Revenue Data 22,000+ Google PPC Leads Will Change How You Think About Measuring Marketing Performance
Introduction
In the last newsletter, I wrote about how I would expect installation demand in HVAC to begin to slow in 2023 relative to the boom we’ve seen in 2021/22.
We’re about 15 years removed from the 2008-2010 low demand period and the cycles tend to play out on that time horizon.
This does not mean (a) demand will definitely slow down (b) you need to panic and downsize (c) that demand for service and maintenance will decrease
You can’t control the demand and the market - you can only control your business and the data I’m about to show you will probably get you thinking differently.
If you don’t already know, Searchlight built our own tracking pixel and data matching technology to help our clients connect the dots no matter what website provider, CRM provider, chat provider, etc. they use.
We paint a picture of revenue flow and we see everything that happens from what generates leads to how well they convert into revenue.
The #1 observation from years of looking at this data across multiple HVAC, Plumbing Electrical, Solar and Roofing companies is that leads are mishandled more than you think.
And we undestand why - things get lost in the shuffle when you use multiple vendors and it’s hard to keep a pulse.
That’s why we built our revenue analytics dashboard, and I’m going to share some benchmarks with you so that you can start bullet-proofing your business and a downturn (if it happened) would have a much smaller effect).
ACHR news published our article about this on June 21st, but I’m going to summarize here with some added etails.
21% of Google PPC Leads Converted to Revenue - Data from Over 22,000 Leads
We will use Google PPC as a case study in this report, and will roll-out future newsletters with similar benchmark data for other channels.
Google PPC has gotten a bad reputation in our industry because it’s been measured incorrectly (cost per lead versus the metrics I’m about to show you).
Regardless, it doesn’t matter what marketing channels you use and how great your strategy is if those leads aren’t converting to revenue:
21% of Google PPC leads turned into a sold or closed job.
So, for every 100 Google PPC leads that came in, 21 of them turned into revenue.
This number usually surprises people.
“So you’re saying 79% of my Google PPC leads DON’T turn into new revenue!?”
The good news is that the economics of our industry work really well even if only 1 in 5 leads to new revenue. As long as your have solid average tickets (install focused), we usually see around $400 cost per booked jobs with $3,500 average tickets, a strong return.
It’s not just Google PPC that we see around 21% booked job rates either, we see this across the board.
The bad news is that most people we work with are below the 21% mark because they aren’t measuring performance properly and don’t know what is broken.
There isn’t great attribution technology (which is why we built our own and we think it’s pretty great), so we don’t hold it against anyone, but these are the metrics we use to measure marketing impact:
Total Leads
Matched to CRM
Match Rate Booked Jobs
Booked Job Rate
Cost per Booked Job
Average Ticket
Return on Ad Spend
When you’re able to look at those metrics each week, month, and quarter, you can quickly figure out where your business is leaking revenue.
We also measure the same data by conversion tool because it helps us see how leads come in and where they are mishandled.
For example, I can almost guarantee that you can improve your team’s follow-up on form leads to get more revenue.
How Much Does It Cost to Get A Booked Job from Google PPC?
This is where you need to re-think your marketing strategy, and how it can benefit you in a downturn.
We rarely talk about cost per lead with clients and now that we are working with advertising agencies to give them our dashboard, we’re encouraging them to stop talking about it as well.
Instead, we need to focus on business metrics like customer aquisition cost. For Google PPC, it was $391.17:
There’s a massive distinction between a cost per lead and a cost per booked job.
A lot more has to happen for a booked job:
Inbound lead —> inbound lead response / customer interaction —> entered into CRM —> appointment set —> consultation —> estimated provided —> scheduling work.
All of the activity that happens after the inbound lead has been undermeasusured (again, we learned this first-hand and decided to build our own software solution for our clients, agencies and other clients interested in this data).
Your cost per lead could be $50, but if you aren’t optimizing how that lead turns into revenue, your actual cost per booked job could be much, much higher.
For example:
Say you paid $50 per lead to get 1,000 leads. That’s $50,000.
If your booked job rate on those leads is 10%, 100 of them turn into revenue.
If your average ticket is $975, that’s $97,500 in revenue on a $50,000 investment. It’s not great.
. . . but your cost per lead is super low! So does that make it a success? No.
In my last newsletter, I measured all the data and in the first year of the Great Recession, HVAC demand dropped 10.5% across AC, Heat Pump and Furnace.
If you dial in your lead handling process, you could more than likely increase your converted revenue by 10% or more.
Using the example above, if you measure the right metrics you can make adjustments.
The average ticket of $975 is too low - there’s probably a lot of service work but not enough getting upsold. You can train your team, ask them what’s preventing them from upselling and adjust your marketing strategy.
Your booked job rate of 10% is too low. You can figure out which conversion tools have the lowest match rates and fix internal processes to make sure your teams are getting back to leads and that they aren’t getting lost in the shuffle.
Again - leads getting completely lost happens way more than you think.
We don’t need to see a 50% booked job rate, but even going from 21% to 25% and getting average tickets up can make a big difference.
If demand weren’t so high, we’d all be doing things to optimize lead-to-revenue flow, but why wait for that to happen?
62% of Revenue Generated from Google PPC Was From New Customers
Search engines are a convenience tool for your customers, but a surprising amount of the revenue generated from Google PPC was from new customers.
Out of $17.44 million generated by Google PPC, $10.89 million of it was from customers who hadn’t done business with our clients previously.
It’s important to know your return on ad spend, but even more important to know that split of new customers versus existing.
This data helps us understand what channels new customers use to convert so that we can optimize on those channels.
This is especially important if that changes.
Google and Bing are still the dominant ways that new customers find home service businesses, but if that starts to change and it becomes NextDoor and TikTok (yes, I think that will happen), we will be the first to know because we track the channel origination of the leads.
Your goal is to use the data to understand how your customers want to do business with you and adapt to what is convenient for them.
Conclusion
This was a longer e-mail, but I implore all of you to revisit how you measure the impact of your marketing strategy.
You need to understand how much it costs to get a paying customer, and how you can improve that cost.
Time and again, people ask us for more leads, but they aren’t responding to the ones they’re already getting in the first place.
A downturn in demand will only accelerate what needs to happen now, which is scrapping cost per lead, and start measuring:
Match Rate - the percentage of your leads that match to an opportunity in the CRM
Booked Job Rate - the percentage of your leads that book a job
Cost per Booked Job - the dollar cost of booking a paying customer through your marketing strategies
Match Rate by Conversion Tool - this has become my new favorite marketing KPI because it allows you to see how well leads from chat, phone, form, Schedule Engine, etc. convert and you can actually do something about it.
Revenue Potential - the sum of open, sold and closed jobs
Revenue closed - the reveue that you closed from marketing channels. The bigger the gap between revenue potential and closed, the bigger the problems you are having internally.
The good news is that there’s a lot of low-hanging fruit, and optimizing now can help your business regardless of market conditions.
If you have any questions about how to use this data for your own business, please don’t ever hesitate to reach out with questions to Jon@SearchlightAdvertising.com.