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How to Price your SMS Packages for Maximum Profits

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Posted 27th March 2012 at 07:53 AM by tjkirgin

This is a good one. There is no one way to price your SMS packages for maximum profits. As a matter of fact, when you do a competative analyis of the pricing that is out there, you will find that it is all over the board. The one common denominator though seems to be that every SMS Reseller is trying to sell on SMS Rate and in doing so, only fueling the commoditization of the product which hurts everyone involved.

Our SMS Resellers don't typically sell on SMS Rate. They sell packages with percieved value and using our model, they earn profit margins of over 400%.

Most SMS Resellers look at what they are paying per SMS and double or triple that rate to create a retail cost. This IS NOT HOW TO DO PRICE SMS MARKETING.

My recommendation is that you start with a setup fee. The setup fee should be nominal but include the percieved value that you will be earning this setup fee by developing the campaign to be optimized for effectiveness. The setup fee should include things like creating a mobile landing page for them, a QR code, SMS Keyword, Autoresponder and scheduled alerts. Most setup fees are between $99 and $400 or more depending on the scope of the project.

Now that setup fee is COMPLETE PROFIT since you should not be paying a setup fee to your SMS Platform Provider per account!

Second, you should look at SMS KEYWORDS as a commodity that has a value for monthly billing. SMS KEYWORD is synonimous with two things:
  1. Trigger - a keyword triggers an action at the application layer, typically an autoresponder
  2. A database - each person that texts the keyword will be added to a HOSTED DATABASE

I say hosted database for a reason. To justify keyword fees monthly, all you need to do is explain that it is a hosted database. If anyone owns a web site, they have heard that it costs extra fees to host a mysql or sql database.

Now as for pricing, we recommend that the keyword be valued at about $35 per month retail with discounts for volume. So for example, if a hair salon needs 10 keywords, one for each stylist, you may discount these to $15ea. If a car dealer needs 300x keywords, one for every car on the lot, you may discount these to $3 per month each.

Now for the SMS. Your SMS Marketing Platform should allow you many SMS billing options including:
  • One time bulk SMS purchase
  • Monthly Rollover SMS
  • Use them or loose them SMS Credits

With a one time Bulk SMS Purchase, your client just buys a block of SMS and uses them until gone, at which time they will buy more from you.

With Rollover Credits, the get a fresh block of credits added to their account each month on the renewal date. So if they are not using the full credits each month, they are actually accruing credits monthly.

With Use them or Loose Them credits, they get UP TO XXXX SMS per month.

THIS IS THE PATH TO 400% MARGINS!

I will now explain how to get there.

So lets take a simple SMS Marketing Plan, say 1x keyword and UP TO 1000 SMS per month*.

Setup fee: $299
Keyword monthly fee: $35
Credits monthly: $90 (based on .09 per SMS when you pay .03 or less*)

*I recommend buying larger blocks of 100k messages to buy down your rate to .019

Complete package:

1x Keywords and up to 1000 SMS per month
Setup: $299
Monthly: $125

Require your client to engage in a 6 month agreement. Yeah, I know there are companies offering no contract but that is a fail waiting to happen. Explain that if they are not committed for at least 6 months, it is not worth doing for them or you.

So at the end of the 6 month term, you have generated $1049 in Gross revenue. IF THEY SENT EVERY MESSAGE, WHICH THEY WON'T, your cost at .019 is a whopping $114!

Your profit is $935!

Your profit margin is 920%

DO NOT TELL ME THAT THIS WON'T WORK, I HAVE HUNDREDS OF CLIENTS WITH THE SAME BILLING MODEL.

With that being said, this billing model is BASED ON MANAGED MARKETING SERVICES. Which means you are doing all the work for the client.

If you want to just give the client a user account and let them do everything, that is fine. But your churn will be horrible as they will not succeed because they A. Don't have a clue what they are doing or B. they won't even use it. If you choose to go this route for some clients, the following Do It Yourself Pricing is recommended:

Do It Yourself package:

1x Keywords and up to 1000 SMS per month
Setup: $99
Monthly: $89

Require your client to engage in a 6 month agreement. Yeah, I know there are companies offering no contract but that is a fail waiting to happen. Explain that if they are not commited for at least 6 months, it is not worth doing for them or you.

So at the end of the 6 month term, you have generated $633 in Gross revenue. IF THEY SENT EVERY MESSAGE, WHICH THEY WON'T, your cost at .019 is a whopping $114!

Your profit is $519!

Your profit margin is 555%

Not bad for doing nothing.

www.AnchorMobile.net
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