Stop Focusing On Wasted Ad Spend: Here's Why and What to Do Instead
Over 100 years ago, department store mogul John Wanamaker famously said “Half my advertising spend is wasted; the trouble is, I don't know which half.”
For decades, just about every advertising agency and marketing technology platform positions themselves to solve this problem, but I’m here to tell you that it is the wrong problem to solve, especially in the home services industry.
Your business depends on your ability to break free of this limiting mindset to stay open to new ideas and marketing channels.
Consumer behavior is constantly changing and your marketing strategy should be about making it easy for your customers to find and contact you, not focusing on minimizing wasted spend (I will go into a lot of detail on this in a later section).
This is not a popular opinion, especially coming from a company that built it’s own revenue tracking solution and offers high-end digital marketing management services.
But I am not here to sell you a narrative that has been perpetuated for too long.
Your business deserves better data and better professional advice from marketers.
2 years ago, you would have seen me promoting the ability to minimize wasted spend with our technology.
But in that same time, our data has shown me a very different lesson: the home services businesses who focus on removing friction for their customers win, the ones that don’t, find themselves frustrated and playing catch-up.
To put some data to this example, we have seen clients get a 55x return on ad spend with digital marketing campaigns for a sustained period of time from only new customers.
This type of return is unheard of and is nearly unachievable in almost any other industry. And no, this wasn’t a new business in a new market.
They simply focused on removing friction for their customers, and weren’t holding back with marketing experimentation out of a fear that they would waste money.
You still have to be smart and disciplined, but you need to be willing to take risks to keep up with an evolving market.
The more at-bats you can take while being disciplined and observing the business outcomes, the more creative you become and the more you stay ahead of your competition.
Let’s break down 5 key reasons why wasted spend should not be your focus with marketing campaigns:
(1) You don’t get enough data about how your customers convert with your business
How many vendors are you currently using to manage your website, run marketing campaigns, have chat and online scheduling functionality and CRM functionality?
3?
5?
More likely than not, you are using multiple vendors and all of their data lives in different places. Even if you use just 2 vendors, you probably get anxious when you need to pull reports and gather data.
We know this, because we’ve talked to a lot of your peers about it and that’s why it is our job to connect all this data to make it easy for you to get actionable insights.
I recently wrote about this in partnership with Schedule Engine and we revealed some pretty surprising data about how customer behavior is changing and how that affects your business:
You can read a deeper analysis here, but the summary is this:
Chat and online booking tools accounted for 24% of revenue from paid leads despite accounting for just 10% of the total initial leads.
If all you care about is wasted spend, you might see a campaign with a poor cost to revenue or low ROAS and cut it before realizing that your form leads were going to your CSR’s spam folder with no shot at any converted revenue.
You might not have realized that no one is fully owning chat responses and that your Facebook campaign drove plenty of high quality leads, but most converted through chat and gave up when no one responded.
We see scenarios like this all the time.
So much so that as a professional marketer, I’m advocating for you to stop focusing on wasted spend and instead focus on your customer experience, which is a controversial take in my world.
No, that doesn’t mean you spend $150,000 on a whim without tracking, but it does mean you get the full picture before prematurely cutting a marketing campaign that may have been doing its job.
Chat and online scheduling are rising stars that customers are starting to prefer more and more over phone calls, but if you don’t have that data at your fingertips for your business, how can you adapt?
(2) You don’t see the performance of campaigns outside of Google PPC
Gen Z uses TikTok as a search engine more than they do with Google.
Don’t get me wrong, Google PPC is still one of the best marketing channels you can use today (here’s a case study from 22,000+ Google PPC leads to prove that) but you better believe that your customers attention will change over time. E.g.: GenZ may not own homes yet, but they will.
You can still generate a lot of revenue from Google PPC, at an average cost of $391.17 per booked job, and have the majority of that revenue come from new customers:
But is it going to stay the dominant channel forever?
Probably not.
July was a relatively rough month for most contractors:
Google PPC return on ad spend dropped by 35% to 11.12x (for every $1 spent, you got $11.12 in return).
Bing PPC was also down, but showed a 15.53x return on ad spend in July (for every $1 spent, you got $15.53 in return).
Bing brings a lower volume of sales, but no one is talking about how efficient it is because we haven’t seen anyone else track that data.
And again, if your goal was truly to reduce wasted spend, you would stop spending on Google PPC and put all of your budget into Bing (which we don’t advise because it just doesn’t bring as much volume).
Want to know something even crazier?
A higher percentage revenue from Bing leads converted via Form, Chat and Online Scheduling than with Google.
Most people assume that Bing is an older audience and they would prefer to call your business, but the data shows that wasn’t the case.
Now that you know this, you can adapt your business to the way customers want to convert with your business.
(3) Return on Ad Spend in a silo is completely useless
On average, 22 percent of Google and Bing PPC leads converted to a booked job (sold or closed revenue) and 2% of clicks from PPC and paid Facebook ads turned into revenue.
The problem is that we assume the marketing campaigns are 100% responsible for the “wasted spend” on the other 78% of leads that don’t turn into paying customers of 98% of clicks that don’t turn into paying customers.
With these numbers, is it even worth spending money on these campaigns?
Those same campaigns brought in an 11.4x return on ad spend closed and a 7% cost to revenue, so I’d say yes it was worth the investment.
You are fortunate to be part of an industry that sells high-ticket items.
You still have to be disciplined, but you can build-in a risk tolerance to your marketing campaigns, because what you need are at-bats.
However, if you look at return on ad spend or cost to revenue in a silo, you may never see that you have a low match rate or booked job rate because of issues with lead handling.
You might never set goals of retraining your CSRs quarterly to ensure they’re familiar with your service areas, services and specials (you’d be shocked by how many quality leads are turned away for being outside a service area when in fact they are in your service area).
(4) Focusing on wasted spend limits your accountability
I hosted a webinar with CallRail, which you can watch here that spoke about the secret-weapon marketing KPI: match rate.
Match rate is the percentage of leads that match to a new opportunity in the CRM.
It can tell you two things:
(1) If you are getting high quality leads
(2) If your teams are trained and directed to handle those leads properly
Most people focus on #1 and never give #2 a second thought because they look at ROAS in a silo.
The businesses that focus on #1 and #2 equally are the ones who end up generating larger returns from their marketing campaigns.
Your customers don’t walk into a show room and pick the HVAC system they want, nor do they purchase a system online.
They need to interact with your team, set an appointment, receive estimates and make a decision for their home and family.
You are the largest factor in that process.
Marketers (even me) like to take credit for driving revenue, but what we really do is make it easy for customers to contact you so that you have the chance to sell them on your business, product and service.
If that process is broken, it doesn’t matter how many leads you get. You can cut all the low performing marketing campaigns you want, but it will never make up for lead handling issues.
62.4% of Google PPC leads were click-to-call, meaning customers call right from an ad and never go to your website. That number is bigger than we thought, but you must remember that your website is part of your lead-handling process.
If your forms are broken, if your chat overtakes the screen on mobile devices and makes the site unusable, if your page links are broken, you won’t get an at-bat with that click.
While there are a lot of “ifs” and “mights” in this article, these are things we see on a daily basis.
Every. Single. Example.
Chalking poor performance up to wasted spend is a way to justify poor customer experience and will not serve you well in the long-run. It’s not fun to write this (and it’s not a criticism) but it’s too important not to reinforce that point.
(5) Focusing on wasted ad spend limits your creativity
Whenever I, or my company, sets a goal or incentivizes an outcome, we always look at the direct opposite of that outcome to ensure we have the right goals / incentives.
Here’s what I mean:
If your goal is to reduce wasted marketing spend, then your outcome is a lower cost to revenue, right?
The opposite of that goal is higher cost to revenue.
If you wanted to nail your goal of $0 in wasted spend, the best strategy is to not spend a single dollar on marketing.
Your marketing managers and agencies need to keep their job and stay in business, so instead they behave conservatively to minimize the loss as much as possible.
This removes creativity from the equation.
They can’t try a YouTube ad, a TikTok ad, a NextDoor ad.
It’s too risky and unknown (our data shows YouTube to be effective, NextDoor is effective organically but not quite yet on paid, and TikTok isn’t there yet, but will be soon).
Ultimately, minimizing wasted spend gets you conservative marketing that doesn’t hit your full potential, even if the cost to revenue metrics look great.
Closing Thoughts
This was a long article, if you’re here and still reading, I sincerely thank you for getting this far into it.
We’ve been fortunate enough to watch our clients use our data to approach marketing differently and grow their business to new heights.
We hope the data and insights shared in this newsletter does the same for you and your business.
I have to really believe that focusing on customer experience > wasted marketing spend is the right message, because I’m going against just about every marketer in existence by saying this to you.
It’s been an honor working with the brilliant minds in this space, and I exist to make your jobs easier and to stay ahead of trends.
My commitment is to highlight our best data to help you make the right decisions for your business in a rapidly changing environment.
If you got value from this, I’d be humbled if you shared it with your colleagues and peers.
Until next time. . .