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Watch Bruce Sittler (our not-so-silent-silent-partner) talk about the importance of branding
The owner of Action Furnace Calgary, Canada. He runs a $50 Million Residential HVAC Business, Action Furnace.
Branding & Pay Per Click
Balancing the need for both .
The home services industry, like many other industries, is struggling to balance the need for short-term sales results, and brand strategies to achieve continuous improvement in the long term effectiveness of marketing.
The way Branding achieves long-term results is fundamentally different from how short-term results are produced with strategies such as PPC. Although long term branding strategies have the effect of producing some short-term results, the reverse is not always true.
Let’s look at branding and the long term effect.
Branding is normally a fixed investment in the long term efficiency of your marketing, taking many months and even years for the effects to be fully realized.
Branding also improves the effectiveness of your marketing in the long term by distinguishing your brand from others. Creating a distinct set of memorable brand assets and promoting them over the long term creates recognition and reduces cognitive burden for the consumer. In other words, people will usually choose a brand that they recognize and see often because it is easier and less risky.
Branding usually UNDER performs PPC for sales volume in the short term but as you build brand equity it will OUTperform in the long run in both sales volume, market share and margin growth.
Branding is usually less flexible, less reliable and less predictable in the short term, and therefore cannot be relied upon to fill the marginal capacity that usually exists in a demand driven business like home services.
Let's look at PPC and the short term effect.
Customer activation strategies such as PPC are investments made for the short term, where the effect is immediate.
PPC strategies will Outperform Branding for sales volume in the short term, but will not have strong long term business effects (Sales - Margins – Market Share)
PPC is however, highly flexible, and predictable, therefore can be relied on to fill the marginal capacity that usually exists in a demand driven business like home services.
In order to fill your schedule today and achieve short term volume growth as well as drive long term increases in your marketing effectiveness, you need to have strong elements of branding and customer activation strategies such as PPC in your business.
Long term Branding strategies and short term conversion strategies like PPC serve different purposes and have different effects. Therefore, you need to evaluate their profitability differently.
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The allocation of your marketing budget between Branding and PPC should be 50% -50%.If you are running an aggressive PPC program then a mix of 45% to 55% can still be very profitable.
Your branding efforts (including all other marketing efforts besides PPC) should fulfill approximately 70% of your sales capacity. 70% of your sales should cover all your overhead (including the branding budget) as well as produce a small profit.
eYour PPC campaign should fulfill approximately 30% of your sales capacity. This allows your PPC program to secure jobs profitably, while still filling out your schedule which is the key to overall company profitability.
This should place your overall marketing budget at around 10% of sales with branding being 5% of sales and PPC 5% of sales.
Your fixed overhead should be no more than 30% of monthly revenue - This also means that your fixed cost would need to be around 55% of your total company expenses.
The key to being profitable
The key to being profitable is to utilize PPC to fill your schedule to capacity while utilizing your branding efforts to fill most of your schedule and to cover all your overhead.
PPC is a powerful lead conversion tool, different from branding strategies with a fixed budget and long term strategy. PPC requires a variable budget and its profitability should be evaluated on the basis of unit economics. Each lead is evaluated in real time as to its profitability, turning PPC into a dynamic profit focused tool.
While your PPC budget should be around 5% of your overall sales, the cost of these leads may be more than 5% of the individual jobs value. However, if you have a 50% gross margin on the job, paying 15% or 20% or even 25% acquisition cost for these jobs is still incredibly profitable as that still means 25% to 35% is going straight to your bottom line. These are the most profitable jobs of the day, because your overhead has already been covered, now 100% of the gross profit, minus the cost of acquiring the job, becomes net profit.
Your PPC program should not have a fixed budget. As long as you have capacity on your schedule and you are securing jobs that are still profitable – you should continue to spend to acquire new customers.