Customer Acquisition Cost Trends and Strategies For Local Businesses

In this video, we're going to go through customer acquisition cost trends that we're seeing in the market. More importantly, we're going to discuss strategies to help improve those customer acquisition costs for your business. And we're going to try to outline a blueprint to help you get more customers in your business. My name is Phil Risher. I'm the owner of Flash Consulting. On this channel we post content about growing local service businesses, helping them increase their sales and keep their schedules full. And let's get right into this video. So we subscribe to this newsletter from a friend of mine, John Tory. He is very good when it comes to analytics specifically for local service businesses. And so in his most recent report, they looked at 25 businesses in the trades across the United States from July 19 to August 15. And the couple things that they looked at was your Google Local service ads, your pay per click ads and your organic. Where is the revenue coming from, the potential revenue, and ultimately how much is it costing you to get a customer? So I'm just going to go through this, I'm going to stop and highlight a couple things and share some strategies on how you can use this data to help grow your business. So what this is is for Google Local service ads. When we look at the potential revenue. So return on spend, potential organic is always going to be in my opinion, number one, where it's 58 times whatever you spent on organic, which could be if you're doing local SEO, off site, SEO, on site, SEO, content creation, that kind of stuff, you're paying for that. Basically what this is saying is that from the spend on Organic it's a 58x return on the potential revenue for the business. Google Local Service Ads 43x Pay per click 14x here's the actual revenue potentials that they broke down. You can see that Google Local service ads drove an 18x return on spend. So this is actually closed revenue. So not just potential revenue, but actually what people close. Organic 31x Google Local Service Ads 18x which is amazing. Pay per click 6x return on spend. Now what's really interesting about this is that you can see that they spent in this 25 trades businesses, they spent $4 million on pay per click advertising and they got a 6x return. But really what I want to look at is this right here. So I want you to think about your business and try to think about what it costs to get a customer because your customer acquisition cost is one of the levers that we look at pooling when we partner with businesses. And, and especially if you're just starting out or you're scaling 1 to $5 million in revenue, even if you're up to 10 million revenue, looking at the customer acquisition cost for your business is very important, especially by segment. So what's interesting about this is that this layer, these are layers to your business when you think about marketing. So organic, the cost of organic traffic, which is like someone goes on Google, they search for you, they come through Yelp, organic, Facebook, organic, something that doesn't really, it's not like a pay per lead model or pay per click model, it's organically happening. That's $73 for a customer acquisition cost. Now again, this is not just for H Vac, this is across the trades. So for some businesses it might be lower. Like for example, if your average revenue dollar amount is like three, if your average job is about 300, 400, $500, then your customer acquisition cost probably going to be lower. But if your average job is $1,200, $1,500 probably going to be higher. And, and so organic $73 Google local service ads $94 pay per click $350 customer acquisition cost. This is really important because when you look at customer acquisition cost and everyone says, oh well, can I just run Google Ads? Can I just pay for clicks or pay for people to go to my website? Yes, you can. But if you're going to spend 150, 200, 300, $400 to get a new customer, it has to make sense, right? So let's just take H Vac for example. Let's say they spend $350 for a new customer. The customer has no AC, they pay your $89 diagnostic fee, you go out and you repair for $150 and you don't sell a membership, well, you just spent a ton more on that customer than what you're actually getting out of it. You want at least a 5x return on your spend, right? On average, they're saying they got a 6x return. But if you're not looking at your average ticket and you're not trying to drive that up and you're not monitoring and managing that, then PPC is going to crush you and it's not going to be effective. That's just one area that people look at. The other one is on your website. If you don't have the correct call to actions, whether it's the chat, widget, online scheduling estimate, calculator pop ups, whatever, then you're going to be driving traffic to your site and you're not going to get as many leads for this amount of cost. And so that's going to drive up your PPC customer acquisition cost. So when we look at this for businesses, we try to layer in these components when we partner with companies. And in your business, think about it the same way. The foundation of what you should start with is organic. And organic, whether that's getting Google reviews on your business profile, whether that's creating localized content through local service pages, which you made content of all this stuff driving organic traffic is going to be the least expensive way to do it. Also, it's going to take the most amount of time because you're building an organic brand and you're building a relationship with Google that it's going to organically recommend you or Yelp or Facebook, whatever you need to build a relationship with them. So it takes the most amount of time. Second to that, Google local service ads, which this is the Google guarantee little buttons that we made content about before, but this is the next layer to it, which is you only pay for leads on Google, which is why it's an effective way to get leads. However, it can be very competitive because they only show three people. And so if you don't have your organic reputation and reviews and trust with Google, it's going to be hard to show up here, which means it's going to be harder to get reviews. So this is the one that takes the longest, but it's also the least expensive. This one takes longer. It's also the medium expensive. This one you can turn on tomorrow and start running ads for pay per click and you can start getting leads in, but it's very transactional and again, it's much more expensive. So when we partner with companies, what we try to say, especially if they have a good foundation, is let's fine tune your organic, let's start layering on your Google local service ads and then let's start running ppc. But a lot of companies, they try to do it the opposite way. They focus on PPC and they jack up their budgets on PPC and then they try to layer in Google local service ads and they don't care about organic and they don't care about their reviews and they don't care about any of that stuff. It's just how much money can I spend to try and get customers? Which everyone has a different strategy. But what we found is that by layering these things on and once you get all this stuff dialed in, once you layer on the ppc especially if you have all your call to actions, everything really tight, then this number is going to help take you to the next level even faster. So this is really interesting. One other note about this is when we look at Google Local Service Ads, there's several different ways that you can get leads on Google Local Service ads. You can do phone calls, you can do messages, you can do bookings. And what they found is that the average tickets for Google Local Service Ads phone calls is 1900. Average ticket messages and bookings are 500 or 400. So it's almost, you know, a quarter of what you're getting for phone calls. So if you don't have the bandwidth to take messages and you don't have online scheduling to monitor these things, then just turn these features off and just get phone calls. Because you're only going to get leads for phone calls if you get leads. And all these leads cost the same amount of money. And so typically what we recommend is if you're just starting out, Google Local Service ads only start with phone calls and then you can layer in messages and bookings, but you can see the average tickets here. So I hope this video was helpful when you when you're thinking about marketing your business and the different strategies that you can utilize. If you have a question or comment or you want other content that spawned from this discussion, drop a comment below and be sure to hit like and subscribe to get updates on content. It comes out every week and we'll see you in the next video.