The long-held secret of the business SMS industry
In 1999 I set up a company called Text Marketer with a couple of friends.
We were one of the first business SMS companies in the country.
The whole venture was great fun and we got many things right. We sold good products at an affordable price.
It was a very successful business which we eventually sold it to a competitor in 2013. It’s still going strong to this day.
An SMS industry standard practice
Along with all other companies in this exciting new sector, we charged our customers for all the text messages that they submitted through our platform.
So, whether a message was delivered or not, we charged for it.
What wasn’t commonly understood by our customers, is that we did not have to pay for messages that weren’t delivered.
We were making an additional profit from all the undelivered texts that our customers sent.
Over ten plus years, the average non-delivered rate for all our SMS traffic was around 18%, so we were benefitting quite substantially from this hidden profit.
This was the industry’s standard practice at the time and so it remains to this day.
There was certainly no intention to mislead customers or hide anything, it’s just the way the industry has always worked.
Most common support question
Like most service companies, we tried to keep our customer support as streamlined and efficient as possible.
We captured all the most commonly asked questions and created full answers, so we could respond in detail, whatever the query.
The most commonly asked question by a factor of about 5 was,
Do I have to pay for messages that are not delivered?
I hated that question.
It meant I had to squirm about and try and justify why we were charging for failed messages.
I never directly lied to any customers but I certainly tried to deal with it as vaguely as possible and then steer the conversation onto something else.
It was painfully awkward and I’m glad to be rid of it.
New company, new approach
When we set about building our new business, an absolute red line was the fact that that we weren’t going to charge for failed messages.
We wanted to offer a rock-solid SMS API with a headline price that was lower than most of the market and crucially, all failed messages were to be refunded back to customers’ accounts.
Having this policy in place does mean that we make much less margin per text, particularly as our SMS prices are low but it means we don’t have do deal with that awful support question.
It also means that we have a genuine point of difference to talk about.
We converted this befefit into a 1 minute video and put is on our home page.
There’s also an unavoidable smugness about being one of the only SMS providers that refunds failed texts.
SMS companies explode, SMS prices plummet
When we started back in 1999 there were about 8 or 10 business SMS companies. Today there are probably over 80.
It’s become ferociously competitive.
SMS prices have also dropped like a stone over the past decade or so. In 2005, the average cost of business text was about 8 pence.
Today it’s around 3.9 pence.
SMS companies are having to do much larger volumes of texts to maintain anywhere near the same margins. New customers are being fought over and the main weapon is price.
Most companies have solid products and support, so there’s very little that can be used to create a genuine point of difference.
Business SMS providers are also benefitting from strong customer inertia. Changing SMS providers is not an appealing prospect for most companies, even with the promise of lower rate per text.
1. Integration costs There are costs involved with integrating a new SMS provider. It takes tme and effort to switch.
2. Risk There's a risk that the new company might not perform as expected.
3. Long payback The benefit of a reduced rate may take months or even years to be realised.
Sometimes it’s easier to stick with something you know.
Business messaging remain strong
Thankfully though, the volume of business SMS being sent is still growing.
According to research by mobile squared, a ridiculous 1.67 trillion business texts were sent in 2017.
They expect that figure to rise to 2.8 trillion by 2022.
That represents a 68% rise in business to consumer texts over a 4-year period.
Despite the rise in the use of messaging apps, nothing has yet challenged the responsiveness and ubiquity of SMS.
If you really need to be sure that a message is read, SMS is the best option.
The future of business SMS
I feel sure that at some point business SMS will be challenged as the dominant communication tool for business. RCS certainly looks promising but it’s a least a couple of years away from being a practical solution.
At the moment, its use is restricted to Android phones on the Vodafone network.
So for the time being, SMS looks safe. Companies will continue to pay less for the texts that they send and even if they send more texts in total, their overall SMS bill is likely to drop.
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