How to successfully segment Performance Max campaigns

In this blog article, we'll unpack the key takeaways and insights from the second Next Level eCommerce episode with Google Ads & eCommerce Expert, Ruben Runneboom. During the webinar, Ruben explained how you can use first-party product and performance data to optimize your Performance Max campaigns for higher conversions and better ROAS.

How does a Performance Max campaign work in a normal setup?

In a Performance Max campaign, Google focuses on finding the best way to get you conversions. While that's great in theory, it can sometimes overlap with traffic you've already targeted in other campaigns, such as branded search campaigns and remarketing campaigns.

Additionally, almost all eCommerce brands see a trend where a smaller percentage of products drive a larger portion of sales. So in a single Performance Max campaign, these high-performing products might capture most of the traffic. This approach could limit the visibility of other products, potentially leading to missed sales opportunities.

Advanced methods of Performance Max campaign segmentation

Luckily there are more advanced methods of Performance Max campaign segmentation that you can use:

• Campaign segmentation based on margin
• Campaign segmentation based on amount of sales
• Campaign segmentation based on new vs recurring customer
• Campaign segmentation based on performance (ROAS/POAS)

Let's quickly take a look at how you can segment your campaigns based on performance data.

Advanced product bucketing (reactive strategy)

If you run a simple Performance Max campaign with all your products, Google might allocate parts of your budget towards products that have a lower conversion rate or profitability compared to others. That's why segmentation can be a valuable strategy, as it allows you to prioritize impressions for products with a higher potential return on ad spend (ROAS).

Here are the steps you can take to segment your campaigns based on performance:

1. Use a script or tool like Channable Insights to track the number of clicks and ROAS per product.
2. Set your benchmarks for these KPIs.
3. Use the script or tool to label these products and put them in a separate spreadsheet.
4. Import this spreadsheet to Channable to enrich your feed.
5. Use these labels in Google Ads to segment your campaigns.
6. Adjust your budgets and bidding strategies according to the various product groups.

As a general rule of thumb, you can use the following bidding strategies to improve your campaign performance:

While this advanced setup can significantly improve your campaign performance, it's important to remember there's no one-size-fits-all solution.

Here's why this particular strategy might not be perfect for every eCommerce brand:

• This strategy is reactive, not proactive
• Segmentation runs on data from the past period (often 30 days)
• Only clicks and ROAS (conversion value) affect segmentation

In order to beat your competitors, you need to move beyond traditional product bucketing.

Advanced product bucketing (proactive strategy)

Instead, you need to deploy a proactive campaign segmentation strategy based on first-party data. Here is a list of the different data points that you can combine:

• Price benchmark data (Google Merchant Center or tools like Optiprice / Prisync)
• Return rate by product (SKU level)
• Size availability (within SKU family)
• Margin
• Velocity of sales
• New or recurring model
• On sale (yes/no)

And here’s a step-by-step guide on how to segment your campaigns with this first-party data:

1. Create a master sheet combining all data points listed at the SKU level.
2. You can determine the weighing of the data points by assigning a grade depending on your business goals (see example below).
3. The total of the numbers from the different data points determines the final score.
4. Create custom_labels based on these final scores.
5. Segment the campaigns according to these custom_labels.
6. Finetune your setup by adjusting the weighing of the data points.
   
   In this example, you can see that Product A is profitable and has a low return rate. In this case, it would be a good idea to put an aggressive bidding strategy on it.
   
   Note: It’s also possible to build this master sheet directly in Channable.

In Google Merchant Center, you can get benchmark data for price. To find the report, sign in to your Merchant Center account, navigate to the “Growth” tab, and click on “Price Competitiveness”.

To effectively segment a Performance Max campaign using this strategy, you'll need a sufficient amount of data and budget. This typically means aiming for 200-300 total conversions per month, with 50-100 conversions within each segment.

Watch more episodes of Next Level eCommerce

Enjoyed this deep dive into Performance Max campaign segmentation? Our Next Level eCommerce webinar series gives you the practical tips and strategies you need to win in the competitive eCommerce landscape.

Want to watch more episodes? Check out our recent webinar with Google Ads specialist Bob Meijer on how to master dynamic feed-based campaigns.