How to Build a SKU Profitability-Based Google Ads Account

Most Google Ads accounts are structured around campaign types or categories. That's convenient for Google. It's not optimal for profit. Here's how to restructure around what actually matters.

Why Category-Based Structure Fails

The typical account structure groups products by category: Menswear, Womenswear, Accessories. Or by campaign type: Shopping, Search, PMax.

The problem: within "Menswear" you might have a £15 t-shirt with 30% margin and a £200 jacket with 65% margin. They need completely different ROAS targets to be profitable.

When you set a single target across the category, the algorithm will naturally favour the products that convert most easily. Usually, that's not your highest-margin products.

The Foundation: SKU-Level Margin Data

Before you can build a profitability-based account, you need profitability data. That means knowing the contribution margin for each SKU, not just the category average.

Contribution margin = Revenue - COGS - Variable costs (pick, pack, payment fees, expected return cost).

Once you have this data, calculate the minimum ROAS each SKU needs to break even after ad spend. Then add your target margin on top.

Step 1: Segment Your Catalogue

Group SKUs by their profitability-based ROAS requirement:

• • High Margin (ROAS 2-3x): Products that can afford aggressive bidding
• • Medium Margin (ROAS 4-5x): Standard products requiring efficiency
• • Low Margin (ROAS 6x+): Products that bleed money at standard targets
• • Exclude: Products that can't be profitably advertised

Step 2: Use Custom Labels

In your product feed, assign custom labels based on these margin tiers. This gives you segmentation control within Shopping and PMax campaigns.

Step 3: Build Campaigns Around Margin Tiers

Instead of one Shopping campaign with a 4x ROAS target, create separate campaigns for each margin tier:

• • High Margin campaign: 2.5x tROAS, aggressive budget
• • Medium Margin campaign: 4.5x tROAS, standard budget
• • Low Margin campaign: 7x tROAS, conservative budget

For PMax, use asset groups segmented by margin tier, each with appropriate targets.

Step 4: Monitor at SKU Level

Your reporting should show contribution margin per SKU, not just blended ROAS. Products can migrate between tiers as costs change, so quarterly reviews of your margin data are essential.

The Implementation Challenge

This approach requires more work than set-and-forget ROAS optimisation. You need finance team collaboration for margin data, regular feed updates, and ongoing analysis.

But the alternative is letting Google optimise for conversions while your most profitable products get outbid by your margin-thin volume drivers.