Performance Max asset groups: split by product margin or by product category?

Most PMax accounts split asset groups by product category because it mirrors the catalog tree and looks tidy. The problem is that bidding doesn't care about categories. PMax optimizes toward a target ROAS or conversion value, so a group that mixes a 60% margin item with a 10% margin one can hit its ROAS number while the cheap items quietly lose money. Take a sporting goods store with a 300% ROAS target: the bulk supplements might clear it on revenue but not on profit. I'd split by margin tier first, then by category inside each tier, so the target means the same thing across the whole group. Has anyone fed margin in through custom labels and actually seen PMax respond to it, or does it mostly ignore them?

Asset groups don't get their own ROAS target. It's set at the campaign level, so a 60% margin item and a 10% margin item sitting in different asset groups of the same campaign still get bid against one number. Asset groups mostly change creative and audience signals, not bidding.

If you want the target to mean the same thing across margin tiers, you either split those tiers into separate campaigns or margin-adjust the conversion value before PMax ever sees it. Custom labels are really just for filtering and reporting, so I wouldn't count on them to steer bidding. How are you getting margin into the value PMax optimizes against?

I'd push back a little on the custom labels point. You're right that they don't change the bid, but they do decide which products land in which asset group, and that shapes the creative and audience signals each group learns from. So a 10% margin SKU doesn't have to share a group with your best sellers.

Where I agree is that separate campaigns are the only way to get truly separate targets. For most accounts, though, I'd rather feed profit into the value itself, sending order value multiplied by margin as the conversion value. Then one ROAS target means roughly the same thing across the whole campaign.

Profit-as-value is the right call, but the margin adjustment has to happen before the value hits the conversion action, not just in a report. If you pass order value times margin through its own conversion action, PMax optimizes to that number, so your ROAS target effectively becomes a profit target. Just make sure the primary action isn't also firing, because then bidding splits between the two signals.

If the revenue action and the margin action are both selected as conversion goals on the campaign, Smart Bidding doesn't split between them, it adds them. So the value gets counted twice and your ROAS target is chasing an inflated number. The fix is to uncheck the primary action in the campaign's conversion goals. Letting it stop firing isn't enough if it's still selected. After that, reset the target, because a 300% target built on revenue will look like a collapse once the value is margin-based, and the client will see the drop before they see the logic.

Agreed, and the double count is easy to miss because both actions look healthy on their own. You don't have to delete the revenue action to keep it visible, though. Mark it as a secondary goal, so it still shows in reports but doesn't feed bidding. Then do the math before you reset the target. A 300% ROAS on revenue at a 35% average margin works out to roughly 105% on margin-based value, and the client should hear that number before anything changes.

Rule of thumb: multiply the old target by the margin you actually earn on revenue-weighted sales, not the simple catalog average. A 35% catalog average can be way off if your bestsellers run at 15%, and then the new target is wrong from day one.