Two myths about SMS marketing are that it's intrusive and expensive.

But is it intrusive?

With mailboxes flooded by marketing emails, now more than two in five consumers want to hear from brands through SMS. In fact, consumers from ages 25 to 54 prefer to communicate with brands via SMS over email. SMS is a viable marketing channel. 

Now, is it expensive? 

In this post, we will break down SMS marketing costs, all contributing factors, and how you can build a cost-effective campaign. 

TL;DR: Using CoEngage, you can send a text message in the US for as little as $0.0095 per SMS. More on this later. 

10 Factors That Influence SMS Marketing Costs

Many factors contribute to SMS marketing costs, majorly campaign size, location, and the provider you choose. Here are the top aspects that influence costs:

1. Location

Firstly, the pricing will vary depending on the location of the consumers you are targeting. For example, CoEngage users can send one SMS at a cost between $0.0095 and $0.013  to US consumers. There are additional carrier fees, which will be explained in the next point. 

2. Carrier Fees

Mobile carriers are service providers that deliver messages. Popular mobile carriers are AT&T, T-Mobile, and Verizon. These providers charge a small price called carrier fees, which are added to the SMS cost. 

3. Message Type

If you opt to send an MMS with media images, videos, or GIFs instead of a text message, then the charges can go slightly higher. For instance, for CoEngage users, the cost of sending MMS ranges between $0.029 and $0.039.

 4. Target Audience Size

The more consumers you reach out to, the higher the cost. The pricing scales with the volume of the contact list. 

5. Message Volume

Beyond the contact list, the number of text messages you plan to send in a month also significantly impacts the overall cost. Providers offer different pricing plans based on message volume. Assess your expected volume in advance to choose the right package.   

6. Provider Charges

The cost of SMS marketing largely depends on the service provider you choose and the pricing plans they offer. Three common types of pricing models are:

• Pay-as-you-go: You pay based on message volume and features used.
• Subscription: You pay a flat subscription, which includes a fixed message volume and features in it. 
• Hybrid: You pay a flat subscription for a certain message count limit. After exceeding the limit, pay-as-you-go pricing is enabled, and you are charged based on the message volume. 

Compare the pricing models across different providers based on your expected volume and features. Find a provider with a pricing model that fits your budget and requirements.

7. Phone Number Type

SMS marketing rules are getting stricter to save consumers from spam. You would need a registered number for business text messaging. Below are three main phone number types that you can use for texting:

• Long code: Long code is your usual 10-digit number that looks like a standard phone number. Example: (415) 555-XXXX. Due to the familiar format, messages from these numbers look more personalized and are effective for smaller SMS messaging campaigns. They allow two-way messaging so they can accept replies from consumers.
• Short code: Short codes are typically 5 to 6-digit numbers assigned by carriers for sending and receiving SMS messages. They are often used for mass notifications, marketing campaigns, and customer support. Shortcodes are relatively expensive compared to long-code and toll-free numbers. 
• Toll-free numbers: Toll-free numbers are a hybrid between short codes and long codes. Toll-free numbers support two-way communication, allowing businesses to engage in interactive SMS conversations with their consumers. Toll free is more cost-effective than short codes.

Tip: With CoEngage, you can get a phone number toll-free for free. We are waiving off the toll-free registration charges for all our users. 

8. Keyword Costs 

An SMS keyword is any word or phrase your consumers can text back as part of a campaign. For instance, If you are planning a Thanksgiving campaign, you can ask consumers to reply 'Thanksgiving' keyword to learn more about the offers. 

SMS keywords are usually used for opt-ins and to get a heads-up from consumers if they are further interested in any particular campaign. SMS marketing providers often charge for the usage of any specific keywords.  

9. Customer Support

Another factor that impacts the cost of SMS marketing is the type of support you expect from the provider. SMS marketing providers offer different pricing plans, each with varying levels of customer support. For instance, basic plans usually provide no customer support, mid-level plans may have email or chat support, and enterprise versions can have onboarding or 24*7 support. 

10. Advanced Features and Customization Options

SMS marketing providers can also offer advanced features like segmentation, personalization, AI support, analytics, etc. These features help in designing an effective campaign. The catch is these features could be included in their existing pricing plans or may come at an extra cost. Check for the below features and their pricing before making the decision. 

• Does the provider allow the segmentation of users into smaller groups with specific attributes such as age, gender, location, purchase history, address, etc?
• Does the provider support automation to trigger SMS automatically at a predetermined time or in response to any user action?
• Does the provider have an analytics report capturing KPIs like open rates, click-through rates, conversion rates, and opt-in and opt-out rates?
• Does the provider offer any AI features for campaign support?

Additional Costs To Consider | SMS Marketing Pricing

Below are additional features that can impact SMS marketing costs. While some of these features may be available in the existing pricing plans, some of them could be chargeable. 

1. Integration

Does the SMS marketing provider offer all the necessary integrations? A few must-haves are integration with other platforms like Customer relationship management (CRM)  tools, eCommerce tools, or other marketing tools. Are the integrations available for free, or do you need any enhanced functionality (which is chargeable)?

2. Compliance 

Does the SMS marketing platform follow all compliance and legal considerations? For example, in the US, businesses must follow the Telephone Consumer Protection Act. It is a federal law to safeguard consumer privacy. It prohibits marketers from sending any marketing messages if the consumer has not given prior consent. The law also provides timings in which businesses can send marketing messages, i.e., between  8:00 AM and 9:00 PM local time. 

While the SMS marketing providers do not charge separately for compliance, it's important to assess different platforms to find which one is compliant. 

3. Subscribe List Maintenance

SMS marketing providers have a limit on the consumer list in different plans. For instance, the CoEngage starter plan captures 5000 contacts. On the other hand, the pro plan allows unlimited contacts.

4. A/B Testing and Optimization Costs

Another additional cost in the pipeline is the cost of testing campaigns before the actual launch. It includes sending sample emails with different subject lines and content to optimize the campaign before the launch. 

5. Response Handling Costs

Two-way communication or handling responses from consumers may incur additional charges. This includes maintaining opt-in/opt-outs and managing customer responses. If you wish to integrate these responses into your existing systems and store them in CRM or customer support platforms, it may further increase the costs.

How To Calculate ROI on SMS Marketing Campaigns

Calculating return on investment (ROI) for SMS marketing campaigns is assessing how much profit you gained against the investment made. 

The steps to calculate ROI are:

1. Determine total revenue: Find the total revenue generated by the campaign. For example, the number of conversions, purchases, etc. 

2. Define campaign cost: Sum up all costs associated with the SMS campaign. It includes SMS marketing platform fees and any additional expenses.

3. Determine net profit: Find your profit against the investment by subtracting campaign cost from the revenue.   

Net profit= Total revenue - Total campaign cost

4. Calculate ROI: You can calculate ROI with a simple formula.

ROI = (Profit/Campaign cost)*100

Let's understand with an example. You planned an SMS marketing campaign in which you sent promotional emails to 15000 contacts using the CoEngage growth plan (priced at $79 per month). Out of 15000 contacts, 800 consumers made a purchase of $50 each.

Total revenue = 800*$50 = $4000

Campaign cost = $79

Net profit = Total revenue- Campaign cost = $4000 - $79 = $3921

ROI = (Net profit/Campaign cost)*100 = (3921/79)*100 = 4963.29%

Plan Cost-Effective SMS Marketing Campaigns With CoEngage

CoEngage offers a generous growth plan for small and medium businesses with up to 25000 contacts at just $79 per month. And Enterprise versions with unlimited contacts started at just $199 per month. Get in touch with our team to design the most cost-effective SMS campaigns.