SMS Marketing Costs & ROI: Is It Financially Worth It?

SMS marketing was such a great idea, but now you’re looking at the bill, and… yikes. It’s a little high.

But just how expensive is SMS marketing? And will you see a return on that investment?

Let’s look at whether SMS marketing is actually worth it.

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SMS Marketing Cost Comparison Calculator

What Is SMS Marketing?

SMS marketing is using SMS (text messaging) to send promotional marketing material to customers and clients.

This can include sending special discounts, alerting customers about important updates or new items, and even taking care of customer service tasks using features like two-way messaging.

How Much Does SMS Marketing Typically Cost?

SMS marketing costs… well, it depends.

There are a few SMS marketing services that are entirely free up to a certain amount of messages.

SMS marketing services vary in whether they charge per message or offer tiered packages with a set number of messages already included, so comparing prices gets tricky.

On average, SMS marketing will cost between one and five cents per message. Tiered packages often start at around $20 to $30 per month for the first 500 messages and upwards of $1,000 per month for 50,000+ messages.

What Factors Influence SMS Marketing Costs?

A few different factors can also affect how much companies have to pay for SMS marketing.

Here are three big ones.

Location

If you’re sending messages domestically within the U.S., you’ll pay a much lower price than you would if you’re sending SMS and MMS messages overseas to places like Hong Kong.

SMS/MMS

SMS (short message service) refers to standard text messages with only text, while MMS (multimedia messaging service) refers to text messages sent with other forms of media like photos, GIFs, and video.

Some services charge more for packages that include MMS or charge more per MMS, so that factors into what businesses pay per month.

Features

Features like shortcodes, shortlinks, two-way messaging, and auto-responses can also cost more for companies using SMS marketing. Unique features like scheduling and collecting payment via SMS also often cost more.

How To Be Compliant (Legal)

One area you want to keep abreast of when considering costs and how to mitigate them is the legal side of things. I’ve compiled a quick list of ways to use SMS legally.

• Get Consent, Stay Cool: Just like you wouldn’t borrow your neighbor's car without asking, don’t send SMS marketing messages without getting a clear ‘yes' from your customers. Remember, the TCPA and GDPR are like the neighborhood watch – they’re there to make sure everyone plays by the rules. Always get explicit consent via a signup confirmation for peace of mind.
• Be Clear, Be Honest: When sending texts, it’s like putting a note in someone’s mailbox. Make sure they know it’s from you (clearly identify yourself) and keep it real (no misleading content). It’s not just polite; it’s the law.
• Carrier Rules, Not School Rules: Think of carriers as the hall monitors of SMS marketing. They’ve got their own rulebook about what you can send and how often. Stick to their guidelines to keep your messages flowing smoothly.
• Privacy Is King: Treat your customers' data like a secret family recipe – guard it closely and don’t share it without a good reason. Respecting privacy builds trust, and trust is what keeps customers coming back.

What Do Credits Mean for SMS Marketing?

SMS credits are essentially the currency of SMS marketing.

With some SMS plans, users are given a certain number of credits that they can use each month. Users can use these credits to send SMS and MMS messages.

For example, let’s say you purchase a plan that includes “500 SMS credits” per month. It costs one credit to send an SMS message and three to send an MMS message. So you could send 167(ish) MMS messages or 500 SMS messages, or any combination of the two.

SMS Marketing Pricing Rates

There can be multiple different rates that you need to factor in to figure out the true total cost of your SMS marketing plan.

Costs per Message

Some plans charge a certain amount for each SMS message, many of which allow you to pay as you go.

Rates for these SMS messages range from one to five cents each (remember that the 160-character limit typically applies) and MMS messages can cost up to three times that rate.

Some of these services offer packages where customers can buy 100 at a time for a certain price per message or get a discounted rate by buying more messages at a time.

Costs per Keyword

Keywords are what companies use to get subscribers to sign up to receive SMS marketing materials.

Keywords are also a great way to easily segment your subscribers into different groups for more targeted marketing.

Many monthly plans include a certain amount of keywords, offering one or two for lower-tiered plans and more for more comprehensive ones.

Businesses often have the option to purchase more keywords at around $15 to $25 per keyword.

Monthly Fees

Monthly fees are the base price that SMS services charge each month for the inclusive packages.

These costs vary widely based on the provider and how many services they offer, but monthly fees typically cost anywhere from around $10 to upwards of $1,000 per month.

Short Code Costs

Shortcode is an additional cost that you will need to include in the total cost of your SMS marketing.

The only place that companies can purchase shortcodes from is the U.S. Short Code Registry, where a randomly generated number costs $500 per month and $1,000 per month for a vanity code (more on that later.)

You will have to pay an additional cost ($800 to $1,500 per month) to get carrier connections included.

What Are Short Codes?

You’ve probably noticed that when you get SMS messages from businesses, they’re sent from an 8-digit number. That’s called a shortcode. Shortcode is the unique short phone number that businesses often use to send messages.

Similarly to how you have to buy the domain name for your site and pay a monthly or yearly fee for it, businesses also have to buy their shortcode number and purchase the rights to that shortcode in 3-month, 6-month, or 12-month increments from the U.S. Short Code Registry.

Vanity vs. Non-Vanity Short Codes

Non-vanity shortcodes are generated randomly by the U.S. Registry. These are a great option for businesses with smaller budgets since they cost half the price of vanity shortcodes.

Vanity short codes are custom numbers selected by a business for specific reasons, typically to have a more memorable or relevant number.

How to Measure ROI of SMS Marketing Campaign

Are you really getting your money’s worth? How do you even know?

Here are a few KPIs that you can use to quantify the success of your SMS campaign and decide if it’s worth it to continue.

Clickthrough Rate

The clickthrough rate or CTR shows the percentage of customers that receive and open your SMS messages actually click on hyperlinks that you send them.

Conversion Rate

Conversion rate is how many subscribers that do click the links sent to them end up taking the action you wanted them to.

This usually means making a purchase.

Cost Per Subscriber

How much are you paying per month for each subscriber? If you’re spending a huge amount of money monthly just to keep people on your subscriber list and aren’t seeing the conversion rate you’d like to, it may be time to try something else.

Simple Formula to Figure Out

If you’re looking to calculate and find out for yourself what your ROI percentage is, just follow this simple formula.

First, find your ROI by subtracting your investment (how much you’ve spent on the SMS marketing service) from your return (how much money you have made from SMS marketing.)

One you have that number, divide it by that initial investment cost, then multiply that number by 100. This will give you your ROI percentage.

This will look like:

• (Return – Investment) ROI
• (ROI / Investment) x 100 = ROI percentage

A real-world example for one month would look like this:

• Return: $2,000
• Investment: $40
• $2,000-$40= $1,960
• ($1,960/$40)= $49
• $49 x 100= 4,900%

Text Message Marketing ROI Case Studies

High-end restaurant using MyArea Network

Using MyArea Network, a high-end restaurant was able to see a 600% ROI percentage over the course of three months.

MyArea Network created a landing page and contest for the restaurant.

According to the case study, “The goal was to build the database while also driving customers into the restaurant for a dinner-for-two special. The landing page received 72,291 impressions through Facebook ads. There were 2,235 clicks and 1,405 entries.

If we estimate that only 5% of people who received coupons visited the restaurant and had an average check of $60, the ROI of this text marketing campaign is 6X the investment.”

• Investment: $600
• Return: $4,200
• ROI: $3,600

Curie

Personal care products brand Curie was looking for the best way to convert free sample users to paying customers, so they turned to PostScript to help with their SMS marketing campaign.

They added text-to-buy callouts to the signage already displayed in partner locations which built a significant list of subscribers. Instead of blasting out mass texts constantly, the brand was intentional with their messaging, and this approach paid off.

The brand achieved an 8% click-through rate with a 46% conversion rate when they used SMS to notify subscribers about their annual sale.

Princess Polly

Australian clothing brand Princess Polly used Yotpo to see a significant increase in their conversion rate and return on investment.

According to the case study:

One of their flash sale campaigns saw a 41% conversion rate and 73x ROI from their non-engaged segment alone. At the same time, the SMS Welcome Flow has realized an 84% CVR.

How Does Text Message Marketing Compare To:

Is SMS really that much more successful than email marketing? What about social media ads?

Email Marketing