine your campaign’s return.
ROI = [(Total Revenue – Total Costs) / Total Costs] x 100
For example, if your total revenue is $20,000 and your total costs are $2,000, your ROI would be calculated as follows:
ROI = [(20,000 − 2,000) / 2,000] x 100 = 900%
4. Interpret and analyze the results
A positive ROI indicates profitability, but the extent of profitability varies. Generally, an ROI between 0% and 100% is considered low, while 100% to 200% suggests a moderate ROI. If yours falls within these ranges, it’s important to identify areas for improvement and adjust your strategy accordingly (more on this below).
How to improve the ROI of SMS marketing campaigns
No matter where your ROI currently stands—be it negative, low, moderate, or high—there are always ways to enhance it. Here are some actionable tips to help you boost your SMS marketing ROI:
Personalize your messages
In a marketplace overflowing with options, it’s not enough to merely highlight your product’s benefits. To drive desired actions, you need to go the extra mile and offer great customer experiences.
Personalizing your messages is like giving your audience a VIP experience—who doesn’t love a bit of extra attention? This approach can be a game-changer in driving engagement rates, customer loyalty, and ROI. Businesses that tailor their communications see 40% more revenue than those that don’t, as 76% of consumers are more likely to buy from brands that offer personalized interactions.
Leverage customer data to make your messages more relevant:
- Address recipients by name.
- Suggest products based on their interests.
- Offer discounts on items related to past purchases.
Optimize send times
Finding the perfect time to send your messages can improve your open rates and deliverability, boosting overall conversion rates.
Avoid sending messages too early (before 8 a.m.) or too late (after 9 p.m.) to prevent annoying recipients and ensure compliance with the Telephone Consumer Protection Act.
Experiment to find the optimal send times by segmenting your subscriber list and testing different times of day. Track metrics such as clicks, conversion rates, or click-through rates to determine which timing yields the best results.
Use A/B testing
You may not register your goal ROI on your first try—it may require some experimentation. A/B testing allows you to test different elements of SMS campaigns—such as messaging content, calls to action (CTAs), and send times—to see what resonates most with your target audience.
For example, you could compare a playful tone with a formal one or try messages with and without emojis. Change one variable at a time to accurately gauge the impact of each adjustment on your ROI.
Leverage Bitly’s suite of marketing tools
Effectively tracking customer engagement is key to optimizing ROI. A URL shortener for SMS can help you monitor recipient actions after receiving your message, and Bitly’s URL shortener is an excellent choice.
Bitly’s link shortening and tracking features offer valuable insights into SMS campaign performance. With Bitly Analytics, you can see total clicks over time, top-performing clicks, and real-time data by location. Use this data to fine-tune your campaigns, focus on high-performing regions, and improve overall ROI.
Maximize your SMS marketing ROI with Bitly
Measuring your text message marketing ROI ensures your budget is working as hard as it should be. With accurate ROI data, you can refine your strategy to better connect with your audience. As you’ve seen, calculating ROI is relatively straightforward—just determine your revenue and costs, and apply the ROI formula.
The Bitly URL shortener simplifies how you track recipient engagement. Take your long, bulky URLs and shorten them with Bitly so they fit seamlessly into your SMS messages. With Bitly Analytics, you can keep track of your SMS campaign links to see how customers are interacting. You can access real-time click data including total clicks, unique clicks, top-performing clicks, and more depending on your plan.
With greater visibility into campaign analytics, your team can make ongoing adjustments to your SMS strategies to test, iterate, and continually improve your efforts—and boost your ROI along the way.
Don’t miss the chance to elevate your SMS marketing ROI—sign up for Bitly today and start tracking your campaign’s success!
