HVAC Demand Trends: Google LSA Revenue Performance - November

👋 Hey, Jon here! In this newsletter, we’re going to look at November (through the 29th) HVAC-specific Google LSA revenue performance data. LSAs have been up-and-down for a lot of brands (as you’ll see in the data below) and is worth keeping a close eye on as you evaluate advertising budgets and channel mixes entering 2024.

Note: This data is from a sample of 17 HVAC 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 October's performance compared to the prior 31 days as a reference:

• Spend: -4%

• Conversions: -1.4%

• Paying Customers: +34%

• Paying Customer Rate: 8%

• Customer Acquisition Cost: $610.22

• Average Ticket: $4,696.89

• Sold Revenue: +70%

• Closed Revenue: +126%

• ROAS Potential: 12.5x

• ROAS Closed: 4.1x

Also note that Google LSA spend decreased by 18% in November.

Let’s dive into the data!

Google LSAs Drove a 10.2x Return on Ad Spend Potential

Revenue potential from LSAs has come down since September by about 2x each month:

14x in September.

12.5x in October.

And now 10.2x in November.

Despite the drop, the double-digit ROAS potential is a good sign that there is enough demand to warrant your investment and energy in a particular marketing channel.

While part of the recent LSA performance down trends could be the seasonal transition - conversions were down by 8% in November and paying customers dropped by 15% - it’s worth keeping a close eye on revenue potential because if it continues to drop it might be time to re-think your channel mix.

However.

The quality of this ROAS potential is also important and the way you can evaluate that quality is by looking at the percentage of revenue opportunity that ended up sold or closed.

For November, 75% of revenue potential ended up sold/closed. That’s really strong - usually, we recommend a goal of 50%.

The above data point is an important nuance that can help you level up your data analysis.

On the surface, dropping from a 12x potential to a 10x potential may be worrisome, but if you go a level deeper, there’s another important takeaway:

If 75% of 10x ROAS potential ends up sold or closed and only 50% of the 12x ends up sold or closed, the 10x potential month actually performed better for your bottom line.

The easy button is just looking at the sold revenue and closed revenue trends, but the point is that you’ll want to look both at the quantity and quality of your revenue potential (and not just from LSA, for all marketing channels!).

Google LSAs Drove a 5.68x Return on Ad Spend (Closed Revenue)

True to our example above, closed ROAS was higher than it was in October, despite a lower overall revenue potential.

Average tickets did increase (slightly), going from $4,696 to $4,838, and October saw a 70% increase in sold revenue (likely closed in November), but in terms of both closed revenue and ROAS, November is up compared to October.

Closed revenue from LSAs was up 16%, but sold revenue was down 45%, which means December will start with much less revenue in the pipeline.

For every $1 spent on LSAs in November (through the 29th) they drove $5.68 in return.

It Cost $633.57 to Acquire a Paying Customer from Google LSAs in November for HVAC Services

Customer acquisition cost via LSAs increased by $23 from October to November to just under $633.57, which is more than twice as expensive as it was in September ($297.30)!

These price swings are really important to keep an eye on because marketing channels ebb and flow in the value they deliver and can help you decide how to adjust your channel mix.

Yes, you can influence customer acquisition with better lead handling, customer experience, sales process, follow-up, etc., but sometimes, it is just simply that the channel is becoming more expensive with more companies fighting for that same digital real estate.

Google LSAs produced strong returns for early adopters, but over time, as other businesses figured that out and started to invest their own dollars in LSAs, performance has evened out and for some has swung the other way.

By tracking this closely, you can make faster and more efficient budgeting and channel mix decisions - in your market, LSAs may be much cheaper and a great avenue, but the following month, you may want to lean more toward a different channel.

It is also worth noting that the paying customer rate of Google LSAs was 7.85% in November, which is very low and likely influenced a much higher customer acquisition cost.

On average, we would hope for at least a 20% paying customer rate with a goal of 25%, but more and more I am seeing Google LSAs with paying customer rates below 10%.

Any time I see a marketing channel with a paying customer rate below 10%, my first thought goes to lead handling and sales process. But in this sample, these brands did have much higher paying customer rates for other marketing channels, signaling a lead quality drop with LSAs.

This is something to keep an eye on for your own business - only in the past few months have I seen LSA paying customer rates drop by so much and it can significantly impact your cost to return.

How Did Customers Convert Through Google LSAs?

I like to keep an eye on this data because it helps me to understand customer behavior and help prioritize lead-handling efforts.

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 90% of conversions in November

(2) Messages were 8% of conversions in November

(3) Booking was 2% of conversions of November

Phone calls also generated 87% of the total revenue opportunity from LSAs, while the booking feature generated 10% of revenue opportunity and messages generated 3% of revenue opportunity.

It was interesting to see that customers who used the booking feature had a paying customer rate of only 9%, but those customers did have the highest average ticket at $14,211.

Until next time . . .

-Jon