HVAC Demand Trends: July 2023 PPC Performance

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

👋 Hey, Jon here! In this week’s newsletter, we’re going to take a deep look at July PPC performance and compare the data both month-over-month and year-over-year. After a difficult Q1, PPC performance has turned around and we even saw June 2023 outperform June 2022 in some metrics!

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

• Lead Volume: +11% (YoY)

• Closed Revenue: +5% (YoY)

• Customer Acquisition Cost: +16% (YoY)

• Revenue Opportunity: -1% (YoY)

• Return on Ad Spend (Closed Revenue): +2% (YoY)

To set the stage for the below analysis, note that PPC spend in this sample decreased by 8% month-over-month and 6% year-over-year.

HVAC PPC Lead Volume Decreased 18% Month-Over-Month and 4% Year-Over-Year

I’ve heard from a number of businesses that PPC lead volume seemed to slow in July relative to June and that’s exactly what the data showed.

Despite a spike in conversions in early July from a heat wave, lead volumes were down noticeably month-over-month, but only 4% year-over-year.

However, just because lead volumes drop does not mean all hope is lost on revenue performance: how well those leads are handled and how well they convert into paying customers (including how much those customers spend on average) can still result in a better ROAS and more closed revenue.

Both match rate and paying customer rates were up 2% month-over-month (40% and 24%, respectively), which tells me that despite fewer leads, more of them were turning into sellable opportunities and paying customers.

Note: Lower lead volume is more likely to impact the following month’s performance, so follow-up is so crucial to anyone recently in your sales pipeline, especially unsold estimates!

Paying Customers From PPC Were Down 12% Month-Over-Month and 15% Year-Over-Year

Despite a higher match rate and paying customer rate, we saw double-digit drops in the number of paying customers from PPC both year-over-year and month-over-month.

We have to consider that spend was decreased, and it would be expected that we would have lower lead volumes and ultimately fewer paying customers, but this is a noticeable drop despite a strong performance on the match rate and paying customer rate.

Let’s see how it impacted revenue performance 👇

Total PPC Revenue Opportunity Was Down 17% Month-Over-Month And 3% Year-Over-Year

Revenue opportunity (the sum of unsold estimate, sold job, and closed job revenue) was also down by a large percentage month-over-month but was only down 3% year-over-year.

The biggest revenue category change was a 40% drop in sold revenue month-over-month, which is a big contributor to the drop in total month-over-month revenue opportunity.

Sold revenue is a good predictor of the following month’s performance, and while a wide number of variables impact that, a big reduction in sold revenue is something to keep an eye on as we get deeper into August.

Also note that sometimes a decrease in sold revenue is a good thing, as it means customers are moving through the revenue flow cycle quickly. If you’re in a good spot capacity-wise, customers shouldn’t sit in the sold category for too long before you complete the work and close the job.

Customer Acquisition Cost Was Up 6% Month-over-Month and 9% Year-Over-Year

Customer acquisition costs increased from June (which is usually the least expensive month to acquire customers from PPC) back up to $350.

Last year, the customer acquisition costs were slightly below $300, so the cost to acquire a paying customer in July 2023 vs. July 2022 was $50 more expensive.

However, average tickets increased 10% year-over-year, by over $300 which more than makes up for the $50 increase in customer acquisition cost.

Average tickets remained largely the same month-over-month, but are up noticeably since the start of the year.

Closed Revenue Was Down 7% Month-Over-Month But Up 11% Year-Over-Year

In June 2023, closed revenue was up 5% year-over-year, and this month, it’s up double digits to 11% year-over-year.

As an added win, spend was down 6% year-over-year, so despite spending less money, the businesses in this sample ended up closing more revenue than the prior year!

Lead volume and paying customers were down YoY, but the increase in average tickets was a major contributor to an increase in closed revenue.

Depending on how you define “demand”, you could argue that overall demand (paying customers) was down in these time frames and is a point of concern. There were fewer paying customers both month-over-month and year-over-year.

However, if you look at demand purely as a function of closed revenue in a timeframe, demand was up.

Throughout 2023, higher average tickets have been able to make up for higher customer acquisition costs and lower volumes of paying customers.

Return on Ad Spend Closed Was Up 2% Month-Over-Month and Up 14% Year-Over-Year

Because closed revenue increased year-over-year and spend was decreased, it’s pretty easy to see how the return on ad spend closed was double-digits higher than in 2022.

We also saw month-over-month ROAS improvements, although just slightly to 8.5x.

So for every dollar spent on PPC in July, these businesses got $8.50 in return.

This is encouraging to see, but still important to keep in mind that overall there were fewer customers in the demand pipeline and average tickets were a large reason for the revenue increases.

With increasing customer acquisition costs, every conversion and lead counts much more than it did last year!

Phone Calls Drove 8% Less Total Revenue Opportunity in 2023 than in 2022

I wanted to include one more data point that highlights how customer conversion behavior is starting to change more and more.

In July 2022, 68% of revenue potential was converted via phone calls.

But in July 2023, only 60% of revenue potential was converted via phone calls.

That means 8% more of your revenue opportunity was converted via something other than a phone call (online scheduling, chat, forms).

Because we know that customer acquisition costs are higher and we’ve been counting on higher average tickets, ensuring you have tight processes in place to handle non-phone call leads is important to capitalize on the opportunity in your market.

I spoke about this topic earlier this year and the trends are playing out exactly as we had thought. This doesn’t mean phone calls aren’t important, but recognizing that your customers are converting in different ways on your website is an insight that can help you better serve them and convert more of them into paying customers.

Until next time . . .

-Jon