Category Structures vs Margin-Based Structures in Google Ads
Most ecommerce accounts are grouped the way the website is: by category. That is tidy, but bidding then treats products with very different economics as if they were the same.
This is an educational comparison, not a research study. It contains no sample data or measured results; test the ideas against your own account data.
What a category structure optimises for
Grouping by category makes reporting match the site and the buying team. The trade-off is that one target applies to products whose contribution margin, return rate and stock position can differ widely, so high-margin items can be held back while low-margin items absorb spend.
What a margin-based structure optimises for
Grouping by contribution margin, or by the commercial job each product has, lets targets reflect what a sale is actually worth. The trade-off is more maintenance: margins, returns and stock change, and groups need reviewing as they do.
When the difference matters
The more your products differ in economics, the more a single category target misprices them.
- • Contribution margin varies widely within categories
- • Return rates differ sharply between products
- • Own-brand and resold stock sit side by side
- • Stock depth varies, so some products cannot absorb more demand
Questions to ask of your own account
- • Do products in the same campaign share a similar contribution margin?
- • Is spend concentrated on products that leave little after ad costs?
- • Can you see contribution after advertising by product group, not just ROAS?
- • How often are product groups reviewed as costs and stock change?