HVAC Demand Trends: June 2023 PPC Performance

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

👋 Hey, Jon here! While June PPC performance got off to a slow start, the month finished strong and outperformed May.

As a refresher, here’s the final PPC performance data from May that you can reference:

• Lead Volume: +1% (MoM)

• Closed Revenue: +30% (MoM)

• Customer Acquisition Cost: +18% (YoY)

• Revenue Potential: 14.5x

• Return on Ad Spend (Closed Revenue): 7.3x

I’ve also gotten some feedback from followers here (thank you!) that you’d like to see more year-over-year data after I posted about rising costs of customer acquisition, so I’ve included that data in here as well.

Let’s dive in!

HVAC PPC Lead Volume Increased 20% Month-Over-Month and 11% Year-Over-Year

May lead volumes only increased slightly, but in June (probably as expected) we saw a significant spike in total leads both month-over-month and year-over-year.

The month-over-month bump in lead volume isn’t what surprised me here, but the fact that lead volume was up double-digits year-over-year is a really pleasant surprise.

From a macro perspective, we are all aware that interest rates are up, we’ve seen a slew of layoffs in different industries, and the overall vibe of the economy is different from a year ago, but still, lead volume demand via PPC was up!

Paying Customers From PPC Was Up 14% Month-Over-Month But Decreased 5% Year-Over-Year

This is where the year-over-year data gets really interesting, but keep in mind that the fundamentals of the analysis are the same.

Lead volume tells a fraction of the revenue flow story, and is not a metric I recommend looking at individually to evaluate your performance and make changes.

Here’s why:

Lead volume was up 11% year-over-year, but the number of paying customers actually decreased by 5%.

And we can dig a little deeper into the reason(s) behind that decrease:

Match rate went down 4% year-over-year.

Paid customer rate also went down year-over-year, by 3%.

This could be a function of customers submitting multiple leads, kicking tires, etc. but could also be a function of decreased lead handling performance given the higher lead volumes.

Leads are a great starting indicator, but to truly diagnose revenue leaks, it requires digging deeper and looking at each step of the lead to revenue journey.

Let’s take a look at how paying customers impacted revenue performance in June.

Total PPC Revenue Opportunity Was Up 12% Month-Over-Month But Decreased 1% Year-Over-Year

Revenue opportunity looks at all of the dollars in various stages of the customer journey (unsold estimates, sold jobs, closed jobs) to understand every dollar opportunity that PPC brought in during a given time period.

Month-over-month, the data looks great - up double-digits from May including a 20% increase in sold revenue, which sets us up for a good start to July.

Year-over-year, there wasn’t a large difference in total revenue opportunity, but it’s still fascinating to see that despite more leads, both paying customers and revenue opportunity decreased.

A 1% YoY decline isn’t that drastic of a difference, but let’s see how it impacted closed revenue and ROAS.

Closed Revenue Was Up 19% Month-Over-Month And Up 5% Year-Over-Year

The good news is that closed revenue was up significantly from May and was up slightly year-over-year.

Average tickets, job types and new vs. existing customers matter significantly as well, and are likely responsible for why fewer paying customers generated more revenue year-over-year.

Spend was up 3% year-over-year, so we would expect to see more closed revenue, but this is still a sign that levels of paying customer demand (and higher tickets) are up year-over-year.

Return on Ad Spend Closed Was Up 12% Month-Over-Month and Up 2% Year-Over-Year

Return on ad spend from PPC was above 8x in June 2022 and 2023. So for every $1 spent on PPC, the channel generated $8 in return.

The year-over-year difference is only slight, but given increased spend (+3%) and macro scenarios, it is a relief to see that paying customer demand and return proportions held their own year-over-year.

June customer acquisition costs from PPC rose 16% year-over-year, but this didn’t end up affecting the ROAS. However, it’s important to note the rising costs of customer acquisition - if there’s a down month in leads, it’s important to make sure your lead handling, follow-up, sales processes and campaign strategies are dialed in.

Unsold Revenue Increased 15% Year-Over-Year

Despite the exciting ROAS numbers both year-over-year and month-over-month, one data point stood out to me as a takeaway for this newsletter:

Unsold estimate revenue increased 15% year-over-year.

My takeaway from this is two-fold:

(1) Closed revenue and ROAS were up, but there was still room for improvement and opportunity to further increase ROAS

(2) Historically, lead volumes spike in June then begin to decline in July and August leading into the shoulder season: if you want to maximize opportunity from the summer and have the capacity, set-up targeted follow-up campaigns

I’ve been beating this drum for a while, but it’s because outbound campaigns work really well.

In the first 5 days of July, lead volumes were down about 25% (largely attributable to the holiday, but July 3rd was apparently the hottest day in Earth’s history). While there’s good sold revenue to start the month strong, it’s likely that customers are used to a longer sales cycle in the summer months (due to capacity) so make sure to re-engage those customers in your pipeline.

If you enjoyed this newsletter, and like the addition of the year-over-year data, please consider sharing this with a friend or colleague :)

Until next time . . .

-Jon