In the constantly evolving world of ecommerce, success depends on your understanding of your product portfolio. How do you gain insights into your products and their interaction with users?
Through data-driven Product Segmentation. In this blog, we're delving deep into this game-changing strategy and exploring why it's crucial for driving your business forward.
Do you want to see the potential of product segmentation for your own ecommerce?
Imagine navigating a vast sea of products without a map. That's what it's like to run an ecommerce business without product segmentation. It's a guessing game, hoping to stumble upon success. But with product segmentation, you gain clarity and direction.
Even as Google and Meta's algorithms continue to evolve, allocating budget effectively across products remains a challenge. Often, platforms prioritize the wrong products or allocate funds to non-profitable ones. That's why gaining insight into which products the platform invests in and which ones drive revenue and profits is crucial.
One of the best parts of this strategy is that it has the ability to help grow both revenue and profitability.
Let's talk specifics. In our product segmentation, we identified distinct categories within our product range:
Now, let's contrast this with a typical ecommerce scenario where product segmentation is not data-driven. In this case, businesses often find themselves in a maze of products, lacking clear insights into which ones are driving revenue and which ones are draining resources. Without a structured approach to segmentation, marketing efforts can be scattered and inefficient, leading to missed opportunities and wasted resources.
The example above clearly shows how a platform, such as Google, may not allocate your money properly if you don't take control of your product segmentation.
This scenario is common and far from the extreme cases we at Profound North have seen. It demonstrates a business can easily observe poor performance on platforms if not using data-driven product segmentation.
The platform operates as intended, systematically testing all products, regardless of quality. With several thousand products in play, however, data becomes limited, causing algorithms to prioritize certain items. Additionally, shopping products are matched based on keyword titles, with Google striving to achieve the best possible match.
Nonetheless, this presents a challenge for both accurate and inaccurate product feed mappings. Google may struggle to differentiate between products, leading to potential bias towards certain items. These factors contribute to why zombies receive limited delivery and villains often receive the most, especially given their typically larger product categories.
By segmenting our products, we optimize our bidding strategies and allocate resources more effectively. We invest in high-performing products while reassessing or repositioning underperformers. This ensures every marketing dollar is maximized for impact.
In this optimized budget allocation, we prioritize budget allocation based on our segmented product categories: Heroes, Proteges, Sidekicks, and Zombies. This strategic approach tells platforms like Google to prioritize certain products over others, ensuring that our advertising dollars are directed towards the products that drive the most value for our business.
You might wonder why allocate budget to products categorized as zombies if they aren't driving revenue or profits. As mentioned in our segmentation, budget allocation to zombies is minimal, but not zero. This allocation allows for the possibility of discovering hidden gems that could potentially become future bestsellers or heroes within our segmentation strategy. However, it's important to note that the budget allocated to zombies is significantly less compared to the allocation for the other categories that already contribute to both the top and bottom lines of our business.
This strategic budget allocation approach ensures that we make the most out of our marketing budget, maximizing returns while minimizing wasted resources. See image attached below to see the ideal budget allocation.
While product segmentation has been widely embraced in the Google Ads community, its benefits extend beyond a single platform. At Profound North, we're integrating these principles into our Social product, recognizing that its relevance extends to other channels beyond merely Google Ads.
In modern marketing, the siloed approach can hinder growth. Data generated from various platforms like Google, Meta, and others often holds valuable insights. However, failing to integrate this data across platforms limits its potential.
To address this, we're breaking down the silos and leveraging data-driven insights across multiple platforms. Our focus extends beyond applying segmentation principles to Google Ads; we're integrating them into our Social product as well. This ensures a cohesive marketing strategy that maximizes the impact of every marketing dollar spent.
Our integration goes beyond single silo / platform application. We are actively implementing ways to share data between platforms, whether it's Meta leveraging insights from Google or vice versa, or even tapping into backend data where possible. This approach fosters a seamless, data-driven marketing experience for our clients.
By adopting a holistic approach to product segmentation and data integration, we empower businesses to uncover new growth opportunities and drive success across their digital activities.
Avoid manual intervention by incorporating automated feedback loops into your product segmentation strategy. It's imperative that this entire process is driven by APIs or scripts, streamlining the workflow and ensuring efficiency.
Utilize a variety of tools such as Google Merchant Center, platform scripts, APIs, and feed management tools to harness the power of automation. By doing so, you can ensure that your feeds and product segmentation are automatically updated. This automation is essential for maintaining accurate budget allocation, even with seasonal products, new best sellers, or evolving collections.
Without an automatic feedback loop, you risk being held back and missing out on significant potential gains on a daily basis.
Wondering if your Google Ads account might be losing money due to ineffective product segmentation? Are you missing out on potential revenue or profits due to suboptimal budget allocation?
If you are in doubt, request a product segmentation below at no cost. Gain valuable insights into optimizing your segmentation strategy without any obligation.
Uncover potential opportunities to improve your advertising effectiveness and make every marketing dollar count.