👋 Hey, Jon here! This week we are going to dive into October PPC performance (Google and Microsoft Ads/Bing) including month-over-month and year-over-year analysis.
As a refresher, here’s the final PPC performance data from September (all of the data below is year-over-year):
Conversion Volume: +15% (YoY)
Paying Customers: +14% (YoY)
Customer Acquisition Cost: -19% (YoY)
Total Revenue Opportunity: +9% (YoY)
Closed Revenue: +48% (YoY)
As you can see above, the big highlight of September ‘23 vs. ‘22 performance was that closed revenue was up significantly. All core KPIs improved, including markedly lower customer acquisition costs and increased conversions. This was a surprise to me, but one month out of the year doesn’t necessarily mean 2023 is better than 2022, but I am excited to see how October ‘23 compares to September ‘22.
To set the stage for the below analysis, note that PPC spend in this sample increased by 6% month-over-month and decreased by 18% year-over-year.
HVAC PPC Conversion Volume Increased by 28% Month-Over-Month and Increased by 11% Year-Over-Year
Conversion volume was up significantly from the prior month, but keep in mind spend was also up by 6%. Regardless, this is a positive sign in terms of early demand indicators for October.
We also saw that conversion volumes increased 11% YoY despite an 18% reduction in spend.
Weather plays a factor here especially during this time of the year, but regardless, conversion volumes increasing both month-over-month and year-over-year is a good start when looking at our KPIs, but we still have much more to dig into.
Paying Customers From PPC Were Up 19% Month-Over-Month and 2% Year-Over-Year
Conversions are nice, but what we really care about are the number of paying customers you are getting each month, because that is what ultimately impacts your bottom line.
Given the boost in conversions, it makes sense to see a 19% increase in paying customers compared to the prior month.
Year-over-year was also up, but only by 2%. Again, with the context of spend here (18% decrease), seeing an uptick of paying customers indicates much better efficiency of the conversions that came in for the month of October ‘23 versus October ‘22.
It is worth noting that average tickets came down YoY by about 8%, which does impact closed revenue as we will see in a later section of this newsletter.
Customer Acquisition Cost Was Down 12% Month-over-Month and Decreased 14% Year-Over-Year
Customer acquisition costs came down again month-over-month and were also down 14% year-over-year.
This is just a sample of data, and every market is going to be different, but it is really nice to see PPC CACs continue to trend downward after a spike in Q1.
Again, the spend context is important: spend was down 18% year-over-year, and so we would expect (and hope) CACs to drop as well, but there’s been a lot of talk and narrative around PPC being expensive.
It still is compared to channels like organic and LSAs, but the volume of revenue the channel brings in and the CAC to average ticket ratios are performing really well, especially for the businesses that use data to focus on revenue flow efficiency.
So that you have a hard number to reference and compare to your own data, note that customer acquisition cost from PPC in October ‘23 was $350.
Total PPC Revenue Opportunity Was Up 2% Month-Over-Month and Increased 3% Year-Over-Year
This is where things get interesting, because ultimately, you care about reveue and the cost efficiency of that revenue.
Revenue potential (the sum of open estimates, sold jobs and closed jobs) increased both month-over-month and year-over-year, but only by 2% and 3% respectively.
These are still positive trends, but the decrease in average ticket certainly blunted the impact of more conversions and paying customers.
However, this is still month-over-month and year-over-year growth of revenue opportunity.
It’s also worth noting that 39% of revenue potential in October ‘23 was in the unsold estimate stage of the sales lifecycle. If you’re looking to maximize your returns on PPC investment, make sure that you have a robust follow-up process for these open estimates!
37% of Revenue Opportunity Did Not Convert via Phone Calls
This is another big data point I think more people should pay attention to. I’ve been talking about it for a while, but the change in the way customers convert between 2022 and 2023 is diverging more so than in past years:
3% more revenue opportunity did not come from phone calls compared to last month.
8% more revenue opportunity converted via non-phone call than the prior year.
Yep, last October, 29% of total revenue opportunity converted via non-phone call, this year, it’s 37% and I expect that to increase.
When you think of lead handling, follow-up, website optimization, KPI tracking and revenue measurement, do not forget to track and monitor conversion tools like online scheduling, chats, forms and outbound text!
Closed Revenue Was Up 13% Month-Over-Month But Down 1% Year-Over-Year
On a very positive note, closed revenue increased 13% month-over-month as we transition into the winter season.
However, closed revenue was down 1% year-over-year.
Spend was down double-digits YoY, but if PPC is a main part of your new revenue growth strategy, budget and efficiency are two things you want to evaluate closely.
With more conversions and paying customers the prior year, if your business has the capacity, keep a close eye on whether or not to increase budgets to capture more demand, especially as we are seeing reduced CACs.
ROAS did improve by 15% YoY, so from an efficiency perspective, this is a big win, but there was more than likely some opportunity left on the table with a lower spend than the prior year.
Until next time . . .
-Jon