HVAC Demand Trends: Google LSA Revenue Performance - December
👋 Hey, Jon here! This week, we’re diving back into Google LSA performance. LSAs started to trail off pretty drastically in the second half of 2023, with rising customer acquisition costs and shrinking demand. For this newsletter, we’re going to look at both plumbing and HVAC performance together using December data compared to November.
Note: This data is from a sample of 20 businesses across the US. Shout out to Josh Crouch and his team at Relentless Digital, who partnered with us to measure lead-to-revenue from their organic and LSA management services, enabling us to share these trends with you.
Below is a summary of November’s performance compared to the prior period:
Spend: -9%
Conversions: -6%
Paying Customers: -28%
Customer Acquisition Cost: $633.57 (HVAC-only)
Average Ticket: $2,616
Sold Revenue: -6%
Closed Revenue: +41%
ROAS Potential: 10.2x
ROAS Closed: 5.68x
Note that Google LSA spend decreased 22% in December.
With that, let’s dive into the data!
Google LSAs Drove a 12.85x Return on Ad Spend Potential
My favorite KPI, return on ad spend potential, captures and sums the revenue opportunities across unsold estimates, sold jobs, and closed jobs, divided by the spend.
This metric tells me the total demand generated by a marketing channel to ensure that it is driving enough potential opportunity for it to make sense to keep investing in that channel.
In December, Google LSAs drove $12.85 in revenue opportunity per $1 spent.
My rule of thumb is that a channel should generate at least 10x ROAS potential for it to remain a viable part of the marketing strategy. When a channel falls below that, it’s typically time to evaluate the budget and strategy of that channel.
The positive here is that ROAS potential only dropped by 4% despite a 22% decrease in spend.
Over the past few months, we’d seen a decline in this metric, but in December, it held steady.
Google LSAs Drove a 7x Return on Ad Spend (Closed Revenue)
For every $1 spent on Google LSAs, $7 of closed revenue was earned in return for December.
It is important to note that total closed revenue did drop by 15%, but because spend also declined, each dollar spent was more efficient at generating returns.
It is a positive to see ROAS closed increase this month after a few months of decline but it is equally as important to consider the context that the total volume of revenue dropped month-over-month.
So while LSAs were more efficient in December, they contributed less to the bottom line than in November.
Conversions were also down 42% month-over-month, with 55% less sold revenue and 25% less open estimate revenue.
There were also 18% fewer paying customers in December compared to November.
In summary, Google LSAs were more efficient for every $1 spent in December than in November, but the availability of demand dropped from November and the sharp reduction in sold revenue puts January at risk for a poor-performing month.
It Cost $310.86 to Acquire a Paying Customer from Google LSAs in November for HVAC Services
For HVAC services specifically, it cost $610.22 in October and $633.57 in November to acquire a paying customer.
When looking at the full picture of HVAC and plumbing services, it cost $310.86 to acquire a paying customer from Google LSAs, which is down 5% from the prior month.
Again, this points to a more efficient month for Google LSAs than in November, but spend was down for a reason: less available demand.
This is the nuance and trickiness of the data - these LSAs were well-managed and produced returns, so in most ways, this is a positive story, but what we need to be mindful of is the overall decline of conversions and revenue opportunity this channel has brought in since September.
How Did Customers Convert Through Google LSAs?
I like to keep an eye on this data because I hope that it helps you understand customer behavior changes so that you know what to look out for in your business.
For example, if we see a sharp increase in customers using the Google LSA message feature, you may decide to turn that on for your business and put an emphasis on responding to those messages quickly.
While we did see a spike in usage of the message feature from August to September, that has come back down in November with the majority of customers converting via phone calls:
(1) Phone calls were 92% of conversions in December (compared to 90% in November)
(2) Messages were 7% of conversions in December (compared to 8% in November)
(3) Booking was 1% of conversions of December (compared to 2% in November)
Phone calls also generated 96% of the total revenue opportunity from LSAs (compared to 87% in November), while the booking feature generated 1% of revenue opportunity and messages generated 3% of revenue opportunity.
It was interesting to see that message leads had a paying customer rate of just 2.5% but had the highest average ticket at over $16,000.
Overall, the vast majority of LSA conversions are still calling versus using the booking and messaging features.
Until next time . . .
-Jon