Welcome to Part 2 of my series on calculating the ROI of your software development initiatives!
Companies that don’t track their ROI and profits efficiently can’t make informed decisions about how to evolve their operations. To take this a step further, firms should monitor the ROI of every department.
The actual return on investment for bulk SMS campaigns is discussed in detail in this article. Remember that this is only one person’s opinion; we can all improve how businesses operate by learning from each other and sharing our ideas.
First, a brief background. Almost everyone acknowledges that SMS has exploded in popularity due to the technology’s ease of use and the fact that messages must be kept short.
Despite this, businesses see SMSing as a considerable benefit, and when it’s done right, the cost-benefit ratio is exceptional. The catch is that while most companies who send out SMSes know it’s worthwhile since customers occasionally walk in and report they got an SMS, few of them can quantify how much money they make from SMSing customers. Not many, right? Now, therefore, tell me: how do you do it?
How to gauge
To illustrate, let’s look at the case of a store that sells goods and services to its customers.
Treating your current clientele like gold would be best, so learn as much as possible about them. Start by getting each client’s name and phone number so you can send them a personalized text message that looks like it was done by hand. That customer’s purchasing history, preferences, and other data can be used to inform future sales efforts.
The second step is to plan the advertising type you will send to your clientele. Keep your customers interested in receiving SMSes from your company by including an offer, discount, or another incentive for everyone that goes out. Never send an SMS to a customer with information or an announcement; doing so increases the likelihood that the customer may become annoyed and unsubscribe or cancel their service altogether. For example, if you plan to send out a campaign, I recommend offering a discount—say, 10% off of a specific service for a week—to customers who have already shown interest in said service. However, the key here is that a customer’s response to an SMS campaign that provides value in exchange for their contact information will always be significantly higher than that of a movement that offers merely information. Comparing the average sale price and the number of purchases completed demonstrates that offering something is less expensive than doing nothing. To increase your profits from a client, you may need to return a favor to them. Consider the domino effect of a satisfied customer on subsequent customers, vendors, etc. Giving back to the customer has many advantages, and this is only one.
Step 3: Include a one-time-use code in each SMS and instruct recipients to provide the code to receive the discount, freebie, etc. You see where I’m going with this, but you’re arguing that customers won’t bother to come in and show their numbers. However, remembering that the goal is to precisely measure how many people return as a result of the SMS, interested clients that receive the SMS will come to your store and show the code if they are genuinely interested in what you are giving back. So I find myself agreeing and disagreeing with this statement. A decent system will also allow you to verify whether or not a customer received the SMS by asking for their cell phone number and then using that number to send them the verification code.
In Step 4, you’ll enter SMS codes into your point-of-sale software, which will verify against the customer’s cell number. Most importantly, set your program to automatically provide the freebie (product code, service code), discount (price reduction), etc. Once the customer realizes that the SMS code expedites the promised goods or services delivery, they will be more open to future efforts of the same type. And did I add that anything else purchased on that invoice may also be immediately and safely attributed to that SMS because your program will have logged that a discount or item was offered due to an SMS code? Why? Since many people are prone to making impulsive purchases, your campaign to give customers something free has resulted in not only the customer returning to your store but also the customer
making more purchases. There will always be customers who don’t fit this description, but most buyers will spend more than you initially anticipated. Even better, if your sales team is up to par, they will upsell more products or services to customers who have just purchased at a lower price thanks to the SMS they received. You are using short message service (SMS) to advertise a series of items to the client by offering the client a discount on one of those products; you may have also negotiated a cheaper cost price from your suppliers for the product, which would have no influence on your profitability on the development.
Finally, your software should generate a simple report that breaks down the cost into the following components based on the date range and SMS campaign:
The total amount spent on the SMS marketing campaign, including the prices of all goods and services shown on invoices related to the effort.
The sales total is the sum of the selling prices (i.e., the actual selling prices minus discounts) of everything listed on every invoice for that particular SMS marketing campaign.
The report then displays an exact ROI percentage after calculating the profit from the campaign by subtracting sales from the cost of sales.
You may now provide an exact method for measuring the success of SMS marketing campaigns; however, this can only be done with software with the necessary features. Most customers (companies) find that the hit rate of customers reacting to the number of SMS sent is likely less than 10%. Still, the return and profitability of the campaign significantly overcome what appears to be a few individuals coming back on your drive. Never forget that you can make a respectable profit with as little as two or three repeat customers accepting your offer. Considering that it only required a well-planned SMS and 5 minutes to send 10,000 SMSs to customers, that is perhaps the best money you could have spent on marketing since 10% of 10,000 customers returning is significant profit for any firm.
Keep in mind that having a report showing the return on investment for an SMS campaign will significantly aid you in becoming even more effective with SMS campaigns, i.e., knowing what time of the month has a better return, what season, time of day, what sorts of discounts clients like best, etc.
Finally, if you’re unhappy with your campaign’s hit rate, try sending more targeted campaigns to a narrower audience. If that doesn’t work, consider improving the service quality, as satisfied customers are more likely to buy from you again. I’ve had customers who got almost no response from SMS campaigns, even though they sent the same SMS campaign that other customers had sent with great success. I didn’t tell them that it was evident that they didn’t offer their customers good service in the first place and that no amount of SMSing or discounts would change that.
I’m hoping that some businesses and individuals may find this post helpful. Suggestions are always appreciated.
Rory van der Berg runs the software development firm All Programming out of South Africa.
I have a clientele in the men’s clothing boutique and hairdressing industries. Over the past five years, I have used cutting-edge Windows Presentation Foundation (WPF) techniques and technologies to construct a point-of-sale system in these sectors.
My primary research focus is on the automation of customer loyalty programs, and in this area, I am constantly working on new tactics with my clients to see how far the envelope can be pushed.
Check out my blog for information on a wide range of business topics. (software development and programming)
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