ROI is critical when advertising because, obviously, you always want to get the most bang for your buck. Yet in a recent study by Lachi Media, it was found that many home service businesses generate less gross profit per $1 on ad spend when their advertising focuses on leads and calls when using Google Ads and Microsoft Advertising.
Across two years of data and $84.1 million in ad spend, it was found that businesses that connected advertising to completed jobs had 38% higher typical gross-profit returns than those focused just on leads and calls: $1.68 versus $1.22 per ad dollar.
Additionally, the accounts that focused on leads and calls ran their advertising at a loss 37% of the time. Meanwhile, the accounts that connected ads to completed jobs only advertised at a loss 8% of the time.
“Advertising platforms became very good at optimizing toward what the advertiser tells them is valuable,” says Roy Danino, co-founder of Lachi Media. “If all they can see are leads and calls, that’s what they optimize for. If they can see which leads become completed jobs, they can optimize toward more customers who are likely to actually book and complete the work. And if the advertiser also reports revenue or gross profit, the platforms can optimize toward jobs that are more likely to generate higher returns.”
The study also found that this pattern isn’t limited to just large advertisers.
“Among companies measuring completed jobs, the smallest advertisers generated a median $1.69 in gross profit per advertising dollar, compared with $1.80 for the largest advertiser in the study, which spent roughly $10 million a year,” Danino says. “Nearly half of the smaller advertisers outperformed it.”
What to Change
The key to improving your advertising return is to connect your CRM or field management software to your ad account. Danino says that in some systems, this is a native integration that can be enabled, while others may require initial integration to pass completed job data back.
“The field service management systems used by lawn care companies in the study generally already supported sending this data back to the advertising platforms, and these integrations have become much simpler in recent years,” Danino says. “Across the full study, about 95% of the companies reported completed-job data either immediately or within 24 hours of closing the job.”
Danino encourages companies not to skip this step because when ad accounts lack the full picture, they keep optimizing toward the top of the funnel.
“From a technical perspective, optimizing only for calls and leads gives the advertising platform a weaker signal,” Danino says. “The more closely advertisers align what they optimize their accounts for with their actual business objectives, the more useful the signals they give the platform to optimize toward those objectives.”
Businesses need to decide what they want to report back, whether it’s simply a completed job, the revenue from that job, or gross profit. The study showed that the closer the measurement gets to real money, the more useful the advertising becomes, with median gross profit per $1 of ad spend increasing accordingly.
For instance, companies that tracked qualified leads had a median gross profit of $1.27 per $1 spent, while companies that reported jobs at gross profit saw a median gross profit of $1.75 per $1 spent.
“The study suggests there’s a substantial opportunity to improve returns, and in most cases, companies already have the technology to do it,” Danion says. “They’re either not aware their FSM has it built in, don’t understand the added value, aren’t sure it’s even an option, or assume it’s more complicated than it is.”
