HVAC Demand Trends: April 2023 PPC Performance

👋 Hey, Jon here. After months of declining lead volume from PPC, we’re finally seeing a turn-around both with demand levels and lead to revenue in the month of April. This is a great sign heading into the summer months. My biggest takeaway from this data is that businesses with a continued focus on lead handling and follow-up will capitalize the most as lead volumes increase during the busy season.

Let’s dive in!

PPC Lead Volume Increased 15% Month-Over-Month

Looking at month-over-month trends, Q1 showed continuous decline in lead volume, which I know worried a lot of the businesses I spoke with:

There have been a lot of macroeconomic influences like interest rates, layoffs, inflation and fears of recession. Historically speaking, winter demand was hit the hardest during The Great Recession, but not so much for summer demand (AC, heat pump). I won’t speculate on what type of economic situation we’re in, but April’s lead volume (month-over-month) is a positive sign.

However, it’s still important to zoom out - Q1 lead volume tumbled so much that April’s bump doesn’t quite make up for it. We’re still down year-over-year, so make every lead count!

PPC Customer Acquisition Cost Decreased 16% Month-Over-Month

More important than lead volume (in my humble opinion) is customer acquisition cost, which went down 16% month-over-month.

Last year, May, June and July were the least expensive months to acquire paying customers from PPC, with the lowest CaC of $242 in June ‘22.

In April 2023, customer acquisition cost was $412.

In the first 6 months of 2022, customer acquisition cost was never higher than $338.95 with 4 months below $300.

So while it’s encouraging to see the number go down month-over-month, we still aren’t close to early 2022 levels.

However, average tickets have increased (up a whopping 35% in January and 16% in February), which has helped off-set the increasing cost of acquiring customers via PPC.

Revenue Potential from PPC Increased 17% Month-Over-Month

In April, we measured a 12.5x return on ad spend potential (all of the dollar opportunities generated from PPC added together), which was up 17% month-over-month.

Higher lead volume doesn’t always mean more revenue potential, but in this case, they both increased in lock-step (15% for leads, 17% for revenue potential), which signals strong lead handling and operations.

Match rates increased about 5% and paid customer rate stayed the same month-over-month.

In the past, when I have seen lead volumes increase sharply, fewer of them turned into paying customers (usually the emphasis pivots away from lead follow up and more to lead handling) but that didn’t happen in April, which contributed to better revenue results.

PPC Return on Ad Spend Increased 7% Month-Over-Month

There are two key takeaways from sold and closed revenue in April:

(1) ROAS (closed revenue only) increased 7% (5.5x ROAS) - this is good to see, but didn’t keep on pace with the increase in lead volume

(2) Sold revenue increased 40% month-over-month, setting up for a strong May

I’ve written about this before but will share again: over the years, I have noticed that prior month pipeline strongly influences current month performance.

I know that may seem obvious, but I can almost always tell if it’s going to be a strong month based on how the prior month sales pipeline closed out, regardless of weather spikes.

It can sometimes take 4-6 weeks before a bump in lead volume makes it all the way through to completed revenue, especially during the busy season.

If you’re seeing increased lead volume, but aren’t feeling the revenue hit yet, take a look at your pipeline. If you have a lot of unsold revenue in estimates, it might be time to pivot back to follow-up. If you have a lot of revenue in sold but not yet complete and collected, it may be a game of patience.

Overall, I’m happy to see the bump in demand and closed revenue. This is a step in the right direction, and when I look at May data through the 15th, we’re on pace to see a 50% increase in closed revenue.

For those open to the feedback, don’t let up on lead follow-up - don’t let that unsold estimate revenue potential get too high!

Until next time . . .

-Jon