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ABC and XYZ Analysis in PPC: How to Increase the Effectiveness of Advertising Campaigns
February 25, 2026
11 mins
Given the number of challenges and the growing competition businesses face today, Promodo is constantly looking for effective ways to optimize marketing strategies for our clients.
In this article, we’ll explain how Promodo’s PPC experts adapted ABC and XYZ analysis—traditionally an inventory and warehouse management tool—for paid advertising tasks. We will also share practical case studies and demonstrate the results achieved by optimizing products in PPC using this approach.
ABC XYZ analysis is a product classification method that combines two approaches: assessing the economic value of goods (ABC) and analyzing demand stability (XYZ). The result of the ABC XYZ stock analysis is a nine-cell matrix that helps prioritize products and make informed decisions regarding assortment and inventory management.
The difference between ABC and XYZ analysis is that ABC focuses on the economic value or revenue contribution of products, while XYZ evaluates the stability and predictability of their demand.
ABC analysis of product assortment groups items by their contribution to annual turnover or revenue:
XYZ analysis assesses demand stability:
Combining these two approaches provides a more complete picture of product behavior. Unlike the classic ABC analysis, which is based on a single metric (such as sales volume or revenue), the ABC XYZ analysis also takes into account the risk associated with demand instability.
In marketing, resources are always limited: budget, team time, and the attention of both algorithms and users. ABC and XYZ analyses help allocate these resources more effectively, focusing not on the number of activities, but on their actual impact on business results.
The ABC method allows you to quickly identify which products, categories, or campaigns generate the largest share of revenue or profit. In marketing practice, this means having a clear understanding of what to scale, what to optimize, and what might be better to limit in terms of investment.
Combining ABC and XYZ analysis helps set priorities and plan budgets with risk in mind. For example, marketing activities with high value and stable performance should receive the main share of the budget, while less stable activities should operate in a test or limited format.
With extensive advertising experience, Promodo experts have rethought the classic approach of ABC and XYZ analysis for product assortment management and adapted it to the realities of PPC campaigns.
“I applied this methodology in its classic form—dividing products into 9 categories—within a test. However, in practice, such granularity turned out to be excessive for PPC.
For example, in the feed, there are two products: one accounts for 7% of ad spend share, the other 3%. Considering that my KPI is set at 15% ad spend share, there is no point in separating them into different campaigns, as would be done in a classic ABC XYZ stock analysis.”
Yevhen Kolotylo, Team Lead, PPC Department at Promodo
Therefore, at Promodo, instead of the classic 9 segments, we use 4 categories for more effective PPC strategy optimization. The B and Y categories are split and assigned to adjacent groups based on their performance metrics.
The first group includes top-performing products. Typically, their number is small—about 5–10% of the total assortment—but they generate up to 80% of sales and profit.
Identification of A/B products is based not only on sales volume but also on their actual effectiveness for the business. Factors such as margin, operational costs, VAT, and alignment with key business KPIs are taken into account.
We recommend focusing the main advertising budgets on A/B group products, as they deliver the highest profit. Campaigns should be scaled to increase sales of top products. At the same time, it is crucial to ensure uninterrupted stock availability, using sales forecasts and demand analytics to avoid shortages or overstocking.
The B/C group includes products that incur significant advertising spend but still generate sales.
The main characteristic of this group is that the overall effectiveness of the products remains below the established business KPIs.
To manage this group, it is recommended to place B/C products in separate campaigns and control them with “tightened” strategies. This approach allows maintaining sales of these products without compromising the profitability of the main top-performing items, while also enabling gradual optimization of their effectiveness through tests and targeted adjustments.
“Our goal is to set up a Performance Max campaign with the right strategy and optimization for Target ROAS or Target CPA, to bring this group’s metrics in line with the established business KPIs.”
Yevhen Kolotylo, Team Lead, PPC Department at Promodo
Products in the X/Y group receive clicks and consume advertising budget but do not generate conversions. Despite their low performance, we do not recommend turning them off immediately, as they can be useful for testing and training algorithms.
To manage this group, it is advisable to isolate these products in separate campaigns. This allows for controlling spend while still giving them a chance to generate conversions (since there are no higher-priority products in the campaign from Google’s perspective). This approach enables analysis of user behavior, testing new strategies, and gradually optimizing campaigns without risking a drop in performance for the main product groups.
The Y/Z group includes products that receive no impressions, clicks, or ad spend. These are also referred to as zombie SKUs. At first glance, this group seems to have no impact on campaign performance; however, our experience shows that the right PPC strategy and optimization for these products can drive sales of items that previously did not sell through advertising.
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The process of analyzing products promoted in advertising can be significantly simplified and automated. At Promodo, we developed our own solution, AdsHub, which allows collecting data, evaluating product performance, and segmenting items into groups by tagging each product according to its effectiveness.
There is, however, an important nuance. Each niche has its own specifics, seasonal demand fluctuations, and different business KPIs. Therefore, before automation, a manual analysis is necessary: evaluate the products, understand their effectiveness, and determine the segmentation logic. Based on these insights, an algorithm for automatic classification is created, taking into account the unique features of a particular business and enabling highly accurate management of advertising campaigns.
In each category and subcategory, the situation was nearly identical, which made manual optimization at the campaign level very challenging.
Using the adapted ABC/XYZ analysis, the entire assortment was segmented into 4 practical groups with separate management logic for each campaign:
The store had a large number of categories with varying demand cycles. Some products were highly seasonal, others worked in waves or depended on weather conditions. Google algorithms struggled to adapt quickly to these changes within a single campaign.
As a result:
Increase overall PPC campaign efficiency without losing sales volume during peak periods
We restructured the campaigns as follows:
This allowed rapid traffic redistribution between subcategories based on current demand rather than historical data.
Promoting a business online in 2026 requires not only professional expertise but also flexibility and innovative solutions. Leveraging over 20 years of experience, Promodo experts go beyond standard practices to identify additional opportunities for optimizing campaigns and product assortments, increasing efficiency, and delivering more value to every client.
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