Facebook's acquisition of WhatsApp and Alibaba's investment in Tango emphasize today's shift to the use of over-the-top (OTT) messaging apps, which allow for communication through internet-based messaging instead of the traditional SMS message. In contrast, application-to-person (A2P) SMS messaging, the channel businesses use to engage with customers, is on the rise – powering not just coupons and discounts for customers, but also retailers' other marketing efforts like contests, loyalty programs and surveys. Despite OTT's popularity, retailers shouldn't write off SMS as a dated technology – it is a powerhouse that will enable brands to interact with the majority of consumers, lower costs and drive increased revenue.
The Messaging Market is Diverging
Nearly 6 billion people have access to SMS in today's connected world. However, as new mobile hardware and software become available, consumers are increasingly attracted to internet-based platforms that run independently of a mobile operator's involvement. OTT, which caters to person-to-person (P2P) messaging, has gained popularity due to its cost savings, especially outside the U.S., where many consumers pay for each text message delivered by their mobile carrier. Retailers must realize, however, that while costs savings and added functionality can make OTT services popular alternatives for P2P messaging, the same conditions don't exist for A2P.
In its Mobile Messaging Markets 2014: Facebook, WhatsApp, SMS and OTT – the State of Play report, Portio Research projects the global growth rate of P2P messaging through 2016 at 1.9% per year; by comparison, A2P messaging is projected to grow at nearly seven times that rate, coming in at 13.1% per year. This gap exists due to A2P's unique, out-of-the box, global community of users. Users don't need to own a certain mobile device, download an application, or have mobile internet access to receive a SMS message.
Retailers use A2P text messaging to interact with customers through mobile marketing campaigns, coupons and discounts, invitations to exclusive events, rewards offers, promotions and more. While the growing number of smartphones, along with mobile app fervor and rapid adoption of OTT distorts the perception of SMS, it remains the most cost-effective path for enterprises to execute effective messaging strategies. The efficiency SMS drives is critical as enterprises increasingly adopt mobile as the core of their multi-channel communications strategy.
The simplicity and directness of SMS allow retailers to engage in two-way dialogues with customers, which will deepen and strengthen customer relationships and build brand advocates. SMS messages are delivered globally across all carrier networks and aren't dependent on a user having a smartphone, internet connection or app, and enterprises don't have to make significant infrastructure investments to employ them. In short, SMS gives global retailers the power to take advantage of multilateral global carrier relationships to deliver real-time information through a channel consumers trust.
Adopting a Messaging Strategy in the Smartphone Era
Simplicity, choice, variable costs and differentiation make A2P SMS the right messaging tool for retailers. With a well-defined messaging strategy powered by SMS, brands can:
- Realize a strong ROI by reducing costs
- Leverage existing technology investments by taking advantage of simple web-based integration messaging methods
- Dramatically simplify the user experience by making smarter decisions about messaging
- Improve the quality and availability of information
Savvy brands that implement mobile messaging into their customer service programs see extraordinary cost savings through reduced call center volumes and shorter case resolutions. In this age of immediate resolution through social media, consumers can also realize immediacy and response rates through SMS.
Portio Research, led by Karl Whitfield, also stated in 2014 that, "SMS remains a simple and effective messaging service now in the hands of almost six billion human beings. That dwarves even the reach of mighty Facebook, and for a long time, SMS will remain a profitable, essential element in the messaging mix."
Getting Started with A2P Text Messaging
There is no debate. For retailers, A2P text messaging provides the best opportunity to gain wallet-share in today's competitive retail environment, reaching consumers at the right place and time. OTT messaging tools have made strides and grown their user-bases, but they haven't proven to be a successful channel for businesses to interact with consumers. With significant growth in the years ahead, consumers can expect an increasingly diverse volume of messages from brands, related to both marketing and customer service, which will deliver valuable content, build loyalty and retain customers.
Tom Cotney is CEO of mBlox, the world's largest A2P messaging provider.