Digital messaging: The latest on how pricing models are changing

What's the best way to navigate the different pricing models of digital messaging channels to determine ROI and drive a more diverse messaging strategy?

Written by Ramy Riad on

As digital messaging continues to evolve, so do the pricing models they use. But what exactly are the costs to businesses for using digital messaging channels? And how can you find clarity amidst fragmented pricing models to drive a more diverse digital messaging channel strategy?

The landscape for digital messaging pricing is shifting

Traditional SMS messaging offers businesses a simple, low-cost way to connect with customers; each set of 160 characters costs your business just a few cents or pennies.

But this pricing model won’t hold true for future messaging channels and the landscape ahead is unclear. Businesses now face disparate pricing between different channels, so those using multiple messaging channels have the challenge of keeping up-to-date with frequent changes in pricing structures across different providers. And those hoping to use more messaging channels in the future face an uphill battle as they assemble a business case and try to provide clear ROI to secure stakeholder buy-in.

There’s no single pricing model in sight

You only need to look at a few examples of messaging services and their pricing models to see the fragmented pricing landscape in action. For example, digital channels like Google's Business Messages don't charge a business, but you need to connect to their software via their partner companies, which will charge for that service. Whereas, for RCS, you pay for an individual message, similar to SMS.

Beyond pricing models, the landscape becomes even more complex with other factors causing pricing discrepancies. An example is geography, which plays a key part in pricing, for instance, there's no charge outside of the UK for RCS at this moment in time.

WhatsApp’s move to conversational pricing

WhatsApp is the longest-serving digital messaging channel and a recent shift in its pricing strategy could demonstrate what the future holds for other messaging platforms.

Currently active in 180+ countries, the WhatsApp Business API helps businesses connect to more than two billion consumers in a simple, reliable, and secure channel. At its inception, if a customer reached out to a business, it was free for the business to respond within twenty-four hours. If the business initiated the conversation, they were charged approximately three times the cost of an SMS message.

Now, the platform is trialing a new type of pricing that's based on conversations. When a business or user sends a message, it creates a conversation: a 24-hour window. Businesses are now charged per conversation session rather than per message – with different rates charged based on if the conversation was initiated by a user, or by the business.

Following a successful pilot program in Mexico, the new conversational price model is set to come into effect from February 2022.

The first one thousand conversations each month will be free, so businesses can start to build WhatsApp experiences into their messaging strategy at a lower cost and risk. Because this model offers more transparency into the cost of each conversation, brands can better understand and control their outgoings and build a more convincing business case for adopting messaging channels that use this price model.

Example: RCS advertisng mock-up

How will other digital messaging channels respond?

WhatsApp's new pricing model throws down the gauntlet for channel providers to reconsider how they charge for their own rich messaging services. Digital messaging providers and mobile operators are all assessing different models for rich messaging channels like RCS, including the conversations approach.

An interesting model that could be adopted is one based on advertising, something that other industries, like newspapers with their digital publication, have implemented to great success. Some rich messaging easily fits into the advertising journey, for example, a user could click on a mobile ad and then be taken to the messaging environment, instead of an app or website. From there, with a few swift taps of the screen, users can tell a business what they are looking for, browse their options, and convert with ease. This could evolve into sponsors using digital messaging channels as ad space, feeding advertisements onto a carousel of articles and content. This type of pricing model moves away entirely from a charge per transaction. 

Improving interactions while keeping costs low - a customer service example

Digital messaging pricing may be fragmented, but the channels can still help businesses simultaneously deliver richer interactions and reduce costs. As an example, let's look at a customer service use case.

In the UK, if a customer service call lasts five minutes, it costs an average of £25 of agent time. Having that conversation via SMS is awkward and could take up to twenty-five messages between the consumer and the business. But at 2p per message, it costs a total of 50p – a much more cost-effective approach than the phone.

If you transition these interactions to an asynchronous rich messaging channel (e.g. WhatsApp), you can benefit from cost savings compared to voice channels and a better user experience, without a dissatisfying chain of texts.

For example, let’s say you can reach 50% of your customers through Apple Business Chat. Currently, you might pay £8 per month for 100 active users. If another 40% of your customers can reach you using RCS – you’ll pay 28p per conversation to connect with them. Then let’s say the remaining 10% are using WhatsApp to resolve their query, that’s a cost to your business of 3p per message.

There’s no doubt these platforms offer a more cost-effective way to deliver a great customer experience compared to traditional messaging and voice channels. An additional positive is that engagement is higher on rich messaging channels, helping to drive higher CSAT scores. For example, when we helped Vodafone trial their first RCS campaigns, they saw a response rate of 25%. By comparison, SMS and MMS scored a response rate of 1%.

While you wait for the future, a partner can help deal with the pricing challenges of today

Over time, we expect to see a simplification of pricing models across the industry, with options for businesses to only be charged for active engagements per month. But this doesn’t mean you should hold off on expanding into new messaging channels.

The way to successfully navigate the fragmented digital messaging channel pricing ecosystem can be found by working with a Communications Platform as a Service (CPaaS) partner. These partners have years of experience managing the complexity of messaging platforms and are often involved in digital messaging provider partner programs. Therefore, they are best positioned to help you measure and balance risk, benefits, and price to build a business case for the use cases that you want to deploy and help you to stay ahead of future pricing changes.

With a partner at your side to help you understand the different pricing models out there, you’ll find the improved CX and customer engagement that digital messaging channels can deliver is worth the extra effort.

The Future Messaging Team at imimobile (part of Webex) is our group of industry experts solely dedicated to building next-generation messaging experiences. The team works alongside businesses to push the boundaries of what messaging can do. Visit our Business Messages Page to connect with our Future Messaging Team today to start planning your digital messaging strategy.