👋 Hey, Jon here! This week we are going to dive into September PPC performance (Google and Microsoft Ads/Bing with data through September 27th) including month-over-month and year-over-year analysis.
As a refresher, here’s the final PPC performance data from August (all of the data below is year-over-year):
Conversion Volume: +20% (YoY)
Paying Customers: +13% (YoY)
Customer Acquisition Cost: -10% (YoY)
Total Revenue Opportunity: +5% (YoY)
Closed Revenue: +6% (YoY)
Return on Ad Spend (Closed Revenue): +4% (YoY)
To set the stage for the below analysis, note that PPC spend in this sample decreased by 7% month-over-month and by 10% year-over-year.
HVAC PPC Conversion Volume Decreased by 6% Month-Over-Month But Increased by 15% Year-Over-Year
For the third straight month, conversions have decreased, although less so than last month (which was -13%) landing at -6% for September through the 27th.
Conversion volume drops are expected as we enter the shoulder months, but it shouldn’t be ignored that conversion volumes increased 15% year-over-year.
This (and as you’ll see, the rest of the year-over-year data) was a surprise to me.
I didn’t expect conversion volumes to increase year-over-year, especially because spend decreased by 10%.
The weather certainly plays a role in these trends, and one month of data isn’t enough to broadly say “2023 is better than 2022” but for September, the top of the sales funnel looks decidedly better than the previous year.
Paying Customers From PPC Were Down 8% Month-Over-Month But Increased 14% Year-Over-Year
When conversion volumes decrease, you typically will end up seeing fewer paying customers within that same time period. Not always, but this is usually the trend and here we are down 8%.
This isn’t as pronounced as August (down 14%), but this will more than likely impact closed revenue unless average tickets increase enough to make up for the lower volume.
But in terms of year-over-year trends, paying customers were up by 14% even with 10% lower spend!
Starting with a higher conversion volume helps to boost paying customers, but efficiency helps to capitalize on the extra opportunity and in this month paying customer rate was just above 25%, which was 5% higher than last year.
Customer Acquisition Cost Was Up 11% Month-over-Month But Decreased 19% Year-Over-Year
There’s an article floating around claiming that Google increased ad prices “quietly” to “meet targets” which has caused quite a stir in digital marketing communities across all industries.
At the beginning of the year, we saw a dramatic rise in CAC from PPC and while we did see an 11% increase month-over-month (more likely a function of lower demand in the shoulder months), there was a 19% decrease in customer acquisition cost year-over-year.
Even if Google raised prices, it doesn’t automatically guarantee that your customer acquisition costs will increase. If your lead handling, in-home sales process, and follow-up are on point, increased cost per click or cost per conversion might not matter as much.
The point is that you are still in control of your costs (largely) and if the contents in the above article were, in fact, true, the year-over-year data shows that the cost to acquire a paying customer dropped significantly and we know that the volume of paying customers was still up 14%!
By tracking and managing to your KPIs, you can overcome and even reverse market dynamics that are out of your control. Customer acquisition cost isn’t 100% controlled by the advertising channel, you and your team have a lot of influence over it as well.
It wasn’t reported that Google’s price increases were massive (only about 10%) but that did not negatively impact year-over-year CAC in this sample.
Total PPC Revenue Opportunity Was Down 19% Month-Over-Month But Increased 9% Year-Over-Year
With lower conversion volume and fewer paying customers, the total revenue opportunity from PPC dropped by 19%, which is a pretty sharp dip, but again, was a bit less than in August (-23%).
Since July, though, revenue opportunity is down 42% which is significant and calls for a greater focus on lead handling and follow-up.
Despite these sharp decreases, though, total revenue opportunity from PPC still increased by 9% year-over-year.
Total revenue opportunity is one of my favorite KPIs because it helps me understand total demand in a market and the percentage of revenue opportunity that closes is a really strong gauge of operational performance.
The come down from July is a bit discouraging, but largely (I believe) are from the natural dips coming off of summer performance.
34% of Revenue Opportunity Did Not Convert via Phone Calls
For the past two years, we’ve been keeping an eye on how customers convert via ad channels. We’ve hypothesized (as have others) that fewer and fewer customers are converting via phone calls and instead are opting to book online, use a chat tool, or fill out a website form.
Last September, 32% of revenue opportunity from PPC was converted via forms, chats, and online scheduling.
This year, that number bumped up 2% with 34% of all dollar opportunities from PPC converting via form, online scheduling, or chat.
This is important because if you are only tracking phone call revenue performance and using that as your benchmark and KPI to drive decision-making, you’re missing over one-third of the total picture.
The way that customers convert on HVAC websites (and other trades’ websites) is changing, and each year we have seen these numbers increase. Tracking phone calls is a great start, but make sure you (or your agency) are tracking all conversion tools to get the full picture to avoid making poor decisions with incomplete data.
Closed Revenue Was Down 16% Month-Over-Month But Up 48% Year-Over-Year
The amount of closed revenue attributed to PPC campaigns dropped by 16% from August, our first drop of closed revenue since the start of the summer.
But the real (pleasant) surprise is that closed revenue is up 48% year-over-year! This is a big increase, but keep in mind it is one month out of the year so it wouldn’t be fair to say 2023 as a whole is better than 2022.
Year-over-year average tickets were also up by 11%, contributing to the closed revenue growth.
Most businesses are focusing on this year and looking at monthly trends, so it’s certainly a challenge ahead knowing closed revenue from PPC has dropped by 16% (with a 7% decrease in spend).
However, sold revenue is up 4%, which is a positive as we look ahead to October.
Overall, month-over-month ROAS dropped from 7.5x to just under 6x, which is still profitable, and very positive, but with down lead volumes and paying customers, now is a really great time to dial in lead handling, follow-up, and operations as a whole.
Until next time . . .
-Jon