December 3rd, 1992. This was the date the first SMS was sent – 25 years ago, give or take a few months. In tech terms, civilizations rise and fall in a quarter of a century; just think of the birth and demise of pagers, fax machines and PDAs. For SaaS companies operating in an increasingly competitive market, and against a mobile landscape that never stops evolving, is good, old-fashioned SMS still relevant?

What’s new in messaging: a quick overview

2016 was famously dubbed “the year of conversational commerce.” The industry was aflutter with the idea of brands casually chatting with Consumers over Facebook Messenger, WhatsApp or virtually any other Messaging interface. Now that we’re into Q2 2017, Chris Messina’s prediction didn’t disappoint: Facebook Messenger alone boasts tens of thousands of chat bots, and AI companies like recast.ai and others are working hard to make them more and more competent.

Before I begin, I want to clarify that conversational commerce (as I see it) largely pertains to utilizing chat, messaging, or other natural language interfaces (i.e. voice) to interact with people, brands, or services and bots that heretofore have had no real place in the bidirectional, asynchronous messaging context.”

Chris Messina, January 19, 2016

In terms of numbers, this interest in OTT conversational commerce makes sense. The popularity of these text messaging Apps has shot up monstrously – some predict that over 25% of the world will use mobile messaging apps by 2019 – making them fertile ground for vendors. But what kind of brand relationships are consumers willing to engage in on channels originally meant for chatting with family and friends? As eMarketer’s Cathy Boyle put it, “Brand marketers are eager to follow consumers to these apps, but injecting themselves into users’ conversations is not easy, and it’s often unwelcome. However, the expansion of messaging apps into platforms that include chat bots and editorial content is providing marketers with more natural places to engage messaging app users.”

The bottom line is for chat bots to help brands instead of hinder them, they must stay discrete. Their focus needs to be on customer service quick fixes or solicited brand story-telling, and certainly not on muscling their way into conversations or overtly pushing marketing messages.  Inserting a traditional “push” marketing campaign into Facebook Messenger or WhatsApp, even if facilitated by a charming chat bot personality, would surely be perceived as intrusive.

The shift from P2P to A2P

As these once personal OTT channels cautiously open themselves up to businesses, SMS followed suit. In other words, SMS is also ceding its place as a P2P (person to person) channel to an A2P (applications to person) one. A2P share of SMS traffic has shot up from 11.7% in 2010 to 22.4% in 2015,[1] and analyst firm Statista claims A2P messages will rise to 1,762 billion by 2018, with others claiming a $58.75 billion market value by 2020[2].  Retail, finance, transport, healthcare, and logistics have seen the most activity on both SMS and OTT apps, using these channels for order confirmations, transaction verifications, delivery tracking, and test results, among many others:[3]

Zooming in solely on SMS, numerous polls show that, in many cases, consumers welcome A2P communication. According to the 2016 Marketing Ecosystem Forum’s messaging report, 76% of consumers globally are already communicating with businesses via SMS, compared to 65% on chat apps. Indeed, a Direct Marketing Association poll showed 44% of respondents would rather receive product details and marketing messages via SMS. It seems that consumers don’t mind timely, contextual SMS from businesses – in fact, they might even like them.

And what about Push?

Where do push notifications fall in all of this? ComScore’s 2016 U.S. Mobile App Report waved a warning flag concerning “push fatigue,” signaling that in the past year, many more smartphone users are rejecting notifications.[4]

They also mentioned that, unsurprisingly, it’s become more and more difficult for new apps to break through the noise, with nearly half of American smartphone users not downloading any apps in a month, and the average user only downloading two.[5] Their key takeaways say it all:

“More time is being spent on smartphone apps, but most of that time is concentrated in the highest engagement apps owned by a few of the largest internet companies […] While we haven’t yet reached ‘Peak App’ the market is definitely tightening […] People aren’t downloading as many apps anymore, they increasingly put those apps into folders, and they are less likely to allow push notifications, making it harder than ever for apps to be seen.”[6]

This doesn’t mean that “push is dead,” but just that it packs less of a punch.

So… what can SMS do for SaaS?

The way businesses communicate with consumers on mobile channels is shifting: OTT apps have made room for brands incarnated as (unobtrusive) chat bots, push notifications have lost some of their flair, and SMS seems to be transforming into the de facto A2P channel.

In the meantime, the tightening market for horizontal SaaS has meant greater focus on developing vertical solutions, and educating consumers accordingly. With its redefined focus on A2P, SMS is positioned to help burgeoning or even well-established SaaS companies better communicate with their users.

SMS for retention and customer service

SMS has shown itself to be particularly welcome as a means of customer engagement and customer service. An eMarketer survey of U.S. and German consumers revealed that they found SMS a less time consuming, more convenient and less frustrating way to get ahold of a customer service department. Similarly, research by Ovum and Tata Communications showed that SMS, by a wide margin, remains the preferred way to maintain contact with consumers. Lastly, a survey from mobile marketing company 3Cinteractive revealed that half of US internet users said they prefer receiving loyalty-related messages via SMS.

SMS can perform just as well in a purely SaaS context, especially if your aim is reducing churn or providing timely customer service.  Zendesk, for example, announced customer-facing SMS integration in May 2016, citing the ubiquity, personal nature and immediacy of text messaging. Depending on what your subscription period, on-boarding and renewal process looks like, using SMS to reduce churn could take different forms: automated text reminders to make sure new clients don’t miss a ramp-up training, reaching out during “red flags” (visiting a downgrade page, someone who hasn’t logged in in a while), sending an SMS during critical renewal periods, or even making sure all questions are answered by texting someone who just visited an FAQ webpage.

For events like these that may not merit a phone call, but are time-sensitive enough to warrant more than an email, SMS can be an excellent choice:  with a well-touted 98% average open rate, most in the first few minutes after delivery, SMS are consulted much more quickly than emails, which often stay unopened in inboxes for days. For all the reasons mentioned above, push notifications are proving less and less effective – if your subscriber has even downloaded your app in the first place.  This isn’t to say that email and push have no place in a multi-channel strategy – far from it – but just that SMS can provide an immediate, note-worthy notification that is more impactful in certain scenarios.

For example, many people resent a phone call when an asynchronous message will do; two-way texting means a customer can consult, reflect on and reply to your message at their convenience.  As for chat bots, aside from the cost and time needed to build them, pushing a message in Facebook Messenger or WhatsApp for the above scenarios would surely count as obtrusive. So much for using SMS to retain SaaS customers – what about offering text messaging directly in SaaS software?

As mentioned above, certain industries (retail, finance, transport, healthcare, and logistics) are already showing a lot of A2P activity via OTT apps or SMS.  Banking, finance and retail have seen especially high usage: “Moreover, 1 in 3 users have interacted with a financial services company via mobile messaging with authentication acting as a key driver – 30% of consumers worldwide have confirmed passwords via text. Globally, the banking and financial services and retail sectors are set to be major verticals and contributing more than 40% of market share for A2P SMS market growth.”[7]

SaaS providers operating in these verticals may seriously want to consider SMS integration as a useful channel to offer future clients, considering how keen consumers in these industries are to communicate with businesses via messaging.  SMS capabilities could also offer a nice differentiator from competitors, while the market for vertical SaaS solutions is still maturing.

Key takeaways

The evolving mobile landscape has made more room for A2P communication via SMS, a shift which consumers seem to be both enabling and embracing. Numerous opportunities exist for SaaS companies to integrate text messaging into their business processes, both to improve communication with their own customers and to integrate directly into their platforms.  Certain verticals stand to benefit the most from integrating text messages into their solutions – namely retail, finance, transport, healthcare, and logistics – since these industries already see high A2P messaging activity with consumers.

[1] Mobile Ecosystem Forum, Messaging Edition eBulletin #1: News and Insights on Mobile Messaging, September 2016, page 12
[2] Ibid., pg. 4
[3] Ibid., pg. 12
[4] ComScore, U.S. Mobile App Report, 2016, pg. 27
[5] Ibid., pg. 21
[6] Ibid., pg. 47
[7] Mobile Ecosystem Forum, Messaging Edition eBulletin #1: News and Insights on Mobile Messaging, September 2016, page 12

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