How to Actually Calculate SMS Marketing ROI (Worked Examples)

In the world of SMS marketing, buzzwords like "engagement" and "reach" often cloud the real measure of success: ROI. Most marketers rely on vague estimations and hopeful thinking rather than concrete calculations when determining the effectiveness of their SMS campaigns. But there's a way to cut through the noise with a hard formula: ROI = Revenue Attributed / (Send Cost + Carrier Fees + Number Rental + Engineering Hours).

Full disclosure, I work for ReadySMS, and we provide an SMS marketing platform that makes tracking ROI straightforward. But regardless of the service you use, understanding how to calculate ROI with real data is crucial to leveraging SMS marketing to its full potential.

Let's dive into three real-world scenarios—ecommerce cart recovery, lead-gen nurture, and appointment reminders—to see how to apply this formula and truly understand your SMS marketing ROI.

Understanding the ROI Formula

Before jumping into the scenarios, let's clarify the components of our ROI formula.

  • Revenue Attributed: This is the revenue that can be directly tied to your SMS campaign actions. It's a measure of the actual financial impact of your messages.
  • Send Cost: The cost you incur per message sent. At ReadySMS, these costs range based on your subscription tier, from $0.0074 to $0.0028 per outbound segment.
  • Carrier Fees: The additional charge passed onto customers, generally $0.0045 per segment regardless of your provider.
  • Number Rental: The monthly fee for renting virtual numbers, which might range based on provider and service level. Assume around $1 per number for simplicity.
  • Engineering Hours: Time spent by the team setting up and maintaining the SMS campaigns, valued at an hourly rate.

Let's see how this math plays out in different contexts.

Scenario 1: Ecommerce Cart Recovery

Ecommerce businesses lose about 70% of potential buyers to abandoned carts. SMS cart recovery campaigns have become a lifeline for retrieving lost sales. Here's how you can calculate the ROI for such a campaign.

Numbers Let’s Consider:

  • SMS Sent: 1,000 messages
  • Conversion through SMS: 5% (50 people)
  • Average Order Value (AOV): $50
  • Revenue Attributed: 50 orders × $50 order = $2,500

Cost Breakdown:

  • Send Cost: 1,000 messages at $0.0074 = $7.40 (using Growth tier)
  • Carrier Fees: 1,000 messages at $0.0045 = $4.50
  • Number Rental: $1 for simplicity
  • Engineering Hours: 2 hours at $50/hour = $100

ROI Calculation:

`` ROI = $2,500 / ($7.40 + $4.50 + $1 + $100) = $2,500 / $112.90 = 22.14 ``

So, for every dollar spent, you’re making $22.14—this is a strong argument for using SMS in cart recovery strategies.

Scenario 2: Lead-Gen Nurture

Nurturing leads through SMS requires a delicate balance of timing and messaging. You aim to convert these leads into customers over time with consistent engagement.

Numbers Let’s Consider:

  • SMS Sent: 500 messages weekly for a month (2,000 total)
  • Conversion Rate: 3% (60 leads to customers)
  • Average Customer Spend: $300
  • Revenue Attributed: 60 customers × $300 = $18,000

Cost Breakdown:

  • Send Cost: 2,000 messages at $0.0064 = $12.80 (using the Professional tier)
  • Carrier Fees: 2,000 messages at $0.0045 = $9
  • Number Rental: $1 for simplicity
  • Engineering Hours: 5 hours at $50/hour = $250

ROI Calculation:

`` ROI = $18,000 / ($12.80 + $9 + $1 + $250) = $18,000 / $272.80 = 65.99 ``

In this lead-gen scenario, each dollar spent returns nearly $66, significantly enhancing your bottom line.

Scenario 3: Appointment Reminders

SMS is widely used to send appointment reminders, reducing no-shows and ensuring better customer service in industries like healthcare and salons.

Numbers Let’s Consider:

  • SMS Sent: 1,500 messages
  • Show Rate Increase: 15% (from 70% to 85%)
  • Appointments: 150 new shows
  • Revenue per Show: $100
  • Revenue Attributed: 150 shows × $100 = $15,000

Cost Breakdown:

  • Send Cost: 1,500 messages at $0.0028 = $4.20 (using the Enterprise tier)
  • Carrier Fees: 1,500 messages at $0.0045 = $6.75
  • Number Rental: $1 for simplicity
  • Engineering Hours: 1 hour at $50/hour = $50

ROI Calculation:

`` ROI = $15,000 / ($4.20 + $6.75 + $1 + $50) = $15,000 / $61.95 = 242.19 ``

A jaw-dropping ROI of over 242 shows just how effective SMS can be for reducing no-shows and ensuring steady appointments.

Practical Takeaways

SMS marketing is more than just a message buzz; it's a trackable tool with measurable results. By understanding and using real ROI calculations, you can make data-driven decisions that optimize your campaign strategies. Each scenario here showcases how purpose-specific goals can lead to significant returns.

Want to replicate these results? ReadySMS can help you set up clear tracking pipelines and provide analytics that make this math a breeze. You can learn more about our pricing and features here: https://readysms.io/pricing.

Remember, it's not just about sending messages; it's about strategizing for impactful results. Calculate your SMS marketing ROI with precision, and you'll soon see where true value lies.