HVAC Demand Trends: Mid-June 2023 PPC Performance Update

👋 Hey, Jon here! After a really positive PPC performance turnaround in May, demand has slowed down a bit. I’ve seen some feedback anecdotally in Facebook groups that June has been a tough month for some brands relative to historical performance, and I did note in the previous PPC substack that “sold revenue was down 23% month-over-month, meaning we have less pipeline to work with beginning in June.”

June closed revenue halfway through the month is only slightly down (-0.6%), but revenue opportunity is down a little more noticeably at -7%. This is just a sample, and we’re only halfway through the month, but I figured it was a good check-in point to look under the hood of the data and see how things are progressing.

Revenue Potential from PPC is Down 7% From The Prior 15 Days

This is one of two numbers I am keeping a close eye on throughout June. Despite lead volume being up another 22% from the last two weeks of May with only a 1.5% increase in spend, the total revenue opportunity dropped by 7%.

Typically, when leads are up but revenue opportunity is down, I look at lead handling performance:

• Match rate (down only 2%)

• Paid Customer Rate (down only 0.7%, so leads are turning into paying customers at a similar rate as the prior period)

These two metrics tell me whether or not the increased lead volume is putting a strain on operations and if the culprit of less revenue opportunity is because leads aren’t being handled well.

But in this sample of data, that’s not the case.

Average Tickets Are Down 18% From The Prior 15 Days

The second number I’ve been keeping a close eye on is average ticket / average sale price. Earlier this year, we saw noticeable month-over-month increases in average tickets that helped make up for significant lack of lead volume.

ROAS didn’t suffer as much from less lead volume demand because those customers were spending more on average.

However, this month so far we’re seeing a significant drop in average tickets, and ROAS is going the other way because of it.

Leads are up, a similar percentage of them are turning into revenue, but those customers are spending less which is impacting businesses and hitting their goals.

It’s worth noting that 58% of opportunities were from new customers (who tend to spend more than existing customers) versus the usual 65%-70%.

Despite that, it is a fairly typical start of a month - I almost always see the back-half of the month pick-up with completed installations at much higher tickets, so it’s very possible this will change and ROAS will increase from May.

One thing I’d like to call out is how demand is sometimes defined differently across businesses and even roles within those businesses.

If you define demand with KPIs like Lead Volume, Matched Customers and even Paying Customers, all three are up double-digits (percentage-wise) from the prior period.

But if you define demand as Revenue Potential and Closed revenue, it’s down from the prior 15 days.

I define demand as revenue potential and closed revenue for the purposes of this newsletter, but like to look all of the above metrics together to help provide a better diagnosis of revenue deficiencies.

Sold Revenue is Down 16% From The Prior 15 Days

Closed revenue is only down 0.6% from the prior period, but what has me cautious about the back-half of June is that sold (but not completed) revenue is down over 16% and estimated revenue is down 7% from the prior period.

There isn’t a big pipeline of work that’s waiting to be completed. The weather could change that, but my recommendation would be to go on offense in these next two weeks given the reduced pipeline.

Now is the time to follow-up on higher ticket unsold estimates and make a push to close some of those jobs whether it is automated outbound campaigns or manual calls to those customers.

PPC Generated a 7x ROAS in the First 2 Weeks of June

Closed ROAS from PPC was still at a 7x for the first two weeks of June, so every $1 spent turned into $7, which is a solid and profitable return (versus 7.3x for the full month of May).

From that perspective, PPC is doing exactly what it needs to do, but my hope is that the data in this newsletter helps give you some ideas and metrics to dive deeper and maximize your opportunity.

7x is a great return, but now knowing that lead volume is up 22% and average tickets fell 18%, there are more specific actions to take in this scenario.

Targeting higher tickets (whether through ad strategy or follow-up strategy) would take priority (if it were me) and I'd make sure to talk to my techs to see if there are any obstacles for in-home flips since average tickets have come down.

Until next time . . .

-Jon