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The Enduring Value of SMS Messaging for Customer Engagement

The cost of SMS messaging to businesses has led to higher customer engagement on the channel. HOT TELECOM CTO Steve Heap and Nexmo Director of Strategic Carrier Relations David Vigar explain why.

To read the full transcript, scroll below the video.

The Enduring Value of SMS Messaging for Customer Engagement (Full Transcript)

Glen Kunene, Editor-in-Chief at Nexmo: Right, right. Yeah. It’s an interesting point about SMS. And we’ve written a lot about it on the Nexmo blog is just, sort of, how in the queue that builds up on all your different communication channels. I mean, you can have Slack unreads, you can have email that’s unopened, you can have queues and, you know, voicemail even queue up. But generally, your SMS inbox, you’re right on top of it and it still has such a high engagement rate as a channel.

Steve Heap, CTO at HOT TELECOM: Yeah. I think the lack of spam is a critical element. I think the point you made there, in fact, whilst you were just talking, I heard the phone ring and I’m sure it would be a spam phone call. We never answer them. It’s sort of just something that you get used to these days. But with SMS, it’s usually something that’s important.

David Vigar, Director of Strategic Carrier Relations at Nexmo: I think that shows the value of SMS to companies. One of the challenges in the market today and one of the trends we’ve actually…we’re actually seeing underneath, in the underlying infrastructure, is that the cost of messaging broadly is going up. Whilst the cost of voice calling is coming down, thanks to regulatory pressure.

Messaging doesn’t yet have that regulatory pressure, I think because regulators are still focused on voice, and roaming, and data, and that kind of thing. Whereas, messaging hasn’t…it doesn’t have that pressure. So operators are seeing their declining voice revenues, they’re looking at SMS as somewhere where they can make a bit more money. Whilst that does leave a larger bill for the enterprise, in a way, it actually makes the channel a little bit more effective as long as that, obviously, as long as that increasing cost is reasonable.

By imposing a tariff on messaging towards the consumer, it’s actually one of the best barriers to spam you can have. If messaging is free, and due to a lot of nuances in the way that the mobile-to-mobile network messaging infrastructure interacted with the applications and messaging infrastructure over the past five years, messaging was largely free for a long time for companies. Or very close to it.

By imposing a tariff on messaging towards the consumer, it’s actually one of the best barriers to spam you can have.

And actually, that set a lot of the growth in spam because a lot of it was simply sent across border at almost no cost. Nowadays, the operators have really got in control of the network. They are imposing, you know, tariffs on messaging. They’re charging for it.

Some of them, I think very reasonably, some of them, I think maybe not so reasonably, but that’s a whole other discussion. That push to actually have, you know, a fee structure in place of the messaging is just cutting off all that spam because there’s no demands to send spam when there is a cost base.

SH: I think the point about the having to pay for each message is actually a really important one. And I think in the voice world one of the reasons that people can make all these calls and certainly do, is that you don’t actually pay for an ineffective call. So, if my phone rings and the phone says it’s, you know, an unknown caller, and I ignore it, there’s actually no cost to the sender of that voice call, and hence they keep doing it.

You know, it doesn’t matter whether they do it 10 times a day or a million times a day, it only costs them when someone actually answers the call and then it’s, you know, it’s become a little bit like the email problem that, you know, it cost nothing to send all these spam emails. So I think the way messaging has continued to have, you know, a reasonable charge associated with it, it does make a difference to the industry.

DV: I think a little bit of an extension, this is maybe taking slightly on a different course. But talking about the value of messaging, one thing that is a bit of a challenge for Nexmo is that there are other players out there who will offer a cheaper price than Nexmo, and that’s always been the case.

We’ve never said that we will be the cheapest messaging company in the market because we wanna provide high quality of service. We’ve spent, you know, time and money building out a network and building out carrier relationships. And what we offer to our customers is a service that certainly works and we see that it works. There are a lot of options out there which are much cheaper, but you will find that with some of those options, messages won’t arrival or perhaps they’ll arrive in a way that consumers are suspicious of them.

In the UK, a good example. There’s been a big problem with PPI messaging. Anyone from the UK will know what that is. Anyone who’s not, it’s a big banking scam that, you know, cost the banks millions in compensation. And there’s a whole new industry popped up of lawyers sending out spam messages, you know, “Have you got a claim?” I’m sure that, “Have you got a claim spam?” is also in other countries.

And that’s a real problem. That was a real problem in the UK in terms of spam text messaging. Anytime you saw that message, it came from a local number. Now, in the UK, an enterprise, if they want to send a text message from their brand name, so when the message comes in, it shows British Airways or Marks & Spencers, rather than a local number. You can do that.

And I think it’s important that enterprise understand that, you know, those kind of features are worth paying for because consumers will take that message more seriously if it’s coming in from British Airways when it is coming in from some random number that’s changing every time you get a text from them.

GK: It’s interesting. I hadn’t heard of the PPI scam. What’s PPI stand for?

DV: Pain and Protection Insurance.

GK: Got it. Okay.

DV: Yeah, and you don’t want any of those texts. They’re quite annoying. I guess, a similar, I mean, a similar analogy for the U.S. in terms of the value of messaging is, you know, if you’re an enterprise sending out an applications person message, whilst it, it is a little bit more expensive, use the shortcode as the sending, you know, that’s what the U.S. mobile operators and the community have agreed is the right way to send an applications person message.

Consumers are used to that and, you know, that’s where you’re gonna get the most value sending text message, rather than, you know, going to somebody who says, “Yeah, I can send your marketing campaign out from all these local numbers.” You will have a much less effective campaign.

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