HVAC Organic Demand Trends - September 2023
September 1st - 19th, 2023
👋 Hey, Jon here! This week, we’re diving into SEO / organic revenue data for HVAC contractors through September 19th.
Before we get into the data, I’ll give a recap of August’s organic performance, which showed an uptick in closed revenue, but a sharp decrease in sold revenue worth keeping an eye on for September. Note that the performance data linked just above is for August 1st-23rd, whereas the data below is for the full month of August:
Leads: +4%
Average Tickets: +6%
Sold Revenue: -46%
Customer Acquisition Cost: $92.58
Closed Revenue: +13%
The below data is from a sample of 20 businesses around the US from September 1st through September 19th, only looking at HVAC services. Shout out to Josh Crouch and his team at Relentless Digital, who partnered with us to measure lead-to-revenue from their organic and LSA management services, enabling us to share these trends with you.
Organic Lead Volume Decreased by 21% Month-Over-Month
Now that we are deeper into the fall, demand (from the perspective of conversion volume) has taken a sharper turn downward.
Active customers also dropped by nearly 20%, but given the time of year, this is expected.
What’s important here is to use this data as information:
Oftentimes, the question is when does the shoulder season downturn in demand begin for your business so that you can react faster and earlier to it. Some of you may not have seen a decline, while for others it happened sooner.
The decrease in sold revenue in August for this sample was a very early indicator that September would see less demand (from a revenue perspective) and that a focus on current leads and any customer in the sales cycle would be paramount to counteract this.
Every lead counts, always, but especially more in months when conversion volumes are lower.
Let’s see how the rest of the data plays out 👇
It Cost $147.07 to Acquire a Paying Customer From Organic Channels
Organic channels still have the lowest customer acquisition cost compared to paid ads (specifically, PPC and GLSA) but the decreased demand likely caused CAC to go up this month.
Customer acquisition cost is a function of supply and demand, influenced by your marketing and sales operations. How many competitors are in your area vs. how many customers searching for you or your services in your area, as well as your lead handling and in-home sales process can all impact these numbers. Spend also plays a role, but in the month-over-month data, it remained the same.
Naturally, with a decrease in conversion demand, the cost per paying customer increased by $55.
We did also see match rates and paying customer rates drop by 20% and 22%, respectively. This means that fewer leads (from an already decreased number from the month prior) turned into sellable opportunities and paying customers.
However, just because customer acquisition costs increased doesn’t necessarily mean that’s a bad thing as we will see below.
Average Tickets Increased by 53% From The Prior Period
The good news is that, just like we saw in Q1, despite a decrease in conversion demand, average tickets increased significantly and made up the difference entirely.
So despite these customers costing $55 more to acquire than the previous month, they were also spending 53% more.
This could be a result of natural demand, tech flips, successful offers that get customers interested in replacements, etc., but this is really important to pay attention to as it is a lever to pull when you are seeing data that shows decreased conversion demand.
There’s also an important lesson in here: while it is great to work on everything you can control to reduce customer acquisition costs (improving match rates, paying customer rates, close rates) there are times when it is okay to increase CAC by investing more in your various marketing strategies.
Using the data, if you knew that your customers this month were, on average, spending $1,000 more per job, it would be absolutely worth it to spend $50, $100, or even $150 more to acquire that customer.
There’s always a ceiling on CAC to maintain profitability, but being in tune with average tickets and current ROAS can help you find the maximum customer acquisition cost to capture as much revenue opportunity your capacity can handle (if that is your goal) while remaining profitable.
Sold Revenue from Organic Leads Increased 175% from the Prior Period
This is a really positive indicator for both the end of September (with 11 days left in the month for some of this work to move from sold to closed and completed) and the start of October.
Sold revenue is something I monitor even more closely in the shoulder months because it is one of the earliest tells (indicators) of how the following month might perform and can trigger action sooner if things aren’t trending in the right direction.
Again, despite fewer conversions, I believe the increase in average tickets is the direct cause of the spike in sold revenue.
As a counter-argument to average ticket increases, you may be thinking about how sustainable that is over time (e.g. average tickets rapidly dropped back down in the summer). Talk to your sales teams - are they just seeing more end-of-life opportunities? Are customers responding well to your offers? Any insights gleaned to make this repeatable would be valuable.
Closed Revenue from Organic Leads Decreased by 33% from the Prior Period to 20x ROI
Although average tickets were up, it wasn’t enough to make up for the decreased paying customer rates out of a pool with much fewer conversions than the prior month.
The ROI of organic from September 1st through the 19th was still $20 in return for every $1 spent but came down from $30+ dollars the prior month.
However, for the month of September (so far), we saw a 50x ROI potential, but only a 20x closed.
The goal is always to close 50% of your total opportunities, which means the expected ROI would be 25x.
Given that sold revenue is up 175% month-over-month, and we could assume a good portion will close before month’s end, we can expect to hit that 25x with about a week and a half left in the month, which is much closer to August’s numbers.
But it’s also problematic when paying customer rates are below 12% - we’re always shooting for 25% (1 in 4 active customers). Lead handling and the in-home sales process are also worth a review or a re-training, especially when conversion volumes are down and it is likely easier to get time from your team members to dial in your processes during the slower season.
Until next time . . .
-Jon