Debate: Do Single Product PLA Ad Groups Strangle ROI?

Building out Product Listing Ad campaigns in Google AdWords with single product or single SKU ad groups has become a fairly common practice. The idea being that isolating each product into its own ad group gives advertisers more control over which item gets served for a given query and enables faster product-level performance analysis and more granular bidding strategies.

A new paper from CPC Strategy challenges this approach to PLA management. It’s not a new position from CPC Strategy, but CEO Rick Backus says,

“We were surprised to see how quickly this SKU-level build out strategy gained traction in our industry. Internally, our tests showed that it was a very basic and primitive way to structure PLA campaigns, but somehow it’s perceived as this ‘cutting edge’ strategy. We pretty much set out to debunk that perception.”

The company says the single product PLA ad group approach is:

• Difficult to manage effectively even with bid automation in place when there are potentially thousands of separate ad groups
• Generally don’t maximize impression share for products
• Spread ad spend too thinly without taking into account specific conversion rates among similar or top-performing products.
• Limit opportunities for increased product exposure by isolating high quality score across individual products instead of grouping them within related product groups

Case Study

After testing single product ad groups across several clients, CPC Strategy found that in most cases the approach hurt ROI. In one case study, CPC Strategy restructured the PLA campaign for their client, Clean It Supply, into single SKU ad groups to compare before and after performance. Compared to the previous period, in the three week after implementing the single SKU structure, in conjunction with campaign automation:

• Traffic fell 34 percent
• Revenue was off 57 percent
• Average order value was down 58 percent
• Conversion rates dropped 36 percent

Performance rebounded after reverting back to CPC Strategy’s standard PLA management.

Advocating Mixed Strategy

CPC Strategy does recommend creating single product ad groups for top performing products when an item stands out among a group of related products. The advertiser should pick that item out of the ad group and place it in it’s own ad group at a higher bid and monitor it manually. Yet, even then, CPC Strategy contends that the retailer should be prepared to add it back into the theme-based ad group if performance doesn’t improve with separation.

The company recommends creating a Top Performers ad group, typically limited to the top 10 percent of inventory to maximize volume and ROI. That 10 percent number might cause raised eyebrows — that’s potentially a very large number of products in an ad group.

Yet, based on their studies, CPC Strategy believes that maintaining themed multi-product ad groups creates a boat lifting effect: 30 products will perform better  in a  Top Sellers ad group than in single SKU ad groups.

The company then typically groups the remaining inventory by product type and brand — or by other groupings that make sense for the business, such as price range or season by using custom labels. Poor performing products are kept in the feed in their own All Product Target ad group at a penny bid. Essentially, they’re advocating a mixed strategy approach.

There are many advocates for single SKU ad groups in PLA campaigns — and for reasons beyond what is outlined above.  Which approach have you seen work?