Any marketing leader for a consumer brand would agree that today one of their most successful customer approach channels for conversion is SMS. With an open rate of 98%, SMSs, are still among the most trusted sources of information that sparks customer interest worldwide.
The worldwide trend in digital adoption has seen traditional incumbents being massively disrupted or even displaced from their very existence by new-age startups that have sought to leverage technology to beat customer expectations. Another scenario we have seen is the poor fate of protectionist policies against digital alternatives in industries like music and software. For years, brands tried to chase down online portals and channels with labels of piracy, but for every website or illegal channel they tried to curb, thousands more sprang up in a matter of days. Ultimately, the leaders in these segments realized that rather than try to fix the rest of the world, their pricing and business models were the inspiration of such a huge illegal market booming.
The solution to the problem arrived when the music and software industry took to the cloud and came out with their streaming avatars. Today the SaaS, music streaming, and OTT industry are worth trillions of dollars worldwide. This business model innovation has enabled billions of consumers to access services that they would have never been able to afford earlier owing to large upfront license or ownership costs.
Businesses moved into a consumption-based subscription model of pricing that spreads their revenue generation cycle over a period of time rather than tied to an upfront fee. This allowed them to book recurring revenue and eventually profit from economies of scale with more users. As often happens, this also reduced piracy because the risk-reward ratio was no longer in favour of trying to circumvent the legal channels when the cost was so minimal.
Now, coming to the SMS industry, one of the biggest pain points that brands face today when leveraging SMS as a key marketing tool is the high pricing bands that they have to deal with from providers. In an age where a variety of options exist to bypass the telecom providers and adopt admittedly grey routes, the temptation of cost savings may prove too great.
Let us examine 3 ways in which pricing can hurt the industry critically and set the grounds for the untimely demise of SMS as a whole:
Unaffordable Mass Communication
As businesses today transition into a volume-based economies-of-scale model for deriving revenue, their messaging services need to cater to hundreds of thousands or even millions of customers daily. Traditional SMS price points would result in brands incurring massive operational costs that will easily overwhelm the savings they achieve through lower customer acquisition or retention costs with SMS.
Rise of Illegal Services
If providers aren’t willing to consider a restructuring of their SMS pricing strategies, there will be a rising number of illegal and incompetent players in the market that will partner with businesses offering lower costs. The problem here is that these services will ultimately put customer information and credentials at risk as they will have first-hand access to important A2P messaging services between brands and their customers.
Spamming and Fraud
Another big challenge that illegal SMS service provider partnerships will result in is that they will also open a whole new dimension of cyber fraud which will cost the industry dearly. To offer lower costs to businesses for SMS services, they will leverage the SMS message and append ads or promotional links for added revenue. Criminals and fraudsters can intercept these communication lines and compromise the appended links and message information. They can then use it to plug malware and other high-risk threats into end-user devices of unsuspecting consumers.
What these 3 major drawbacks of higher pricing do for the SMS industry is that it makes SMS a less trusted entity from a consumer perspective. More spam, fraudulent activities, and threats will result in customers eventually deciding not to avail SMS-based alerts and notifications from businesses. This has the potential to lead to the demise of the industry’s revenue prospects soon.
With so much potential for customer engagement and opportunities to diversify usage scenarios with each guaranteeing higher conversion, it will be a huge blow for the industry to let SMS die a slow death solely because of traditional and hidebound pricing problems.
SMS providers and businesses can collaborate on ideas to restructure pricing options that are meaningful for both stakeholders. One of the key factors that providers and businesses cite for costly SMS services is the need for enabling secure communications and fortifying their infrastructure to prevent spam and fraud. Rather than leveraging costly manual efforts to solve this problem, providers and businesses can leverage modern technology solutions to enable a more secure and integrated SMS communication channel. Over time, these solutions will reduce the manual effort, deliver scale, and create more secure channels. This will also lead to better cost control and management that could translate to better pricing options.
Using technology, businesses can also enable borderless communication strategies through SMS services. What they need is the right guidance and the aptest digital tools to enable this experience. This is where our expertise can help make a difference. Get in touch with us to explore more about building an amazing customer experience through SMS engagement without compromising on security or worrying about scale or geographic expansion capabilities.