HVAC Demand Trends: Q1 2023 PPC Performance

👋 Hey, Jon here. Q1 (January, February, March) 2023 as a whole was a difficult month for a lot of businesses. We saw 3 consecutive months of lead volume declines that put a lot of people into follow-up mode to make those leads count. Overall, however, PPC leads generated a better month-over-month ROAS in 2 out of those 3 months because of the resilience and grit by various teams around the country to improve lead-to-revenue efficiency, raise average tickets and staying laser-focused on marketing operations.

This newsletter covers a month-by-month analysis of Q1 performance trends, and at the end, I’ll highlight a new emerging trend that’s worth paying attention to now that April lead volumes are finally back up (over 22%!).

Let’s dive in!

January 2023 PPC Performance Trends

Most areas of the country experienced a cold snap the week before Christmas (2022), which dramatically impacted lead volume (up 180% during those few days), that led to 78% more revenue generated, but at a lower efficiency (4x ROAS vs. the typical 6x ROAS).

The sudden increase of demand tapered off very sharply on Christmas day and the few days after, setting January up to be a month where lead volumes would drop quite noticeably, and they did:

🗣️Lead Volume: -28%

Compared to December, January lead volume dropped a whopping 28%. Part of this was due to the spike of leads at the end of the prior month, but it set the tone for a Q1 with fewer leads as a whole.

📉Opportunities: -27%

Opportunities, or the number of customers with some type of activity in the given month also dropped significantly. There just weren’t as many people actively shopping for HVAC services as the prior month (from the data in this sample).

🎯Matched to CRM: -17%

The number of overall leads that matched to a sellable opportunity in the CRM declined by 17%, which was lower than expected. If you got 28% fewer leads, you’d expect about 28% fewer customers who matched to a new opportunity (the match rate below helps explain the difference).

💵Paid Customers: -16%

The total number of paid customers dropped 16%, but again, this drop was not proportional to the lead volume drop.

🎯Match Rate: +13%

Match rates, the percentage of leads that ended up in the CRM/FSM with a sellable opportunity increased by a whopping 13%. So, fewer leads came in for January, but more of them turned into an opportunity to sell something to a customer.

💵 Paid Customer Rate: +15%

The rate at which leads became paying customers also increased: again, even with lower lead volume, you’ll see below that revenue potential and closed went up despite significantly fewer leads.

📈Customer Acquisition Cost: +13% ($473)

Customer acquisition costs have notably been on the rise and have increased significantly from 2022 (again, from this sample of marketed leads).

There were fewer leads in January, and they were more expensive, but more of them converted into paying customers.

📈Average Ticket: +35% ($2,665) 

Average tickets rose throughout Q1, helping to off-set a lot of the decline in lead volume, providing revenue output relief.

💵Revenue Potential: +40% (10x)

💵 Revenue Closed: +10% (4.5x)

Despite a 28% lead volume drop from December to January, revenue potential and revenue closed both increased at notable rates from the prior month.

February 2023 PPC Performance Trends

To shorten this newsletter, I won’t go one-by-one through each of these metrics for February and March like above, but February again resulted in more revenue despite fewer leads.

The decline in lead volume, opportunities, and paid customers was less pronounced, but customer acquisition cost did go up another 10%.

Average tickets rose (again), resulting in a 10% increase in return on ad spend closed month-over-month.

A lot of the KPIs from lead to paid customer were on the decline, and compared to last year, ROAS numbers are down, but overall, it was a good performing month with ROAS closed up 10%:

🗣️ Lead Volume: -4%

📉 Opportunities: -4%

🎯 Matched to CRM: -9%

💵 Paid Customers: -11%

🎯 Match Rate: -6%

💵 Paid Customer Rate: -8%

📈 Customer Acquisition Cost: +10% ($492)

📈 Average Ticket: +16% ($3,182) 

💵 Revenue Potential: -3% (9.8x)

💵 Revenue Closed: +10% (5.4x)

March 2023 PPC Performance Trends

March looks significantly different from February in that customer acquisition costs went down, but so did average tickets, and ultimately, return on ad spend dropped by 6%.

The ROAS closed average was still a 5x (for every $1 spent, get $5 in return) average tickets were not enough to mask another 10% dip in lead volume:

🗣️Lead Volume: -10%

📉 Opportunities: -9%

🎯 Matched to CRM: -7%

💵 Paid Customers: -13%

🎯 Match Rate: +2%

💵 Paid Customer Rate: -4%

📉 Customer Acquisition Cost: -3% ($486)

📉 Average Ticket: -0.1% ($3,171) 

💵 Revenue Potential: +7% (11.1x)

💵 Revenue Closed: -6% (5x)

April Demand Is Up Over 22% But Paid Customer Rate Dropped Nearly 20%

April, in terms of top-of-funnel demand, is looking stellar.

Lead volumes rebounded and are up 22% month-over-month.

This is a great sign that with the turn of the weather, we’re seeing more activity and interest in HVAC products and services.

However, revenue potential (unsold estimates, sold jobs, closed jobs) is actually down about 3% month-over-month, and ROAS closed is only up by about 6% or slightly above a 5x.

Customer acquisition costs are down about 7%, but average tickets remain the same.

The trend I’m seeing, that’s very worth paying attention to in your own business, is a shift away from lead follow-up and marketing operations.

I’ve seen this happen in past years during the transition out of shoulder season, but it’s more pronounced this year than it was last year. Match rates and lead-to-customer rates are both down nearly 20%.

That means for every 100 leads that come in, 20 fewer of those are matching to a sellable opportunity, and 20 fewer are turning into paid customers.

Just like low lead volume doesn’t always mean higher ROAS, high lead volume also doesn’t always equal higher ROAS.

Anecdotally, many businesses I spoke with put a strong focus on customer follow-up in Q1 due to the lack of lead volume, but admittedly geared down because of all the new leads coming in.

Next week’s newsletter will look at the full month of April performance, but as of now, the new volume of leads has had only a slight impact on the return on ad spend generated from those PPC leads.

Until next time . . .

-Jon