Ever wondered how to supercharge your Ecommerce store's revenue using Google Ads? Today, I'm diving into the nuts and bolts of structuring your Performance Max campaigns for maximum revenue and profitability.
This strategy helped one of our clients achieve a $1M increase in revenue, a 53% jump, and a 121% boost in Return On Ad Spend (ROAS) compared to the previous year.
Let's get right into it!
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Determining the Number of Campaigns
Before you nail down the perfect structure for your Performance Max campaigns, you need to figure out how many campaigns to run. The balance is crucial:
Too many campaigns: Google Ads' AI struggles to optimise, leaving you perpetually in learning mode with inconsistent results.
Too few campaigns: You might avoid some frustration, but you miss out on potential profit, as a more segmented structure could bring in more revenue.
The key is conversion volume.
Google Ads' AI needs enough data to optimise your bids effectively. Here's what you should aim for:
Less than 100 conversions per month: Stick to 1 campaign.
100 to 500 conversions per month: You can handle 2 - 4 campaigns.
500 to 1000 conversions per month: Go for 3 - 8 campaigns.
More than 1000 conversions per month: Opt for 3 - 10 campaigns.
As you break out more campaigns, always aim for at least 50-100 conversions per campaign per month to ensure the AI optimises efficiently.
Campaign Structure
Here are some different ways you can structure your campaigns.
1. ROAS Performance Structure
Segment your products based on their ROAS performance in Google Ads. Depending on how many campaigns you can afford to have, based on your conversion volume, you could break this out into a 2, 3 or 4 campaign version like this:
2 Campaigns: A High ROAS campaign and Low ROAS one. Set a higher ROAS target for high-performing products and a lower one for low-performing products. The low performing products might struggle to get any spend and clicks if their ROAS target is too high.
3 Campaigns: Now you can afford to have a “Medium” campaign, in between the “High” and “Low” ROAS ones, for products who’s ROAS performance is somewhere in the middle.
4 Campaigns with a Zombies Campaign: If your conversion volume affords you to have 4 campaigns, then not only can you have High/Medium/Low, you can also have a “Zombies” campaign. This is for products that are not getting any spend or clicks. Bring these zombies back to life by putting them into a “Zombies” campaign that has a low daily budget and is set to “maximise conversion value” (No Target ROAS).
2. Product Category Structure
The simplest way to organise your campaigns is by product category. For example, if you sell living room furniture, you might have separate campaigns for sofas, coffee tables, and lamps. This structure helps with organisation, especially if gross profit margins are consistent across categories.
If you have enough conversions and a need for more detailed segmentation, consider blending this structure with the ROAS Performance Structure.
3. Gross Profit Margin Structure
Segment products based on their gross profit margins. The simplest form of this would be to create two campaigns based on gross profit margin, like this:
High Gross Profit Margin: Set a lower ROAS target, allowing higher bids and more revenue.
Low Gross Profit Margin: Set a higher ROAS target, leading to lower bids but maintaining profitability.
If you have more products and more variable gross profit margins, you can create more campaigns than just the 2 campaign “high/low” split. In most cases, 2-4 campaigns based on gross profit margin is enough.
To help bucket your products into the right tier, create a spreadsheet with all your products, their sales revenue, and the gross profit margin % on there. Then, group products into 2-4 tiers based on their gross profit margins, and set appropriate ROAS targets for each tier. This does not have to be pinpoint precise. Group products together where their gross profit margin % is within 10-20% of each other.
This structure is beneficial if there's a lot of variance in gross profit margins across your products. For high margin products, it allows you to put them in a campaign with a lower ROAS target. The lower ROAS target still needs to be well above the break even point, of course. But compared to low margin products, the high margin products can have a lower ROAS target in your bid settings. This allows the system to bid higher on the CPC’s and thus get you more traffic and share of the market for those high margin products.
On the other hand, low margin products need a HIGH ROAS target to make sure they are profitable. If the low margin products were lumped together in the same campaign as high margin products, the system might spend unprofitably on them and thus waste your money.
And that right there is the power of the gross profit margin structure. More share of market on your high margin products, and avoid wasting money on low margin products.
Combining Structures
You can blend these structures based on your conversion volume and product specifics. For instance, a business with high conversion volume and varied product performance might use a mix of Product Category and ROAS Performance structures. Heck, if you have tonnes of conversions per month, and if you have multiple product categories and very variable gross profit margins, you can even cross blend all three structures and have things broken out by ROAS performance, Product Category AND Gross Profit Margin. This would end you up with a lot of campaigns potentially, and as I mentioned I do recommend you max out at around 10 campaigns as any more than that and you might struggle to manage it effectively.
Summary
Structuring your Performance Max campaigns correctly is crucial for maximising revenue and profitability. Here’s a quick recap:
Determine the right number of campaigns based on conversion volume.
Choose the appropriate structure: ROAS Performance, Product Category, or Gross Profit Margin.
Combine structures if needed, ensuring enough conversion volume for each campaign.