Hong Life CalculatorsUnderstanding the SMS marketing ROI calculator — concept and principle
This calculator estimates the return on a text-message (SMS) marketing campaign: what the messages cost, how much revenue they generate, the gross profit left after paying for the campaign, and the resulting return on investment. Shops and service businesses use it before a send to check whether a campaign is worth running, and afterwards to compare actual results with the plan. It works with any currency.
How it is calculated
- Campaign cost = messages sent × cost per message
- Orders = messages × conversion rate ÷ 100
- Revenue = orders × average order value
- Gross profit after cost = revenue × gross margin ÷ 100 − campaign cost
- ROI (%) = gross profit after cost ÷ campaign cost × 100
The conversion rate here is per message sent, not per click.
The principle
ROI compares what you gained with what you spent. Using gross profit rather than revenue matters: a sale only adds the margin on the product to your business, because the product itself has a cost. Subtracting the campaign cost leaves the net gain the messages created, and dividing by that cost shows how many times the spend came back. Because SMS costs are small per message, even low conversion rates can produce a high ROI, which is why the break-even conversion rate is a useful check: cost per message ÷ (average order × margin).
Worked example
- Messages = 20,000 at 0.02 USD → campaign cost = 400.00 USD.
- Orders = 20,000 × 1.5% = 300; revenue = 300 × 40 = 12,000.00 USD.
- Gross profit = 12,000 × 50% = 6,000; after cost = 6,000 − 400 = 5,600.00 USD.
- ROI = 5,600 ÷ 400 × 100 = 1,400%.
- Break-even conversion = 0.02 ÷ (40 × 0.5) = 0.1%.
How to read the result
An ROI above 0% means the campaign paid for itself from gross profit; 1,400% means each 1 USD spent returned 14 USD of profit on top of the original 1 USD. Compare the break-even conversion rate with your real rates: the further above it you are, the safer the campaign. Remember that frequent sends raise opt-outs, which lowers future results.
Common mistakes
- Counting all orders during the campaign, including those that would have happened anyway.
- Using revenue instead of gross profit, which overstates ROI.
- Forgetting platform fees, coupon discounts or the cost of building the list.
- Ignoring consent rules for marketing messages.
Frequently asked questions
What is a typical SMS conversion rate?
It varies widely with list quality, offer and industry. Use your own past campaigns as the benchmark.
Should I count clicks or orders?
Orders. Clicks show interest, but only purchases create the profit that ROI measures.
How is this ROI different from ROAS?
ROAS divides revenue by spend. Here, revenue is converted to gross profit and the cost is subtracted first, so the figure is lower but closer to real profit.
Sources: Philip Kotler and Kevin Lane Keller, Marketing Management (Pearson)