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How Pricing Affects the Quality of SMS Services

BONUS MATERIAL: SMS Service Quality and What It Means

We often come across companies who are looking to save money on messaging services and SMS APIs by splitting a quarter of a cents and are ready to risk losing in delivery quality as the few percentages of messages lost seem to be rather trivial. They might think it will save them tens or hundreds of euros per month, and that the upside of a smaller invoice outweighs the undelivered messages and the lost revenue.

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Using below market price connections usually means their messages are sent via third-party connections or SIM farms where there are no interconnection fees calculated in the price. These are the grey routes we’ve talked about. Nowadays, when operators are starting to protect their networks and filtering incoming traffic, these low-cost routes simply don’t work anymore or work for a short period of time and your messages will have a poor delivery quality.

The loss in delivery quality comes from both the undelivered messages (resulting from the route either failing, having low throughput thresholds or the connection being terminated by the operator) as well as from the delay in message delivery. The latter happens because the connections need to remain undetected to keep working and thus delivery is done in batches rather than in a consistent and constant flow of delivery.

So, if you take a closer look and analyze what cutting back on quality might cause, a question arises – is the money they saved worth it?

Paying less = less revenue

We’ve illustrated the issues a single percentage can cause if the alternative cost of an undelivered message is high and in these cases, even an 80% reduction in cost would still mean a significant loss down the line in lost revenue.

Take the marketing example: a 1000 message campaign costs around 10 euros to send and let’s say the conversion rate is 5% from that campaign. If you manage to pay 80% less, you’ll most likely experience a delivery rate around the 50-60% mark, meaning that even in an ideal world (without dataset issues) 500-600 messages get delivered.

Let’s say that each conversion is worth 5 EUR, so for a high quality connection of 98% the gained amount of money is 98% x 1000 = 980 messages delivered, x 5% in conversion = 49 converted messages, x 5 EUR = 245 EUR gained - 10 EUR for the campaign = 235 EUR in revenue.

With a delivery rate of 60% though, 60% x 1000 = 600 messages, x 5% in conversion = 30, x 5 EUR = 150 EUR, - 2 eur for the campaign = 149 EUR in revenue. The difference is 86 EUR or 8600 messages a whole 8.6 additional campaigns worth of money.

Indirect costs

In addition to the direct costs associated, there are a bunch of indirect costs  that will end up influencing the bottom line: 

Service quality – whenever your messages are not being delivered it will affect your level of service quality and will have a negative image among your users. Undelivered PIN codes, reminders, etc. will cause users to lose faith in the service.

More work for your support team – users who were expecting to receive PIN codes, reminders, or notifications will eventually approach your customer support team, so this means more work for them.

If the same analogy in routes is used as above with a difference of 380 messages undelivered, then in case those would have been transactional messages, for example, that would mean an additional 380 support cases. Even if they only take 5 minutes to solve, that’s still 31.7 hours of support time. Even if the support team is paid 5 EUR an hour, that’s still a solid 159 EUR spent on those messages not being delivered.

Pay for undelivered messages – as we’ve said before, senders pay per message request, not per message delivered. Thus, those messages will still be paid for, even though they cause support issues and a loss in revenue.

Quality is worth paying more

By investing more in the quality of your messaging service, you will reap the benefits of higher revenue, higher customer satisfaction, and lower workload for your support team.

Lauri Kinkar
2019-10-17 00:00:00 UTC