👋 Hey, Jon here! This week we are going to dive into November 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 October (all of the data below is year-over-year):
Conversion Volume: +11% (YoY)
Paying Customers: +2% (YoY)
Customer Acquisition Cost: -14% (YoY)
Total Revenue Opportunity: +3% (YoY)
Closed Revenue: -1% (YoY)
As you can see above, October 2023 performed well in terms of conversion volume, paying customers, a noticeably reduced customer acquisition cost, and increased total revenue opportunity, but closed revenue did come down slightly year-over-year.
Let’s see how November shakes out both month-over-month and year-over-year. Note that spend increased 12% month-over-month but decreased 3% year-over-year.
HVAC PPC Conversion Volume Decreased by 6% Month-Over-Month and Increased by 4% Year-Over-Year
While conversion volume from October to November decreased noticeably (by 6%), it is encouraging to see that conversion volume went up by 4% year-over-year.
It’s even better than the 4% increase in YoY conversions was done with 3% less spend.
Conversely, though, conversion volumes dropped month-over-month despite a 12% increase in spend.
But remember, conversions (leads) don’t tell the full picture. This is a good high-level KPI but any time you are reviewing PPC performance, make sure you go through this progression and work your way down to closed revenue!
Paying Customers From PPC Were Up 2% Month-Over-Month and Down 3% Year-Over-Year
The next KPI I look at after conversions when evaluating PPC performance is the number of paying customers generated by the channel and how that’s trended month-over-month and year-over-year.
Despite fewer total conversions (which can include duplicates, non-bookable leads, existing customers, etc.) paying customers were up 2% month-over-month.
However, the number of paying customers did drop by 3% year-over-year.
Again, paying customers is another good part of the analysis (especially for those who are particularly interested in unit sales vs. looking at unit sales and increases in average tickets) but doesn’t tell the full story.
Just because the number of paying customers trends up or down does not automatically mean that closed revenue will trend in the same direction.
Customer Acquisition Cost Was Up 19% Month-over-Month and Increased 3% Year-Over-Year
This is my favorite metric to look at every month, especially now when there’s a lot of chatter about how expensive pay-per-click advertising is.
Throughout the middle of the year, we saw lower year-over-year PPC costs, however, November had both month-over-month and year-over-year CAC increases.
19% is a pretty big jump and something to keep an eye on if it continues to trend in this direction in December.
For your reference, the customer acquisition cost for PPC in November was just over $450.
We do know that the summer months tend to be the least expensive when acquiring customers from PPC based on our historical data and that it begins to trend back up in the fall and winter:
As you can see above, June was the least expensive month to acquire a paying customer in 2022, peaking in August with another bump in November before a downward trend.
It hasn’t played out exactly the same in 2023, but the good news is that CAC only increased 3% year-over-year in one of the more expensive months of 2023.
Also note: it’s not necessarily a bad thing if customer acquisition costs on a particular marketing channel goes up. If the return on ad spend is profitable (we recommend a 6x or above, minimum of a 4x) it might be worth spending more to acquire customers to help you grow and hit your target. It always depends on your business, market and goals, but I always recommend pairing ROAS with CAC to get the full picture.
Total PPC Revenue Opportunity Was Up 1% Month-Over-Month and Increased 18% Year-Over-Year
Despite rising customer acquisition costs, PPC delivered with an 18% increase in total revenue opportunity year-over-year!
Revenue opportunity accounts for all estimated, sold, and closed revenue to give you an understanding of every dollar opportunity the channel drove whether it closed or not.
This metric is a helpful metric both to make sure you’re getting enough opportunity and to keep you and your teams accountable to closing that opportunity at a reasonable rate.
Both in 2022 and in 2023, 47% of total opportunity ended up as closed revenue. We encourage all of our clients to shoot for closing 50% of the total revenue opportunity from any given marketing channel.
39% of Revenue Opportunity Did Not Convert via Phone Calls
Like the previous few months, more and more revenue opportunities are being converted via non-phone conversion tools (e.g. forms, chats, online scheduling).
Last month, 37% of revenue opportunities were converted via forms, chats, and online scheduling, and this month we’re knocking on the door at nearly 40%.
This is very important for you and your teams to be aware of. Many businesses we work with don’t regularly QA their online scheduling availability, form, and chat processes and it is directly responsible for lost revenue.
In most cases, if you can improve lead handling from these conversion tools, you can increase your revenue without spending additional dollars.
To put this increase in context, only 29% of revenue opportunities were converted via forms, chats, and online scheduling in November 2022. This trend continues to change faster and faster!
Closed Revenue Was Up 5% Month-Over-Month and Increased 21% Year-Over-Year
At the end of the day, the dollars hitting your books from various marketing channels are what counts the most, and we saw month-over-month and year-over-year growth in closed revenue from PPC channels!
Return on ad spend (factoring in costs) also increased about 20% year-over-year to just above 6x ($6 earned in closed revenue for every $1 spent).
Average tickets did go up 20% year-over-year, helping to offset increasing customer acquisition costs, but overall this is a really strong performing month and it is great to see continued growth from 2022.
Many are talking about how expensive PPC is (which is true, on average it has higher CACs than other marketing channels) but it delivers a robust revenue stream volume-wise and in November 2023, 65% of closed revenue came from new customers.
Until next time . . .
-Jon