If you ask the question to several marketers on their favourite way to reach their customers, most of them will tell you that email marketing is still the most profitable channel of all. But now, what about SMS Marketing? Is it a channel that we can leverage as a marketer? 

My guest today, Rafael Chemtob, Co-Founder of TXTFi, a SaaS company that helps Shopify owners reach their customers through text messages, will give us an overview of the present and the future of SMS Marketing. Rafael, welcome to Social Selling!

(Rafael) Thanks for having me. It’s a pleasure to be here.

(Antoine) Very cool. And Rafael, before we talk about SMS Marketing, can you tell us the reason you started TXTFi in the first place?

(Rafael) Sure! So, before I start with the questions, I appreciate meeting you and being on a podcast and like you mentioned in the intro, SMS Marketing is definitely taking off. 

And the reason is, what it comes down to is consumer engagement, right? Customer engagement on SMS is through the roof when you’re comparing it to email. Just to give you the quick KPI on it – email open-rates for 2019 is 13.9%, where in 2018, it was 14.8%. So, it’s almost a 7% drop, year over year. And, I think you can thank spam filters (laughs), just because everybody’s sending out a lot more emails, so it’s definitely busier on the email side. Everybody’s getting so many emails, so people just don’t have the time to open every single one and they just skim through their junk folder maybe once a day, once a week, and they’ll miss a bunch of them, that’s for sure. 

To give you a background to TXTFi and where we are with SMS is that, you know, we’re a conversational commerce company, so like we mentioned before, many companies are using SMS for marketing purposes, and our approach was a little different. We wanted to live on the transactional side of SMS, meaning that we allow online retailers to accept orders using SMS.

It’s a little different because most of what we’re used to over time was that we’re gonna use all these marketing channels like emails and SMS and everything else to drive people to our site so they can go through the process of adding things to cart, and go through the checkout. We decided to kind of take the transaction away from the site and put it onto the SMS side. 

Classic example would be, like, a Vitamin C bottle. So, let’s say you walked into, or you went online and you ordered from VitaminShoppe a Vitamin C bottle or 30-day supply of Vitamin C, right? VitaminShoppe knows that it’s going to last you 30 days if you take your pill everyday. So they’re kind of at the mercy of their email campaign, or your email filter, because after 30 days, if you don’t have a subscription, they’re at the mercy of you opening your email that they’ll send you to reorder that Vitamin C bottle.

So, as opposed to, or in addition to getting the email, imagine you get an SMS from VitaminShoppe about 5 to 7 days before your bottle ran out, saying ‘Hey, your bottle should be running out. Do you want to order another one?’ And you actually do this over a conversation in text, but on the other side, you’re really not talking to a person, you’re talking to an artificially intelligent bot. That’s the concept. So, we’re kind of the solution to the subscription that didn’t happen. 

And your question was, how did we come up with this? Why did we do this? It’s a story, and I repeat it so many times. I believe things always happen for a purpose. So one day – one night (laughs) – I was coming home from work, I’m driving, and I get a text from my wife saying, you know, pick up milk. And anybody with a bunch of kids – I have 5 kids – anybody with a bunch of kids knows this, right? You’re gonna get this many times. So I got to the store and pick up milk, whatever, and I’m at the checkout counter. She goes, ‘I need onions, and peppers, and cereal,’ and this list kept going on and on and on. And like, I wanna go home and eat my dinner. 

So I picked up everything. I went home, and that night, we’re sitting watching TV, and it was like a lightbulb just went off. It was like, ‘Wait a second. She texted me to get her all this stuff and I got her this stuff. Why doesn’t she text the store to order all this stuff?’ And then it just went on and on. So, it was like, ‘Wait. So, someone has to be there to answer the text. What happens if that’s not scalable?’ And, you know, the idea just kept building and building, and that’s kind of like the seed of TXTFi, where, you know, we could do this. It’s conceptually possible, so why not? And the more we looked at it, the more we researched, the more team members I added on board and the more partners we added on board, everybody believed in the concept and the beauty of what this can be. We just built it from there.

(Antoine) Interesting. And you mentioned something very, very interesting at the beginning. The difference between SMS Marketing, and after that, SMS Marketing, but a little bit more transactional, right? 

So, just to be sure the audience understands it quite well, what you’re saying is the transactional aspect of it [is] to make sure that every initiative, every effort that you’re going to do through SMS Marketing will be related to transactions in the next couple of minutes, correct?

(Rafael) Minutes, hours, days – yes. The idea is not to have everything flow always through the same process. It goes back to what you’re going through now. We have a pandemic going on. And, what you notice is all these stores – local stores, right, these little, tiny stores – who don’t have a website, who want people to come to the store to buy from there, they’re not changing their ways ever – all of a sudden, they never did deliveries [and now] they do deliveries. All of a sudden they do curb-side pick-up. They all have this 20 year old website. 

So, over time, if you look at the paradigm shift, like 20 years ago, people went from retail to ‘e-tail,’ and they started adapting to a new way of shopping. And as time went on, we noticed that mobile usage is actually overtaking desktop usage. So, there’s a paradigm shift, right? All these online stores, you know, said ‘Oh, we’re gonna go mobile,’ so they put this responsive mobile site, but it’s not a ‘mobile’ site, it’s just responsive. Essentially, they’re looking at it on a desktop. 

So, we’re looking at this and we’re saying, this is a mobile-first solution to a mobile-first customer, essentially, because everybody’s on their phones 12 hours a day. 

(Antoine) Yeah, no, totally. Question for you, because a lot of people in the past tried to use SMS Marketing. We saw it with a lot of our clients. And sometimes they didn’t have, necessarily, a great outcome and maybe the right strategy to get results out of it. What would be your tips, your vision on that? How do you see SMS Marketing [being] implemented, let’s say, for a subscription-based business in 2020? Do you see that as an independent channel, or as something that works in complement to email marketing, Messenger bot marketing, or something like that?

(Rafael) So, it comes down to a lot of different things, right? Marketing is always thought of as just another touch-point. Consumers are, let’s say, they’re on their email and they’re browsing the web and they’re seeing a display ad and they’re watching videos on their phone. So, there’s all these touchpoints, right?

SMS as a marketing tool is another touchpoint. It’s another medium, but it can be more than just a medium. And that’s how we looked at it. You can’t make a transaction over email. The idea over email is to get them to open the email, to click on the email to get to your site, because essentially, email cannot be transactional. But that doesn’t mean SMS can’t be transactional, right?

And you’re starting to see that also with – not starting – but you’re seeing that with Google becoming a marketplace and Facebook becoming a marketplace, where essentially they’ve always functioned as a marketing medium, right? So, when someone goes on paid search and they click on an ad, now, you can go to Google Shopping and buy the product directly from Google and have the online retailer dropship the items. The marketing channel is becoming the transactional location of that experience. Essentially, SMS can do the same thing. 

(Antoine) Very interesting. So, basically, what I understand, and from what I saw from the other clients that you’re working with right now, Rafael, is this is primarily transactional. SMS Marketing, [and] the way you structure it with TXTFi here, is way more useful for companies that will generate recurring purchases on a weekly, monthly basis, correct?

(Rafael) So, yes, but there are updates. So, the initial entrance to the market was the subscription model. So the subscription didn’t work, but that customer still needs this item in 30 days or 60 days. So, how do we tackle this problem? And we know email is great, but it’s not the end-all be-all solution because open-rates are going down. Since then, we’ve also actually implemented the ability to place the first order using SMS. 

So, I’ll give you the example and I’ll give you the case itself. A company that sells spices came to us and said, ‘We want to put the name of the spice or a code word of the spice on the label itself and to be able to let the customer order when they finish that bottle.’ So, let’s say someone is in the kitchen. They’re cooking with cumin, and they put the stuff in and all of a sudden it runs out. They look at the label and it’s like, ‘To reorder, text CUMIN to 54321#,’ and that kicks off the initial order. 

It doesn’t necessarily have to be an existing customer. It can also be a customer that bought something at retail and now is buying it directly from the brand itself. It can be anybody, really. But it doesn’t necessarily have to just returning customers that can use it, but the initial order has to happen through the regular process. We’re not reinventing shopping. We’re just making it easier for people to shop.

(Antoine) Very interesting. Do you have other examples like that - companies that find a creative way to trigger the purchase? 

(Rafael) We have other things in the works. Essentially, restaurants, beauty salons. Let’s say, someone needs botox. Someone needs a doctor’s visit, [or] pharmaceuticals, someone needs to pick up their prescription, dentist, oil change on your car, rotating your wheels...there’s so many different aspects where text or SMS can be a reminder feature and it can also take you from just a reminder over to transactional. ‘It’s time for your tire rotation, would you like it?’ And then go through the transaction of paying for it, so when you get there, you have a spot, you have a time to  go in. 15 minutes, and it’s done, right? It’s just a lot easier.

(Antoine) Very interesting. How does the tracking work? So basically, let’s say tomorrow we have TXTFI,  like you said VitaminShoppe, [or] supplement companies. We send a text message to a customer that maybe we had in the past, that maybe hasn’t ordered our supplements for the past 60 days. The person receives a text. Are you able, from this specific text message, to track the order to see what kind of return on investment this initiative generated? 

(Rafael) So, currently, we support Shopify stores, and within the Shopify ecosystem, we are able to track that SMS to that specific order, and see if that client actually transacted and completed their purchase. So, yes, we’re able to track it through the whole thing. We’re also implementing BigCommerce, which we’re able to do, and Magenta and a few other platforms. We haven’t come across a platform that we cannot do this. So, essentially, yes, we are able to track everything from the initial message all the way to the end of the transaction. 

(Antoine) And I guess there’s an incredible untapped potential for these companies, right? Because, clearly, making sure that these customers hear from us after a certain amount of days – you mentioned it – emails, the open-rate, the click-rate, is going down. It’s expensive sometimes to advertise on social media. So, at some point, text messages can become a very valuable way to reach these customers. 

(Rafael) It really is. So, to give you an idea, SMS open rates are 98%, compared to email open rates which are 13.9%. So, just imagine, you’re sending an email campaign to 1000 customers. 130-140 will open it. But, if I send an SMS to 1000 customers, 980 are gonna read that message. Just if everything else after that falls exactly in the same metric as it was before – email click-through rate, conversation rate, etc – it’s higher on SMS, but let’s say if I even follow that, you’re automatically gonna make a lot more revenue just because more people are actually seeing the message. 

(Antoine) Interesting. Do you have stats on the click-through rate?

(Rafael) So, we do. Email open-rates are 13.9% versus SMS, open-rates are 98%. I can only speak to the engagement rate that we see within our system. From what we’ve researched so far, email engagement rates are about 17% versus what we’re seeing at 29%, or depending on the week, 31-35%. And then, when we look at the conversion rate of email we’re seeing an average of about 2%, while we’re seeing an average of about 6-8%.

And there’s a reason for that, right? Because our messages are really customized and they’re personalized. So, if you ordered something, then the message is about you and what you ordered specifically, and you need that specific item to replenish on or a bigger bottle. 30 day bottle? ‘Upgrade to a 60 day bottle, or a 90 day bottle.’ So, it’s really specific to something that you’re used to and you’re buying on a regular basis. And I think that’s the reason the conversion rate itself is higher because the product is more specific.

And as we expand to bigger capabilities with marketing and everything else, I’m sure that’s gonna decrease but I don’t think it’s gonna be where email is, because essentially, we’re starting off at 98 versus 13. So, we’re already driving a hell of a lot more revenue than email would if we compare our sales apples to apples.

(Antoine) I saw that, and I heard that many times in the past coming from customers of our customers, saying that at some point, receiving a text message from a company, can be annoying. What is your answer to that? Is there a way to structure it so people understand exactly the purpose of this text message? Are there also ways that we shouldn’t use SMS Marketing that you see companies sometimes using in a completely bad way, where they’ll just annoy their customers at the end of the day?

(Rafael) I’ve seen a lot of SMSes used in a very positive way and I’ve seen it also in the opposite. So, I’ll get to the positive last. 

The opposite – the way I don’t want it to be used – is actually what’s going on right now in the States with politics. I get like 4 texts a day from representatives that I lived in the past or that I live in now and I never signed up for these things. I don’t agree with them, but that’s just my personal thing. I don’t want it to be used this way because you’re just wasting my time. When I get a message that’s too generic, I’m like this is a waste of my time. When I get a message saying ‘Hi Rafael. You have an appointment at 6:45 on Tuesday at this address for this doctor.’ That’s more personal to me and I will look at that and say this is not annoying, this is really good. 

And a lot of the, I guess, hesitation we, not encountered, but worried about very early on was; is this too intrusive for customers? We’re going to their phone, something they hold onto all day long, essentially they’re looking at it 150 times a day. Are we being too intrusive for them? 

And when we started with our 4 beta clients, we actually wrote up a whole bunch of different customer service questions. ‘How did you get my name? Why are you texting me?’...all this stuff. I went through about 300,000 SMSes since the beginning of the year when we started sending a little bit. We started at like 3000 a day and we’re up to a lot more now, and when I went through this, I did not see one customer asking that kind of question. Like, ‘How did you get my name? Is this a scam?’ and all of that stuff. 

So, I don’t think we’re there yet where consumers are saying ‘This is too annoying.’ I think the idea of keeping it personalized and keeping it specific to the user and adding the user’s name into it so they feel like this is for them, I don’t think we’ll get there. But, that’s just my personal opinion. 

(Antoine) That’s very interesting. So, basically, what you’re saying here is, clearly it will not be annoying as long as the person that we’re trying to connect with had an intent in the past, right? 

You said politicians came to you trying to text you about their campaign, but you never signed up for that, right, compared to the appointment that you have with your doctor. Basically, it, again, just comes down to the audience that you’re trying to market to. 

(Rafael) Exactly, exactly. 

(Antoine) Interesting. And for people who are listening today – we have a lot of marketers and people who run online stores, specifically Shopify stores – can you walk us through how TXTFi will work for, let’s say, a Shopify store that runs, I don’t know, a supplement company?

(Rafael) To set up TXTFi specifically, it takes about 10 minutes. It’s a really short amount of time because essentially what you’re only doing is you’re assigning the frequency for the product. Let’s say this product is 30 days, this product is 60 days. And then you’re setting up the, I guess, voice and feel of your brand. We call it TXTFi bot, but let’s say you’re a Vitamin Store, it’s Vitamin Store bot and any other type of name that you want to call it. So that’s the set-up process. It really does take 10 minutes. 

And what they should see is their customers really engaging a lot more than they were with their email. And don’t be surprised when it happens. Consumers are just on their phone more, they’re checking their text messages a lot faster than they’re checking WhatsApp and they’re checking their email. It kind of goes back to the paradigm shift I spoke about earlier. If you go back about 15 years, when email started being used a lot more often by people, where AOL started and you got excited. ‘You got mail!’ And you checked it – you checked it at home, you didn’t check it so much at work, your personal email. Now all day you’re on your phone. You’re checking it every 20 minutes, every 10 minutes, whatever it is. 

I can give you, like, a case study where, you know, what some of our customers – and I repeat this case study a lot, which is why I wanted to repeat it. We have a brand that sells skincare. They were putting a lot of effort into getting their existing customers to buy again but it was kind of like a one-size-fits-all solution. It wasn’t the right solution because it didn’t work. About 10% of their revenue was from their existing customers and 90% was coming from acquisitions and anybody who knows knows that balance is a dangerous balance because new customers are just expensive. We implemented TXTFi with them really early on. They were one of our beta users. So, they started in January. By early March, or I would say, mid-April, 30% of their revenue came from their existing customers on replenishment. Specifically about, they used the cream, it worked great and they saw the notification from the brand and they ended up ordering through the SMS. So, it’s a great case study. 

So if someone has a supplement store, the same concept would apply. They sell vitamins, minerals, a whole bunch of different things that essentially are consumables. And every single nutritional company that we work with always has a subscription feature on their site. But essentially, a very small percentage of their customers actually do the subscription. So, the rest of those customers fall into TXTFi, and we’re able to get those customers to reorder, like I said, the subscription that never happened. 

(Antoine) Very interesting. Did you work with other companies in the past where your mandate was to turn a one-time purchase into, literally, a monthly recurring payment from the same company?

(Rafael) So before TXTFi – currently, also – I’m in the digital marketing space and I actually have a digital marketing agency, so I’ve worked with many different brands in many different areas. 

And the most common thing that I hear is that a big part of our business is driven from our existing customers, we need to tackle this new acquisition problem because essentially our customers are just gonna stop buying from us at some point, so as long as we feed customers in, we should be able to live off of both new customers and existing customers. So I definitely have a lot of experience working with this, which is why we actually started with the recurring purchase, the replenishment purchase. Because we knew the space really well. We knew the problem in the market, where brands are very worried that their customers are gonna stop buying from them. So how do we get more to buy from them to relieve this issue? It’s a great entry into the market, but it’s not where we’re stopping. But, it’s a problem that every day everybody faces and that’s just because consumers are getting bombarded with 15,000 messages from email to display to video to etcetera, right? We figured out in text, it works really well.

(Antoine) Interesting. Rafael, thank you very much for being with us today on the podcast, and for the people who are listening, how can they know a bit more about your company? The best way would be to go on your website, do you have a free trial...how does it work?

(Rafael) So I really appreciate being on the podcast. I’m really excited about it. So they can sign up to our service using the Shopify app store. Just look up SMS ordering and look for TXTFi. You can go to our website – go to www.txtfi.com. Or, the best way to experience it, because I always believe that you wanna see what your customers are gonna see, right? That’s gonna be your smell test to see if you want to put this in front of your customers. Just text the word ‘demo’ to 2017333321. And by doing that, you’ll be able to experience exactly what a customer would experience going through the process of ordering through TXTFi. And you can also just look up TXTFi on LinkedIn. You’ll see myself and you’ll see my partner, Jordan, Jeremey who is on our team  – we have a small team. We believe that if you reach out to any of us, we’ll be happy to help you with any questions that you have. 

(Antoine) Right, I love it. And we’ll put the number and the whole procedure you just mentioned in the podcast notes. So, Rafael, thank you very much for being with us today. For the people who are listening, see you soon for a new episode of Social Selling.