HVAC Demand Trends: August 2023 PPC Performance

Year-over-Year and Month-Over-Month Trends

👋 Hey, Jon here! This week we are going to dive into August PPC performance (Google and Microsoft Ads/Bing) with month-over-month and year-over-year analysis. We are beginning to see the come-downs from summer highs, but the year-over-year trends are pleasantly surprising.

As a refresher, here’s the final PPC performance data from July (all of this is year-over-year):

• Lead Volume: -4% (YoY)

• Closed Revenue: +11% (YoY)

• Customer Acquisition Cost: +9% (YoY)

• Revenue Opportunity: -3% (YoY)

• Return on Ad Spend (Closed Revenue): +14% (YoY)

To set the stage for the below analysis, note that PPC spend in this sample decreased by 9% month-over-month but increased by 4% year-over-year.

HVAC PPC Lead Volume Decreased 13% Month-Over-Month But Increased 20% Year-Over-Year

For the second straight month, lead volumes from PPC have decreased. This is not surprising because we’ve historically seen demand peak in June with declines in July and August as we enter the shoulder season.

We also saw spend decrease by 9% (MoM), so some lead volume drop is to be expected.

However, (and this is a big however), lead volumes increased 20% year-over-year despite just a 4% increase in spend over that same time period.

This is a very positive early YoY performance indicator but still requires a more complete analysis before jumping to conclusions because by now, all of my readers know that lead volume is just a very small sliver of the full picture.

Just because your business was contacted 20% more times than the year before does not mean that more customers are actively ready to buy and the types of services that they buy could’ve shifted over the last year.

Paying Customers From PPC Were Down 14% Month-Over-Month But Increased 13% Year-Over-Year

More leads are great, but how many of them are actually turning into paying customers?

In this sample, month-over-month data showed 14% fewer paying customers than the prior month.

Again, this doesn’t tell the full story, because if a higher percentage of those are install customers or are paying higher average tickets, it might not affect revenue and ROAS numbers.

The paying customer rate (~20%) was largely unchanged from the month prior, so given the lower budget and fewer leads to work with, this decrease is right in line with our expectations.

But what’s most interesting is that paying customers were up by 13% year-over-year.

Let’s see how this impacted total revenue opportunity. 👇

Total PPC Revenue Opportunity Was Down 23% Month-Over-Month But Increased 5% Year-Over-Year

From July to August, we saw a very noticeable drop in total revenue opportunity (unsold estimates + sold revenue + closed jobs) at minus 23%.

Total Revenue Opportunity sometimes shows up in the current month’s closed revenue performance, but often the trend is reflected in the following month’s performance.

For example, sold revenue was down over 30% from the prior month, which reflects the sales pipeline going into September.

Unsold estimate revenue was also down by over 30% and both of these are typically forward-looking KPIs.

Unless lead volume and paying customers rebound in September, the month is starting with a much smaller sales pipeline than August and is an indicator that we will see weaker performance in September (barring any major weather changes).

If your sold revenue is down noticeably (10% or more) this is a sign to begin planning now for how you can activate customers already in your pipeline and how you can adjust your marketing strategies, expectation setting, and sales budget for the following month.

Customer Acquisition Cost Was Up 6% Month-over-Month But Decreased 10% Year-Over-Year

Paying customers cost $21 more in August than in July to acquire via PPC, but surprisingly, that was 10% less expensive than it was last year!

In early 2023, customer acquisition costs were much higher than the year prior, but as the year has gone on, these costs have come down as well.

This sample may be biased because we are able to accurately track these metrics and work with the businesses in this sample to improve efficiencies to reduce customer acquisition costs, but it goes to show that it is possible to bring these costs back down with better revenue flow management.

This is a really positive sign because average tickets have also come down 10% year-over-year (reversing the trend we saw earlier this year) and they came down 10% month-over-month.

In early 2023, CAC was higher but so were average tickets, so the revenue impacts weren’t as sharp.

Now we’ve seen average tickets come down, but customer acquisition costs (year-over-year) have also come down.

Customer acquisition costs and average tickets can also help you decide how aggressive you want to be with your PPC budget. Knowing that September is going to start with a smaller opportunity pipeline, you might be comfortable pushing your CAC higher to get more volume, fill your job boards, and overcome a weaker pipeline.

Tracking these metrics closely is key to make sure you don’t start to see a negative return on ad spend if you take it too aggressively in either direction (too high of a budget or too low of a budget).

Closed Revenue Was Down 17% Month-Over-Month But Up 6% Year-Over-Year

The month-over-month PPC trends aren’t strong: most of these KPIs have come down and a 17% drop in closed revenue is tough, especially knowing that sold revenue is also down by over 30%.

The year-over-year trend is positive, but based on your business and your own KPIs, now is the time to start planning for less demand to start the month of September.

Return on Ad Spend Closed Was Down 12% Month-Over-Month But Increased 4% Year-Over-Year

Return on Ad Spend (Closed Revenue) from PPC investment landed at an average of 7.5x in August.

That means for every $1 spent on PPC, it returned $7.50 on average, which are strong and profitable returns (and up 4% from last year!).

While closed revenue dropped 12% (keep in mind the spend decreases) the proportional return still makes sense for the investment.

Based on the data I am seeing, right now is a very good time to meet with your agency and internal team members to attack September.

The drop in sold revenue has me concerned, but even if absolute growth (closed revenue) is down month-over-month you can still maintain strong ROAS through proper lead handling, strategy, budgeting and follow-up.

Until next time. . .

-Jon