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All your questions on Premium Rate SMS, answered by Thomas Schuster, Director of Engineering, Flytxt
Background
Premium rate SMS (PSMS) is the term that describes the charging of a premium to consumers, for a text message that is either sent or received by their mobile phone. The premium is charged to the subscriber's mobile phone bill. The premium cost is either in excess of the standard cost of sending a text (between 10-12 pence) or the free text messages that are often part of people's mobile subscriber bundles.
Since June 2002, PSMS has been possible across all four of the major UK networks. The first usage of PSMS as a revenue generator was by Comic Relief during their summer fundraising event - Sport Relief, where they successfully raised over £100,000 from PSMS alone. Since then, PSMS has been embraced by the broadcast sector in particular, as a way of generating extra revenues for TV and radio stations, and injecting further interactivity into their medium. Last year, Big Brother generated more than 13 million text messages - 10.3 million at premium rate.
A brand running a premium rate mobile campaign today, will typically use the Mobile Terminated (MT) method, which means it is the message the consumer receives after responding to a service or promotion, that costs the premium. The reason for this is because not all operators have mobile originated (MO) billing set up, where it's the message sent by the consumer that costs the premium.
There is also another driver, which is control. Using MT billing we can first check if we want to bill someone. For example, we can check age or other parameters before actually making a financial transaction. With MT, you can use applications, which protect children from spending more than a predefined amount on a service automatically, which you can't with MO billing.
The limit that a premium rate tariff can be set at across all four mobile operators is currently £1.50, but they are currently working on increasing this.
What's possible?
Payout rates have three key variables:
Firstly - the tariff at which you set your premium. For example, one operator's payouts on a £1.50 tariff are 60% of the message cost, whereas the payout on their 25 pence tariff is 47%.
The second key variable is the volume of inbound messages a promotion or service receives. The pay out rates from one operator on a 25 pence tariff can vary from 7.3 pence if a campaign prompts 20,000 or fewer messages to 12 pence, if it prompts up to 500,000 responses.
The third variable is the mobile operator you're expecting payouts from. Mobile operators have different payouts for the same tariff and volume. For example, the payout rate on a 50 pence tariff can range between 24 and 30 pence (in the higher messaging volume bracket) depending on the operator.
An interesting point to bear in mind with payouts on tariffs is that, because it's only just a year old - operators have been and continue to adjust their revenue models and payouts in response to demands made by companies like Flytxt - based on client needs. So feedback from clients and consumers help build the future picture.
Who governs the premium rate SMS industry?
ICSTIS is the industry body that governs the premium rate SMS industry. They have the power to impose fines and cut off unethical marketers using this medium.
Are self-liquidating SMS campaigns a reality?
As with the answers to most questions in this context - it largely depends on the strength of the brand and the level of exposure your promotion or service has. Besides these two factors, it is possible to recoup at least the messaging costs of a promotion by setting the tariff at around 15-20 pence. It must be remembered, however, that the greedier you are - the less you'll get: high premiums are likely to impact response rates!
Having said this, WKD, one of the UK's leading packaged premium spirits brands, received an amazing half a million plays with a 50 pence premium rate entry competition.
Generating revenues from standard rate texts
If you don't want to put off your customers with a high premium rate entry route or even if revenue generation isn't an objective of your campaign, you could set your standard rate entry to a premium rate entry of 10 pence. This way, even though your customers aren't exposed to a premium entry, you will still recoup some of the messaging costs from your campaign.
The only fact to be aware of is that the 'standard' rate entry, might not be standard for everyone, as some will have free texting packages as part of their mobile phone contract and therefore may be upset to be charged at all for a text message.
What are the basic rules when using PSMS?
Whilst PSMS offers fantastic opportunities for generating extra revenues, the potential for upsetting the customer is greater than with standard rate SMS. Adhere to the following basic rules to keep your customers happy, satisfied and loyal:
Stay Legal, Decent, Honest and Truthful
Advise on cost of service up front!
Keep the promotion or service appropriate to the audience
Observe specific rules for certain services, e.g., competitions
Short codes (five digit numbers) will yield higher response rates than long numbers
Use technology to protect users from overspending money on a service (for example, on absolute and daily limits on entering competitions).
How much longer before PSMS payments match premium rate telephone / Interactive Voice Response (IVR) payments?
Over to the operators to answer that one ;) Flytxt is constantly talking to operators and trying to negotiate better payouts for our clients.
And finally…
Operators recently agreed on standard prefixes to short codes (as with prefixes for IVR premium numbers) in the hope that consumers will understand what service is being run and hence perhaps be more likely to take part. This may certainly be the case for one of the prefix's set aside for the 'adult entertainment' services, which has been allocated the prefix 69xxx.
Thomas Schuster, Director of Engineering and Co-founder of Flytxt: driven by a relentless passion for high-quality software engineering, as well as a clear vision for mobile marketing needs, Thomas led the development of Flytxt's mobile marketing platform, FXTrinity. Thomas is currently leading Flytxt's software architecture development.
© Copyright Flytxt Ltd 2006. Unauthorized use of any content constitutes a material breach.
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