You check your ad reports and see the same products getting plenty of clicks and sales. I've seen this play out countless times: wished they had known this beforehand.. The problem? They’re also some of your least profitable products. Meanwhile, higher-margin items barely get a look-in. It can feel as if your ads are actively working against your business.
Usually, they aren’t. Advertising platforms are doing what they’re designed to do: find products and audiences likely to generate the result you’ve asked for. If that result is revenue, conversions or a low cost per sale, the platform may prioritise products that are easy to sell, even when they leave little profit behind.
This is one of the uncomfortable realities of ecommerce: getting a sale is not the same as making money. Tight margins, relentless competition and customers who can compare prices in seconds all make it harder to grow profitably. The solution is not necessarily to spend more or switch off your best-selling products. It is to give your campaigns better commercial direction.
Why advertising platforms favour low-margin products
Most advertising algorithms optimise towards the conversion goal and signals you provide. If you ask for more conversions or revenue, they will look for products and customers that appear most likely to deliver those outcomes. They do not automatically understand your product costs, fulfilment expenses, returns or the margin you need to retain.
A product with a familiar brand, a competitive price and lots of historical sales may be an easy choice for the system. It can generate frequent conversions and appear to perform well in the dashboard. A less familiar, higher-margin product may have fewer clicks and a longer path to purchase, so the algorithm gives it less exposure.
The result can be a feedback loop: the products that already sell get more traffic, generate more conversion data and become even more attractive to the platform. That does not necessarily mean they are the best products for your business.
- Revenue is not profit. A high-value order can still be a poor result if the product has a thin margin or high costs. Conversion volume can hide product mix. A campaign may hit its sales target while selling a disproportionate number of low-margin items. Historical performance influences delivery. Products with more data can be favoured over newer or less frequently purchased items. Price competition is easy to spot; your cost base isn’t. Platforms can observe prices and user behaviour, but they need useful business data to understand what a sale is worth to you.
Ecommerce is harder than it looks
From the outside, online retail can look straightforward: list products, attract visitors and fulfil orders. In reality, every sale has costs attached. Product cost, shipping, payment fees, discounts, returns, packaging and customer service can all affect the amount left over.
On top of that, customers face little friction when comparing retailers. They can open another tab, check reviews, compare delivery promises and find a lower price within moments. This relentless competition and price transparency put pressure on both conversion rates and margins. It also means that the product with the lowest price is not always the product customers choose.
Reviews and delivery are important conversion drivers. Strong reviews can reassure shoppers that a product is worth buying, while clear, reliable delivery information can remove a reason to abandon checkout. These factors may help a product convert, but they do not make its margin healthier. Keep the distinction clear: conversion drivers help win the sale; profit-based optimisation helps assess whether that sale is worth pursuing.
Start by finding out what is actually profitable
Before changing campaigns, build a more complete picture of product profitability. A simple product-level view is often more useful than another campaign-level report.
What to review Why it matters Net selling price Use the amount customers actually pay after discounts, rather than relying only on list price. Product cost and variable costs Include the costs that change when an order is placed, such as product, fulfilment and payment costs. Returns and cancellations A product that often comes back may be less valuable than its initial sales figures suggest. Advertising cost Compare the cost of acquiring an order with the contribution that order can realistically produce. Repeat purchase potential Some products may justify a lower first-order return if customers are likely to come back. Use evidence, not assumption.Agree internally on what “profitable” means. For some retailers, that may be contribution after product and fulfilment costs; for others, it may include a target return on advertising spend or a minimum margin threshold. The important thing is to use a consistent definition and make sure the people managing campaigns can access the relevant data.
Build a product set strategy around business value
A product set strategy means organising products according to the role they play in your business, rather than treating your entire catalogue as one interchangeable group. It gives you more control over what campaigns can promote and what success looks like for each group.
You might separate products by margin band, stock position, seasonality, returns, strategic importance or customer acquisition role. The right categories depend on your catalogue and your operational data; there is no universal structure that works for every retailer.
Useful product groups to consider
- High-margin products: items with room to absorb acquisition costs and still contribute profit. Low-margin bestsellers: popular products that may need tighter bids, budget limits or a supporting role in a wider basket. New products: items that need controlled testing before you have enough performance data to make a confident decision. Clearance or seasonal stock: products with a specific stock or timing objective, measured against an appropriate target. Products with operational concerns: items with high return rates, limited stock or delivery constraints that could make additional demand unhelpful.
Once products are grouped, give each group a clear objective. A high-margin set is often assessed on profit or contribution, while a clearance set may be judged on stock reduction within an acceptable margin. Avoid using one target for products with very different economics.
When should you exclude SKUs?
To exclude SKUs is to prevent specific products from appearing in a campaign or product set. This can be a useful safeguard, but it should be based on a reason rather than a reaction to one disappointing day.
Consider excluding a SKU when it is consistently below your minimum margin, frequently out of stock, has a high rate of returns, or cannot be advertised profitably at the current acquisition cost. You may also exclude products with inaccurate feed data or an offer that is no longer available.
Before excluding a product, check whether the issue is temporary or fixable. A pricing error, poor product title, weak images or missing delivery information may be suppressing performance. If a low-margin bestseller helps smenews.digital attract customers who add more profitable products to their basket, removing it could also reduce total order value or customer acquisition. Test that assumption against order-level data.
Use exclusions deliberately and review them regularly. A product that was unprofitable during a short promotion may perform differently at full price, while an item that looks healthy today may become less attractive if stock, costs or return rates change.
Move towards profit-based optimisation
Profit-based optimisation means guiding advertising towards the commercial value of a sale, not just its count or revenue. It is a shift in measurement as much as a campaign-setting change.
Define the profit signal. Decide which costs and adjustments are included and agree a minimum acceptable outcome. Improve product and order data. Make sure prices, product identifiers and any margin or value data used for decision-making are accurate and current. Set product-level targets. Use different expectations where products have different margins, roles or customer value. Monitor the mix, not just the total. Check which products are taking spend and whether their contribution supports the business goal. Allow for a learning period. Avoid making drastic changes based on a tiny sample; assess trends over a period that reflects your sales cycle.If your measurement setup cannot pass reliable profit information into an advertising platform, you can still make progress with campaign structure, product exclusions and regular reporting. Just be clear about the limitations: revenue-based reporting cannot prove that a campaign is profitable.
Don’t ignore the reasons customers convert
Profitability is not just a bidding problem. The product page and the overall offer influence whether paid traffic turns into an order at a sustainable cost. Reviews, clear product information and delivery details all help customers decide whether to buy.
You know what's funny? make delivery costs and estimated arrival times easy to find. Keep stock information accurate. Show useful reviews and answer common product questions. These improvements may help conversion without relying on deeper discounts, which can protect margin. They also help set accurate expectations and may reduce avoidable returns.
However, don’t assume that a higher conversion rate automatically means better performance. If a change increases sales of a product that loses money on every order, the business may be worse off. Review conversion improvements alongside product margin, returns and order value.
Common mistakes to avoid
- Optimising only for revenue or return on ad spend. These measures can look strong while overlooking product costs and other variable expenses. Excluding everything with a lower margin. Some lower-margin items support basket-building or customer acquisition; verify their wider contribution first. Changing too many things at once. If you restructure every campaign and alter targets together, it becomes difficult to tell what helped. Assuming the algorithm will know your priorities. It can only act on the goals and data available to it. Ignoring stock and customer experience. Driving demand for products you cannot fulfil reliably can damage both profitability and trust.
A practical way to take control
Start with a product-level profitability review, then create a manageable set of product groups. Identify which SKUs need protection, which deserve more investment and which need further testing. Update campaign structure and measurement in stages, and compare results against a defined profit target—not just clicks, sales or revenue.
Finally, keep checking the customer experience behind the numbers. Competitive pricing may win attention, but reviews and dependable delivery often help close the sale. The aim is not to stop advertising popular products; it is to understand their true role and make sure your product set strategy supports sustainable growth.
Ads can be very good at finding demand. Your job is to make sure the demand they find is worth serving. If you publish this guide on your site, an AddToAny sharing widget can make it easier for readers to share it; the widget itself, of course, does not change campaign performance.