Is SMS Strategy A Costly Mistake?

Have you ever felt overwhelmed by the constant barrage of promotional SMS messages on your phone? I certainly have. 

Just the other day, I was sifting through a sea of unread messages, all screaming for attention, and it struck me: Is this strategy effective?

The Reality Of SMS Marketing In India

The once-celebrated SMS marketing landscape in India is undergoing a transformation, with its effectiveness facing scrutiny. The click-through rate (CTR) has witnessed a sharp decline, dipping below 0.1%, raising concerns about the channel’s cost-efficiency. 

While the cost of sending an SMS remains relatively low at around 10 paise, the average cost per click (CPC) has soared to INR 100, creating a significant disparity. 

This imbalance is particularly concerning given the generally lower conversion rates observed on mobile devices compared to desktops.

A Closer Look At Customer Acquisition Costs

Imagine sending out a thousand text messages and only gaining ten new customers. That’s the reality for many businesses that rely on SMS campaigns to acquire new customers. 

With a conversion rate of just 1%, the cost of acquiring a customer (CAC) through SMS can reach a staggering INR 10,000 ($120). While this approach still holds value for some industries with high customer lifetime values, it’s essential to weigh the costs and benefits carefully before embarking on an SMS marketing campaign.

Who Still Benefits?

Financial Products: Considering the high referral bonuses offered by some banks for credit card sign-ups, a customer acquisition cost (CAC) of INR 10,000 can be justified.

Real Money Gaming Apps: While their low ticket size might suggest otherwise, their high user engagement and frequency make the high CAC worthwhile. This is because their loyal customer base brings in consistent revenue and repeat business, which ultimately justifies the initial investment in acquiring new customers.

Real Estate: In the real estate industry, the substantial transaction values make it easier to bear the higher customer acquisition cost.

The Vicious Cycle And A Possible Solution

This reliance on SMS marketing has led to a vicious cycle: more messages lead to lower click-through rates and higher CACs. Many, including myself, have turned off SMS notifications to escape this deluge. 

A potential solution? Increase the cost of sending promotional SMS. This approach, already adopted in several developed countries, could break the cycle, encouraging more targeted and thoughtful campaigns.

As we navigate the ever-evolving landscape of digital marketing, it’s crucial to reassess our strategies and adapt to changing trends. The current state of SMS marketing in India is a clear indicator that what once worked may not be as effective today. 

By initiating a dialogue on these issues, we can collectively steer towards more innovative, efficient, and user-friendly marketing practices that respect both the consumer’s space and the marketer’s budget.

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