Understanding and Utilizing the 4 Performance Max Segmentation Strategies

Understanding and Utilizing the 4 Performance Max Segmentation Strategies

When it comes to running Performance Max campaigns, there are four main segmentation strategies that advertisers can employ. In this article, we will break down each strategy, discuss their pros and cons, and provide some insider tips on how to make the most of these strategies.

1. Top performer/high margin segmentation

The most common structure found in Performance Max campaigns is a focus on “top products.” Advertisers often believe that they should prioritize advertising the products that sell the most. By segmenting products into “top performer” and “long-tail” campaigns, advertisers can manipulate Performance Max to spend more on top-performing products. However, this approach can be flawed. It assumes that the product clicked is the product purchased, which is not always the case. Additionally, assigning queries to the most appropriate product is essential for success in shopping. If top products are forced, it may result in showing irrelevant products and losing potential sales opportunities. Advertisers should also ensure that asset groups are properly segmented by product type to avoid mismatched ad creative and copy.

2. Product type segmentation

Another common strategy is to group like products together. This helps keep data clean and assets relevant, making it easier to manage budgets and promotions. It also allows for maximally relevant auction insights. However, this strategy often fails to consider other business contexts such as margins, call center sales volumes, and customer types. Before launching campaigns based on feed product types, it is recommended to analyze the historical performance of products to identify smaller categories that may need to be grouped with other long-tail categories for success. Proper segmentation using asset groups is crucial to maintaining well-organized ad copy.

3. Brand and non-brand segmentation

While less commonly seen, brand and non-brand segmentation can be a useful strategy for fixing Performance Max/Search overlap in poorly built and managed accounts. It can also be used to differentiate between brand and non-brand campaigns in shopping. Advertisers sometimes worry that Performance Max will run branded text ads that they prefer to run through existing search campaigns. However, Performance Max cannot run a search ad if the user’s query exactly matches the text of any keyword in the existing campaign. This strategy is recommended for accounts with a comprehensive branded search campaign, but it may result in segmenting data between more campaigns, potentially leading to less revenue.

4. Customer segmentation based on nCAC/LTV

The least common structure observed in audits is customer segmentation based on new customer acquisition cost (nCAC) and lifetime value (LTV). This strategy allows advertisers to justify higher CPAs by understanding the true value of a purchase beyond the average order value. By bidding to the value of the consumer rather than the value of the transaction, advertisers can focus on acquiring high-value new customers. However, this strategy may result in lower return on ad spend (ROAS) within the platform and can squeeze margins. It requires careful implementation and monitoring to ensure profitability.

Two must-haves for Performance Max campaigns

Regardless of the segmentation strategy chosen, there are two key elements that advertisers should incorporate into their campaigns. The first is a “zombie SKU” campaign, which includes products that receive very few or no clicks. By separating these products into their own campaign, advertisers can force the algorithm to test them and potentially discover winners that add meaningful incremental volume. The second must-have is a “catch-all” campaign set to low priority. This campaign helps ensure that advertisers do not miss any new products added to their catalog.

Enhancing Performance Max campaigns through segmentation

Performance Max has evolved since its debut and now provides a powerful out-of-the-box solution for advertisers. To succeed in modern Google Ads, advertisers should focus on structuring their campaigns in a way that gives Performance Max the best signal quality and volume. By utilizing one of the four segmentation strategies discussed in this article and incorporating the two must-haves, advertisers can make the most of Performance Max and drive results.

In conclusion, understanding and utilizing segmentation strategies in Performance Max campaigns can greatly improve advertising effectiveness. Advertisers should carefully consider their goals, product offerings, and business contexts when choosing a segmentation strategy. By implementing the right strategy and incorporating the recommended best practices, advertisers can maximize their performance in the Performance Max auction and achieve their desired outcomes.