Henry Cazalet - Director, The SMS Works
Two SMS industry pricing issues that not many people are aware of
The business SMS industry started to take off in the late 1990s. Back then there were probably half a dozen SMS providers.
In 2020, there are literally hundreds of SMS API companies, most of which offer a reliable and cost effective service. The SMS market has undoubtedly become ferociously competitive.
The price of SMS has also plummeted. 20 years ago, you could expect to pay around 9.5 pence per text if you were buying a block of 1000 credits. Fast forward to 2020 and the average price has dropped to around 3.5 pence. That’s a drop of 63%.
Buyers of SMS services are certainly getting much better value now than they were in the 90s.
But there are two big SMS industry pricing issues that most people are still unaware of.
Almost all SMS companies still charge their customers for undelivered texts
No SMS provider has ever had to pay for undelivered texts, yet most are still charging their customers for all the messages that they submit, including the failed ones.
This has been going on since the industry started. There hasn't been a deliberate policy to overcharge customers, it’s just the way the industry has always worked.
If you ask your existing SMS provider why you have to pay for non-delivered texts, you’ll get an awkward and waffly answer that’s decidedly evasive. This is an issue that the industry would much rather stay firmly under the carpet.
For the 20 years that the industry’s been operating, almost all SMS companies have been profiting from 100% of the cost of failed messages. In fact most companies are wholly reliant on that margin to remain profitable.
How big is the SMS overspend problem?
The average non-delivered rate across all our customers and all industry sectors is about 11%. So most SMS users have been overspending by 11% month on month, year on year.
Cumulatively across the UK, that equates to 100s of £million of wastage.
For larger users who send over 100,000 texts a month the overspend is eye watering.
If a company sends 120,000 texts a month and they pay 2.3 pence + VAT per text, their annual SMS spend is £33,120.
Paying for non-delivered texts is costing them an unnecessary £3643 every single year.
Prices reductions are not being passed on
Despite the huge 63% drop in prices since the late 90s, most SMS gateways are not passing on those price reductions in full to their customers
As prices to SMS suppliers have dropped, only a fraction of the reduction is benefiting the actual senders.
The chances are that your SMS supplier is making more margin from you than they were 5 years ago.
Lethargic SMS industry
Overall, the SMS industry has been slightly passive with its customer involvement. Once an SMS integration has been set up, typically the only communication that takes place is over billing.
SMS companies are often seen as providers of a technology commodity rather than being a partner in any true sense of the word.
For lots of customers, this slightly passive approach is absolutely fine, If everything works smoothly, there is no need to have unnecessary conversations.
But there may be ways that your SMS provider could help improve your SMS activities.
Can the message content be changed to improve response rate?
A/B testing of different messages
Can you reduce the number of messages being sent and reduce costs?
Testing using branded short URLs in messages rather than generic ones
How can delivery report data be used to improve and clean customer data?
How can 2 way SMS be used?
How can the customer experience be enhanced with better mobile landing pages?
How could you segment your data to deliver tailored messages to different types of customers?
These are just a few things that could be explored to improve the customers experience with SMS
Business messaging landscape is changing
In the past few years we’ve seen the emergence of new messaging channels that could challenge the dominance of SMS in the future. RCS messaging, WhatsApp and Apple Business Chat are all making stuttering progress in the field.
While it’s too soon for any of these new platforms to be a viable option yet, they are all making progress and one or all of them could be worth integrating with at some point in the future.
SMS providers are well placed to advise on when and which channels should be investigated.
If you feel you could be getting a bit more love from your SMS API company or you'd like to explore what cost saving might be possible, then please get in touch, we'd love to chat.