HVAC Demand Trends: March 2023 PPC Performance
👋 Hey, Jon here. Now that we have a full month of March data, it’s time to take a look at pay-per-click performance trends including customer acquisition cost, average tickets, ROAS and trends going into April (things are looking up!).
I’m also excited to share that I joined Gary V on his podcast yesterday and this newsletter was a focal point of the conversation. I know I am humble-bragging here, and not everyone is a fan of Gary, but he’s been a really positive influence on me and injected some of the motivation I have to ensure this newsletter continues to deliver free insights that can truly impact your business.
So again, I thank everyone for following and sharing because the interview was a meaningful experience and I couldn’t have done it without you all!
Alright, let’s get to the good stuff!
Return on Ad Spend Potential from PPC Increased 9% Month-Over-Month
When I look at monthly trends, return on ad spend potential is the first KPI I evaluate.
This data point tells me the total opportunity that PPC generated for a particular business relative to the cost of the ad spend.
As you can see from the graphic above, the total opportunity is the sum of open estimates (one per customer), sold jobs (not complete) and complete jobs.
If these companies closed 100% of the opportunities generated by PPC, they would have seen a 12x return on ad spend (ROAS).
This metric is essential because it cuts to the core analysis of two very important business functions:
(1) Marketing strategy - is my paid ads strategy working well enough that my business is getting enough new opportunities at an efficient cost to return ratio?
(2) Operations and Sales - when we get those opportunities, how well are we converting them to paid customers?
Our typical benchmark is that 50% of revenue potential turns into closed and completed work.
So, if PPC drives $100,000 of revenue potential, we would expect $50,000 of that work to close.
Whenever that number falls below 50%, it signals an operational issue.
Return on Ad Spend from PPC Decreased 8.5% Month-Over-Month
Closed revenue was only at a 5x ROAS in March, which was less than 50% of total opportunity closed. This is still profitable, but given that budgets in this sample dropped 17%, we are continuing to see downward trending demand.
However.
Sold revenue was up 31% month-over-month.
Sold jobs are accepted work that haven’t yet been complete and collected on.
This is a metric I keep a close eye on to give me a sense for the work that’s going to be completed and closed in the following month(s) and acts as a “sales pipeline” metric.
This is a leading indicator for the performance of April, which I’ll preview in a later section.
PPC Customer Acquisition Cost Was $507.95 in March
Customer acquisition costs across PPC and other channels have gotten significantly more expensive year-over-year.
But month-over-month, it actually went down by 2.5%!
A year ago, it would cost around $300 to get a paying customer from PPC (not a lead, but someone who turned into a paying customer).
But in 2023, it’s been creeping up and has been steadily over $500 and even upwards of $750 in larger, more competitive markets.
If you are spending that much more to acquire a paying customer, make those leads count!
It’s more expensive not to convert those leads than it has been in the past few years, so re-evaluating your lead follow-up process is worth considering.
PPC Lead Volume Dropped 12% Month-Over-Month
Lead volume continues its decline, something we’ve seen since the end of 2022.
But even though total lead volume dropped by 12%, return on ad spend only dropped 8.5%.
It’s still a drop in closed revenue, but slightly higher average tickets and a higher match rate (good operational processes) help contribute to making more out of less.
April PPC Performance Data Preview
In the first 5 days of April (small sample that includes a weekend) we are seeing ROAS improved by 24%.
Customer acquisition costs are down 18%, to $365.
Average tickets are up 12%.
But, lead volumes are still down 13%.
So for now, April is seeing more efficiency on the PPC marketing investment (great trend to have), but is still seeing declining lead volume.
More to come . . .
-Jon