In this episode of Functional and Fabulous, Gordon and Ger chat with Mike Ryan, a seasoned expert in ecommerce insights. As the Head of Ecommerce Insights at Smarter Ecommerce, a leading provider of performance optimisation solutions, Mike brings a wealth of knowledge to the table. The conversation delves into the intricacies of Performance Max (PMax), exploring its evolution, common challenges, and effective strategies for maximising its potential.
What is PMax?
Performance Max (PMax) is an automated campaign type introduced by Google Ads. Evolving from Smart Shopping campaigns, it combines the more classic elements of campaigns such as Search, Display, Video etc into a single, unified effort. It then leverages Google’s machine learning to automatically optimise across channels.
The PMax Paradox: Balancing Automation and Control
While PMax automates many aspects of advertising and can offer convenience, there are some drawbacks to this as outlined by Mike. Straight out of the box, PMax limits user control compared to previous campaign types, including reduced promotional controls and reporting transparency.
Mike also emphasises that PMax campaigns often focus on remarketing and existing traffic, leading to potentially lower incremental reach. To optimise PMax effectively, it's crucial to prioritise products based on your business objectives and guide the campaign towards desired outcomes.
Despite these drawbacks, they acknowledge that many advertisers have adopted Performance Max due to its potential benefit, however it's crucial to maintain control over key elements. PMax is a tool that requires active management to achieve your goals, and simply relying on its automation might not yield the best results.
Key Strategies for PMax Success
- Provide Contextual Data: Provide Google with detailed product information and create custom labels to categorise products based on your business objectives. This helps PMax understand your products and tailor campaigns accordingly.
- Structure your Campaigns Effectively: Organise your campaigns into well-structured groups based on relevant factors to your business such as product type, margin or sales performance.
- Set Clear Goals and Targets: Define your business objectives and translate them into clear budget and efficiency targets.
- Balance Promotion: Identify which products are most crucial and allocate resources to promote both high-performing and less-performing products to maintain a balanced portfolio.
- Get to know Merchant Center Next: Google is moving towards a more data-driven approach to product feeds, transitioning from the traditional Merchant Center to Merchant Center Next. This shift means less reliance on structured feeds and more emphasis on data sources that Google can extract from your website using AI and machine learning. While this offers potential benefits, it also indicates a potential decrease in the level of control you have over your product data within Google Ads.
Beyond ROAS: A Comprehensive Approach to PMax Measurement
And of course, given Mike's expertise in ecommerce optimisation, the conversation naturally shifted to key performance indicators (KPIs). Gordon and Ger were curious to get his perspective on ROAS, a widely used metric for tracking advertising performance.
Mike believes that while ROAS is a valuable KPI, it is essential to use it with other metrics and not as the sole KPI. He cautions against over-reliance on it, as it can be a proxy metric that doesn't accurately reflect the full picture. He suggests using a combination of metrics to make informed decisions and avoid falling into the trap of prioritising ROAS over strategic business goals. Here are the KPIs Mike outlined for a more comprehensive assessment of overall performance:
- Marketing Efficiency Ratio (MER): MER provides a higher-level view of your overall marketing efficiency by comparing total sales to total advertising costs.
- Profit-Based Metrics: Consider metrics like profit margin and contribution margin to assess the financial impact of your campaigns.
- Value Per Click (VPC): Evaluate the value generated by each click, considering factors like order value and conversion rate.
Navigating the Competitive Landscape
The advertising landscape is constantly evolving, with new powerhouses like Temu and Amazon impacting market dynamics by rapidly expanding their market share through aggressive advertising. While this drives up costs for competitors (think higher CPCs and CPMs), Mike Ryan offered a surprising perspective:
- Increased Visibility Wars: By aggressively dominating the advertising space, companies like Temu can unintentionally benefit smaller retailers. Their heavy spending on generic auctions can “soak up” irrelevant bidding wars, freeing up space for smaller businesses to focus on more targeted campaigns and potentially reduce their advertising costs. This phenomenon can create a more competitive and efficient advertising environment for smaller retailers.
- The Contrast Bias: Temu's less-established brand image might create a “halo effect” for more established competitors. Consumers, who tend to be wary of Temu, might perceive other brands as more trustworthy.
The Irish Market Braces for Change
With Amazon.ie launching next year, Irish ecommerce is poised for a significant shift. Here are some potential outcomes:
- Increased Competition: Expect higher costs for advertising and customer acquisition.
- Domestic Seller Adoption: The extent to which local sellers embrace Amazon.ie will be crucial.
- Consumer Preferences: Irish consumer behaviour will dictate the impact on existing retailers. Their loyalty to local brands and existing shopping habits will play a significant role.
Conclusion
Even with the convenience of automated tools such as PMax which provide ‘the path to least resistance’ overall this episode of the podcast summed up how it is important to:
- Set Guardrails to Guide PMax: Many advertisers make the mistake of setting up Performance Max (PMax) campaigns and then neglecting to actively manage them. To optimise PMax, it's crucial to establish well-structured campaign buckets, provide Google with relevant product data, and actively influence PMax's behaviour through your campaign settings. By adopting a proactive approach, you can ensure that PMax effectively aligns with your business objectives and delivers optimal results.
- Understand Efficiency and Growth are interconnected: Striking a balance between efficiency and growth is essential. Ruthless efficiency without growth can be counterproductive.
- Allocate Risk Budget and Strategically Test: As explained by Ger, just as a mountain climber might get stuck on a local peak without realising there's a higher one, marketers can become trapped in suboptimal solutions. To overcome this, they need to be willing to step outside their current strategies and explore new possibilities through testing and experimentation.
Something pique your interest? Why not watch back the podcast here →
Alternatively, you can also find this episode and previous episodes of the podcast on YouTube Podcasts, Apple and Spotify.
