Analyzing Year-Over-Year HVAC Demand Trends and Customer Acquisition Costs from PPC
👋 Hey, Jon here. I’ll be out of the office this Thursday and Friday (heading over to the Smoky mountains) but I wanted to get out this newsletter to answer a common question I’ve gotten from multiple people in just the last few days:
How has lead volume and customer acquisition cost changed since last year?
To unpack this, we’re going to look at January, February and March year-over-year (2022-2023) pay-per-click performance data from a blind sample of HVAC contractors using the following metrics:
Lead volume
Lead to Revenue Rate
Customer Acquisition Cost (CaC)
Average Ticket
Sold / Closed Jobs
Return on Ad Spend
Let’s dive in!
January CaC from PPC Increased 40% Year-Over-Year
This winter has been a difficult one for some brands - while we are only looking at one specific marketing channel, it’s clear that PPC customer acquisition costs have been rising in 2023, but the full story paints a better picture:
⬇️ Lead Volume: -1%
⬆️ Lead to Revenue: +3.3%
⬆️ Customer Acquisition Cost: +40%
⬆️ Average Ticket: +51%
⬆️ Sold / Closed Jobs: +13%
⬆️ Return on Ad Spend: +7%
In January, return on ad spend and closed revenue both improved year-over-year despite rising PPC costs, due to a large increase in average ticket and better lead handling operations.
Year-over-Year, match rates (the percentage of leads that match to a new sales opportunity in the CRM) rose by 22%, which contributed to a 13% increase in sold jobs.
The Takeaway: ROAS improved year-over-year despite a 40% (!) increase in customer-acquisition-cost. Inbound lead handling, lead follow-up and your sales process can overcome rising costs of leads.
February CaC from PPC Increased 31% Year-Over-Year
February had better lead volume performance year-over-year, but fewer of those leads turned into revenue.
The year-over-year PPC customer acquisition cost wasn’t as severe as January, but average tickets dropped and ultimately, return on ad spend decreased by 19%:
⬆️ Lead Volume: +6%
⬇️ Lead to Revenue: -2%
⬆️ Customer Acquisition Cost: +31%
⬆️ Average Ticket: +9%
⬆️ Sold / Closed Jobs: +5%
⬆️ Return on Ad Spend: -19%
The Takeaway: ROAS in this sample was still above a 6x, which is a strong and healthy return, but not at the same ratio as the year prior. It took more spend to get a slightly higher lead volume. Higher CaC doesn’t always mean a poor return on investment, but you’ll still want to look at absolute ROAS to ensure it’s generating profit to your business.
March CaC from PPC Increased 36% Year-Over-Year
We still have 10 days left in March but it’s clear that this is the worst performing month year-over-year when looking at pay-per-click performance.
Lead volumes were up slightly, but lead to revenue, average tickets, and sold / closed jobs are down across the board:
⬆️ Lead Volume: +2%
⬇️ Lead to Revenue: -11%
⬆️ Customer Acquisition Cost: +36%
⬇️ Average Ticket: -3%
⬇️ Sold / Closed Jobs: -11%
⬆️ Return on Ad Spend: -28%
The Takeaway: Leading indicators like unsold estimates can help us understand what might close in the last 10 days of the month or into the following month, but currently those are down about 28% and don’t suggest a tailwind for the rest of the month.
Hopefully this is the “bottom” of the shoulder season.
Closing Thoughts
Pay-per-click cost and results can vary significantly between markets, so it’s not to say that all brands are seeing the exact same trends I outlined above.
Some of you might be seeing better performance at lower costs, others may be seeing worse performance than this.
That’s why it is helpful to track this data to know how you are trending in your specific market to make faster decisions that don’t set you back.
Most notably, brands tracking this data increased their spend to match the uptick in CaC.
It was less profitable relative to last year but still netted a positive return and kept the job board full versus leaving budgets as they were and experiencing a more significant drop in lead volume.
We’ve seen significant weather changes alter demand dramtically so we are closely monitoring this performance to stay ahead of the trends to avoid playing catch-up.
Until next time . . .
-Jon