👋 Hey, Jon here! This week we are going to dive into January 2024 PPC performance (Google and Microsoft Ads/Bing) with month-over-month and year-over-year analysis.
As a refresher, here’s the final PPC performance data from December (all of the data below is year-over-year):
Conversion Volume: -38% (YoY)
Paying Customers: +12% (YoY)
Customer Acquisition Cost: +18% (YoY)
Total Revenue Opportunity: +35% (YoY)
Closed Revenue: +15% (YoY)
36% of closed revenue did not convert via phone calls
Note that the January spend on PPC for the accounts in this sample increased 25% month-over-month and 40% year-over-year.
HVAC PPC Conversion Volume Increased by 55% Month-Over-Month and Increased by 60% Year-Over-Year
From a conversion volume perspective, December 2023 was a down month for PPC with a 38% YoY decrease in conversion volume and a 34% decrease in month-over-month conversion volume.
However, January rebounded strongly with a net increase of 22% YoY conversion volume and a 21% month-over-month increase.
It is important to note that spend also increased significantly in these time periods, and that January had more working days with fewer holidays and some cold snaps around the US, all likely contributing to an influx of new conversions.
Before we discount the effects of increased spend, though, we’ll want to look at how efficiently the new conversions were handled, what it cost to acquire a paying customer and how that impacted revenue-generated.
I know it’s frustrating to have to spend more on any marketing channel to compete, but if that spend drives higher volume of revenue while maintaining efficiency (and you can accurately track this) it can be beneficial to your business.
Paying Customers From PPC Were Up 15% Month-Over-Month and 28% Year-Over-Year
Whenever conversion volume increases drastically in a short period of time (month-over-month) the percentage of those conversions that match to a net-new opportunity and a paying customer usually goes down.
Higher volume usually makes it harder on CSRs and sales people to keep up with the demand and is something we see across almost every business.
In this case, match rates (% of those active customers matching net-new opportunities) and paying customer rates (% of those active customers who turned into sold/closed revenue) were both down 18% and 16% MoM, respectively.
Despite those decreases, paying customers increased 15% month-over-month and 28% year-over-year.
Both are notable increases, but didn’t keep pace with the lead volume.
The key is balancing new lead volume with efficiency (how well those customers turn into revenue) and ensuring you get enough net-new paying customers to maintain profitability on the additional spend.
Customer Acquisition Cost Was Down 10% Month-over-Month and Decreased 12% Year-Over-Year
The positive news here is that despite the additional spend, customer acquisition costs were down both month-over-month and year-over-year.
It is possible to spend more on any marketing channel while reducing your customer acquisition cost, and more of this is in your control than you think.
Your business isn’t totally beholden to Google, or any ad channel when it comes to cost.
I think at this point we are all aware that Google increased its prices and many businesses felt that over the past year.
However, if you can really dial in your operations from lead handling to sales follow-up, you can influence your customer acquisition cost.
Despite Google raising prices, it cost 12% less to acquire a paying customer from PPC in this sample of businesses than it did this time last year.
Total PPC Revenue Opportunity Was Up 13% Month-Over-Month and Increased 11% Year-Over-Year
Despite the fact that average tickets were down nearly 25% month-over-month, total revenue opportunity (the sum of unsold estimates, sold jobs and closed jobs) was up 13% month-over-month.
The net-new increase of paying customers was able to off-set the increased spend on PPC and generate an even higher absolute return.
When it comes to return on ad spend potential (the sum of estimates, sold jobs and closed jobs divided by the spend), it did drop 3% month-over-month, but was still at a 10x overall.
As your budget grows, it becomes harder to maintain ROAS potential and ROAS closed.
For example, if you spend $1,000 on PPC, you just need $10,000 of revenue opportunity for a 10x on ROAS potential.
But if you spend $100,000 on PPC, you’d need $1,000,000 of revenue opportunity for a 10x on ROAS potential.
So, if you decide to spend more and more on PPC, tracking these KPIs are crucial because, inevitably, your ROAS will decrease as your revenue targets grow, but you can find the sweet spot of maximizing budget to produce the most revenue volume while maintaining profitable returns.
34% of Revenue Opportunity Did Not Convert via Phone Calls
It was interesting to see that fewer revenue opportunities were attributed to non-phone calls than the past few months.
The general trend we observed in the second half of 2023 was that more and more customers were converting via non-phone channels like online scheduling, chats, forms, etc.
While this is anecdotal, I do notice that during significant weather changes, customers tend to call businesses more because they have a higher sense of urgency.
Regardless, it is still important to understand how your customers convert so that you can properly assign resources to handle those leads and follow-up.
Closed Revenue Was Up 2% Month-Over-Month and Increased 14% Year-Over-Year
The total amount of closed revenue increased both month-over-month and year-over-year, but not at proportional rates to increased spend.
ROAS closed came in around 4.5x for January, which is still profitable, but was down 16% from December.
However, sold revenue was up 15% month-over-month, signaling a stronger start to February.
Often times, when lead volume spikes, you may not see that revenue until the following month because your schedule is busier, you book customers further out and it just takes longer to get to that work.
So while closed revenue did increase, and ROAS maintained profitability, the benefits of the increased conversion volume may show up in February.
Overall, January ‘24 has been a hot start for organic and PPC, and hopefully sets the tone for the rest of 2024’s performance.
Until next time . . .
-Jon