The cost per acquisition in the home service industry is higher than most other industries, but a business texting software can help home service companies reduce the CPA by converting more leads. Texting is also a powerful tool to help reduce no-shows, which are a significant problem for most home service businesses.
Customer acquisition costs and employee salaries have increased over the years, and the digital demands from customers have forced home service businesses to invest more in technology. That’s where business texting can help big time. We’ll cover exactly how business texting can help you drive more revenue and save on costs.
To better understand the industry, here are some types of businesses within the home service sphere:
- Handyman services
- Moving companies
- HVAC services
- Gutter cleaning
- Carpet cleaning
A breakdown of the costs to run a home service business
Before we jump into the savings from using a business texting software, let’s take a closer look at some of the most significant expenses of an average home service company.
Home service businesses run some of the highest customer acquisition costs. Some sources cite the cost per lead, or CPL, for home services to be as high as $201 per lead. Considering that the average service for most home service businesses is only a few hundred dollars, the investment to acquire a new customer only works if that customer brings recurring revenue through repeat appointments.
No-shows are a significant concern for businesses that rely on appointments to generate revenue. A no-show can also be the result of any hindrance that makes a service undoable. This can look like a customer not being home for their scheduled slot for the home service industry. For example, if a lawn care company cannot access a backyard due to the door being locked and unable to cut the grass, that’s considered a no-show.
Cost of labor
Not only are customer acquisition costs rising, but so are the salaries for jobs within the home service industry, like an electrician or plumber. That’s because there has been a shortage of specialists in these fields as fewer people pursue these careers. The top 10 percent of electricians now make close to $90,000a year. Home service businesses are responsible for paying employee salaries whether a service is completed or not, so keeping appointments on the calendar is crucial.
How does texting tie in?
Business texting can help home service businesses book more appointments and reduce no-shows to increase their return on investment. How? Texting can help improve a company’s lead conversion rate due to its higher response rate. This increase in lead conversion allows companies to reel in more revenue. The high response rate also helps companies get more responses to appointment confirmation messages, reducing the overall number of no-shows. We’ll break down the math of how texting can help improve your business.
Converting more leads with business SMS
As mentioned earlier, converting more leads is the key to lowering high CPA, cost per acquisition, in the home service industry. You can convert more leads with texting’s higher response rates, in turn increasing your revenue and decreasing the CPA. To illustrate what we mean, let’s bring some numbers into the mix.
Imagine a landscaping company (we’ll call them Larry’s Landscaping) spending $200 per new lead. Larry’s Landscaping spent $20,000 to get 100 new leads.
$20,000 total spend on new leads / $200 per new lead = 100 new leads
Before implementing a texting strategy, Larry’s Landscaping used phone calls to try and convert leads. With phone calls, Larry’s Landscaping had a 24 percent pick-up rate, and on average, could convert 50 percent of those responses.
100 new leads x 24 percent response rate = 24 responses
24 responses x 50 percent conversion rate = 12 new customers
$20,000 total lead spend / 12 new customers = $1,667 CPA
Realizing that they needed to book more appointments, Larry’s Landscaping turned to text to help them convert more leads. Larry’s Landscaping proactively texted leads to book new appointments.
Compared to phone calls, texting has a response rate of 45 percent, meaning Larry’s Landscaping was able to get more responses from their customers when switching to texting. They still had a 50 percent conversion rate.
100 new leads x 45 percent response rate = 45 responses
45 responses x 50 percent conversion rate = 23 new customers
$20,000 total lead spend / 23 new customers = ~$870 CPA
$1,667 CPA (without texting) - $870 CPA (with texting) = $797 savings per CPA (with texting)
As shown by the math, by increasing their response rate, Larry’s Landscaping converted a higher number of leads into more customers, which lowered their CPA.
No-shows are an everyday ordeal when trying to schedule appointments. When dealing with no-show appointments, the best way to tackle them is to reach out to customers proactively to get a response. Whether they confirm their appointment or need to reschedule, getting an answer from a customer helps your home service business accurately predict its monthly revenue based on its calendar. To better understand this point, let’s again turn to numbers for help.
In this example, we have a hypothetical handyman company called Not So Average Joe’s. Not So Average Joe’s had an average of 21 appointments scheduled per month, with the average cost of each service being $300. Unfortunately, Not So Average Joe’s dealt with a high no-show rate of 30 percent. So their estimated monthly revenue was much less than anticipated.
30 scheduled appointments x 30 percent no-show rate = 9 no-shows per month
9 no-shows per month x $300 average cost per service = $2,700 missed monthly revenue due to no-shows
Realizing that a single missed appointment was costing them so much money, Not So Average Joe’s turned to business texting to help them reduce no-show appointments. Sending appointment reminders to customers through SMS can reduce missed appointments by 26 percent. Not So Average Joe’s customers also mentioned a preference to be texted instead of called in a recent customer survey. After implementing business texting, Not So Average Joe’s reduced their monthly no-show appointments from nine per month to six per month.
9 no-shows per month (without texting) x 26% reduction in no-shows (with texting) = 3 less no-shows per month
3 additional appointments x $300 average cost per service = $900 increase in revenue from reducing no-shows (with texting)
The bottom line
Booking a new customer is a thrilling feeling, but the real value comes from booking repeat appointments with a customer. Ultimately, business texting can save your home service business thousands of dollars by simply keeping more appointments on the calendar. With the increased revenue from proactively texting your customers, your business can invest in more leads, higher quality leads, hiring more staff, or saving profits for a rainy day. ☔