HVAC Demand Trends: Google LSA Revenue Performance - January 2024
👋 Hey, Jon here! This week, we’re diving back into Google LSA performance for January ‘24.
GLSAs have been generating a lot of buzz this week because Google is rolling out a new feature that will impact your business. Joshua Crouch outlines the change and how it could affect your business, below:
This newsletter will be a great barometer for any benchmark changes in GLSA performance, but make sure to talk to your agency about this change to decide the best approach for your business!
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 December’s performance compared to the prior period:
Spend: -22%
Conversions: -42%
Paying Customers: -18%
Customer Acquisition Cost: $311.34
Average Ticket: $2,585
Sold Revenue: -55%
Closed Revenue: -15%
ROAS Potential: 12.85x
ROAS Closed: 7x
Note that spend on GLSA increased a whopping 104% from December to January!
Conversions from GLSA Increased 150% From the Prior Month
I’ve written before about how Google Local Service Ads has been one of the most volatile channels we have tracked this year and it’s no different over these past 2 months.
From November to December, GLSA conversions trailed off significantly with a 42% month-over-month decrease.
However, conversions shot right back up in January by 150%, a significant boost in activity and new potential opportunities.
Going from a 42% decline in conversions to a 150% increase in just 60 days is a very large and potentially business-changing swing in that time frame.
But, we need to dig a little deeper to see how well those conversions turned into revenue:
Both the match rate and paying customer rate dropped 28% month-over-month to 24% and 15% respectively.
This is expected due to the significant increase in conversions - whenever that happens, we almost always see a reduction in the above KPIs because a higher volume usually means more difficult to keep up with the influx of demand.
Despite those decreases, the number of customers who matched to a net new opportunity was up 57% and the number of paying customers was up 58%, which had a significant impact on the potential revenue opportunity generated.
Google LSAs Drove a 9.15x Return on Ad Spend Potential
As we dive into the revenue opportunity generated, it’s important to keep in mind that spend on GLSA increased 104% month-over-month.
Because of that large increase in spend, despite all of the additional conversions it generated, the return on that ad spend dropped month-over-month from 12.85x to 9.15x.
Typically, I like to see marketing channels generate at least a 10x potential return but in this case, GLSAs made up in volume what it lacked returns proportional to spend.
Month-over-month, revenue potential increased 44%.
So even though GLSA generated $3.70 less per $1 spent in January than it did in December, the channel drove a much higher volume of revenue opportunity this month.
Note: 84% of the revenue potential generated by GLSAs came from new customers.
Google LSAs Drove a 3.46x Return on Ad Spend (Closed Revenue)
Despite the 44% increase in revenue potential, closed revenue only increased slightly, by 0.2% and $1 of spend only generated $3.46 in closed revenue compared to $7 in December.
This is why it is so important for you to understand the volume of revenue at each stage of the customer journey in your own business so that you can redirect your teams’ focus to capture as much revenue as possible during times of high demand.
In this case, 52% of the revenue potential (the sum of unsold estimates, sold revenue, and closed revenue) was in the unsold estimate stage of the customer journey.
That means that over half of the new revenue opportunity generated by GLSA is “stuck” in this open estimate status and more than likely money is being left on the table.
While it is true that sold revenue increased 46% MoM and will help February’s numbers, we see often that estimate follow-up takes a hit during these surges of demand and that can significantly impact closed revenue.
It Cost $401.97 to Acquire a Paying Customer from Google LSAs in January
Last month, it cost $311.84 to acquire a paying customer from GLSA, but in January, CAC rose 29% to $401.97.
We also saw a 32% decrease in average tickets, which was down to $1,755 from $2,585 in December.
The nearly $1,000 decline in average tickets almost certainly contributed to stagnant closed revenue despite an influx of paying customers, but the key takeaway remains that too much revenue was stuck in the unsold estimate category.
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.
Despite the influx of new conversions in January vs. December, the way those customers converted remained unchanged:
(1) Phone calls were 92% of conversions in January (compared to 92% in December)
(2) Messages were 7% of conversions in January (compared to 7% in December)
(3) Booking was 1% of conversions in January (compared to 1% in December)
One thing to note is that GLSA message conversions had a paying customer rate of just 1%, compared to 16% for phone calls and 42% for online booking.
If you have GLSA messages turned on, make sure you are receiving and responding to those messages quickly - a 1% paying customer rate is abysmally low, and likely indicates an operational issue versus a lead quality issue.
Until next time . . .
-Jon