This case study is from 2018. A renovation contractor was trying to find ways to be more profitable. They had excess capacity in their work force and were considering laying off a couple of employees to trim operating costs. They were also considering cutting their modest Google Ads budget to save advertising costs. The business owner asked me how much they could save and still keep generating 75% of their current level of web traffic and leads. So we dug into the data. When we were done, we surprised the owner with a recommendation he did not expect.
There were two Google Ads campaigns running. One targeted to commercial renovation projects and one to residential. The commercial campaign received 65% of the total budget as this was their core business. Both campaigns were performing above industry average levels. The interesting statistics were that the click-through rate (3.85%) and the conversion rate (12.46%) of the residential campaign was extremely strong and trending upward.
Looking into their overall online performance in Google Analytics, by comparing user engagement and conversions across all traffic sources, we could see that Google Ads was performing as well as organic traffic sources and better than social media traffic sources. Over the past 6 months, their average monthly Google Ads campaign traffic looked like this:
Checking reports in Google Ads, we discovered that at the current budget level, they were only receiving 21% of the traffic available, before their budget ran out. In other words, the potential visitors to their website from Google ads was up to 4 times higher. We asked the owner to do some work to put a value to how much a residential project was worth to them and what percentage of the residential leads were converted to projects. This gave us all the variables we needed. What we found was that the Return on Investment of the residential campaign was far higher than the commercial campaign, although the size of the jobs were smaller.
With some simple calculations, we were able to show that increasing the residential campaign ad budget would lead to a corresponding increase in leads. If they were able to maintain their 10% closing ratio, this would lead to increased levels of residential projects and increased profitability. So we recommended that at first the investment in the Residential campaign should at least be increased to $2000, the same amount as the Commercial campaign. Then if the ratios continued to hold, additional budget investment could be funded by increased profit levels.
Cutting costs was not the answer to profitability, making a data driven marketing investment decision was the answer and the result was 6 months later the business owner was in hiring mode to handle the business growth.
- * Note: the business owner wished to remain anonymous and actual numbers shown are modified in scale.