YouTube Ads 3-Tier Targeting Framework for Ecommerce

YouTube is the second-largest search engine and reaches 2+ billion users monthly. Yet most ecommerce brands struggle to make YouTube ads profitable. The problem isn't YouTube—it's targeting.

The Targeting Problem

Common mistakes:

• Too broad targeting (millions of impressions, no conversions)
• Only remarketing (leaves growth on the table)
• Same creative for all audiences (mismatched messaging)
• Expecting immediate ROAS (YouTube builds awareness first)

The 3-Tier Solution

Structure YouTube targeting into three tiers:

• Tier 1: Cold - New audiences who don't know you
• Tier 2: Warm - Engaged audiences with some familiarity
• Tier 3: Hot - Ready-to-buy remarketing audiences

Each tier requires different:

• Targeting strategies
• Creative approaches
• Bid strategies
• Success metrics

The Funnel Logic

Cold → Warm → Hot → Conversion

YouTube excels at moving people through this funnel. Expecting cold audiences to convert immediately is a recipe for disappointment.

Realistic YouTube Expectations

Tier	Expected ROAS	Purpose
Cold (Tier 1)	0.5-2x	Awareness, list building
Warm (Tier 2)	2-4x	Consideration, engagement
Hot (Tier 3)	5-15x	Conversion, immediate sales

Blended across tiers: 2-4x ROAS is solid YouTube performance.

Tier 1 reaches people who don't know your brand. The goal isn't immediate conversion—it's awareness and audience building.

Tier 1 Targeting Options

Custom Intent Audiences Build audiences based on search behavior:

• People who searched your keywords on Google
• People who searched competitor keywords
• People searching problem/solution terms

Example for Running Shoes:

• "best running shoes 2025"
• "running shoe reviews"
• "Nike vs Adidas running shoes"

In-Market Audiences Google's pre-built audiences of active shoppers:

• In-market for Running Shoes
• In-market for Athletic Apparel
• In-market for Fitness Equipment

Affinity Audiences Lifestyle and interest-based:

• Running Enthusiasts
• Health & Fitness Buffs
• Outdoor Enthusiasts

Topic Targeting Target videos about specific topics:

• Running & Jogging
• Marathon Training
• Fitness Equipment Reviews

Tier 1 Bid Strategy

Recommended: CPM (Cost per Thousand) or Maximize Conversions (wide net)

Target: Efficient reach, not immediate ROAS

Budget: 30-40% of YouTube budget

Tier 1 Creative

For cold audiences, lead with:

• Problem identification ("Tired of foot pain while running?")
• Brand introduction (who you are)
• Value proposition (why you're different)
• Soft CTA (learn more, watch more)

Don't lead with:

• "Buy now!" (too soon)
• Price-focused messaging
• Product details (they don't care yet)

Tier 1 Success Metrics

Track:

• View rate (15%+ good)
• Cost per 1000 impressions (<$15 target)
• Audience growth (people added to warm lists)
• Brand lift (if running lift studies)

Don't fixate on ROAS at Tier 1.

Tier 2 reaches people with some familiarity—they've seen your ads, visited your site, or engaged with content. The goal is deepening interest and moving toward purchase.

Tier 2 Targeting Options

YouTube Engagement Audiences People who engaged with your channel:

• Viewed any video from your channel
• Subscribed to your channel
• Liked or shared your videos
• Viewed specific videos

Website Visitor Segments (Non-Purchaser) People who visited but didn't buy:

• All website visitors (last 30 days)
• Product page viewers (last 14 days)
• Category page viewers
• Blog/content readers

Engaged App Users For brands with apps:

• App installers who haven't purchased
• Frequent app users
• Recently active users

Similar Audiences (Lookalikes) Based on your best customers:

• Similar to converters
• Similar to high-value customers
• Similar to frequent purchasers

Tier 2 Bid Strategy

Recommended: Target CPA or Maximize Conversions

Target: Engagement and consideration actions

Budget: 35-40% of YouTube budget

Tier 2 Creative

For warm audiences:

• Social proof (reviews, testimonials)
• Product deep dives
• Comparison content (vs. competitors)
• Use case stories
• Moderate CTAs (shop now, see collection)

These people know you exist—now convince them to choose you.

Tier 2 Success Metrics

Track:

• Click-through rate (0.5%+ good)
• Cost per engagement
• Add-to-cart rate from YouTube traffic
• Movement to Tier 3 (hot) audiences

ROAS expectation: 2-4x, sometimes break-even is okay.

Tier 3 reaches people ready to buy—they've shown purchase intent. The goal is closing the sale.

Tier 3 Targeting Options

Cart Abandoners Highest intent:

• Added to cart but didn't purchase (last 7 days)
• Started checkout but didn't complete
• Viewed cart page

Product Page Visitors Strong intent:

• Viewed specific product pages (last 14 days)
• Viewed product multiple times
• Compared products

Past Purchasers For repeat purchases:

• Purchased 30-90 days ago (consumables)
• VIP customers (high LTV)
• Seasonal repurchasers

Customer Match Lists Your customer data:

• Email subscribers who haven't purchased
• Leads from other channels
• Lapsed customers

Tier 3 Bid Strategy

Recommended: Target ROAS or Manual CPV

Target: Conversions and revenue

Budget: 25-30% of YouTube budget

Tier 3 Creative

For hot audiences:

• Direct product focus
• Strong offers (discount, free shipping)
• Urgency (limited time, low stock)
• Testimonials from similar customers
• Clear CTAs (buy now, complete order)

These people need a nudge, not an introduction.

Tier 3 Success Metrics

Track:

• Conversion rate
• ROAS (target 5-15x)
• Cost per acquisition
• Revenue from YouTube remarketing

This is where YouTube drives direct ROI.

Frequency Considerations

Hot audiences are small. Watch frequency:

• 3-5 impressions/week: Optimal
• 6-10: Acceptable for high intent
• 10+: Fatigue risk, refresh creative

The 3-tier system works when audiences flow from cold to warm to hot. Here's how to build that pipeline.

Pipeline Architecture

Cold Pool (Tier 1):

• Custom intent audiences
• In-market audiences
• Affinity + demographics

↓ (View ads, visit site)

Warm Pool (Tier 2):

• YouTube engaged
• Website visitors (non-purchaser)
• Similar audiences

↓ (Engage deeper, show intent)

Hot Pool (Tier 3):

• Cart abandoners
• Product viewers
• Customer lists

Audience List Setup

Create in Google Ads:

1. Navigate to Audiences
2. Create segment
3. Define membership rules
4. Set membership duration

Key Audiences to Create:

YouTube-Based:

• Viewed any video (30 days)
• Viewed specific campaign videos (14 days)
• Channel subscribers

Website-Based:

• All visitors (30 days)
• Product viewers (14 days)
• Cart abandoners (7 days)
• Checkout abandoners (3 days)

Customer-Based:

• Customer match: All purchasers
• Customer match: VIPs (top 20%)
• Customer match: Lapsed (90+ days)

Audience Sizing

Minimum audience sizes for YouTube:

• Display/Video campaigns: 100 users (some placements)
• Remarketing: 1,000 users minimum
• Similar audiences: Based on seed list quality

Audience Exclusions

Prevent wasted spend:

• Exclude purchasers (last 7-14 days) from acquisition
• Exclude Tier 3 from Tier 1 campaigns
• Exclude Tier 2 from Tier 1 campaigns

This prevents showing cold ads to hot audiences.

Each tier needs different creative. One-size-fits-all creative wastes budget.

Tier 1 Creative: Awareness

Format: Skippable in-stream (15-30 seconds)

Structure:

• 0-5 sec: Hook with problem/emotion
• 5-15 sec: Brand introduction
• 15-25 sec: Value proposition
• 25-30 sec: Soft CTA

Creative Approach:

• Lead with the problem you solve
• Be entertaining/educational
• Don't push product immediately
• Goal: "I should learn more about this brand"

Example Script Frame: "Tired of running shoes that fall apart after 3 months? [Hook] At [Brand], we engineer shoes to last 500+ miles. [Intro] Our ProCore technology provides the support you need without the bulk. [Value] Learn more at [URL]. [CTA]"

Tier 2 Creative: Consideration

Format: Skippable in-stream (30-60 seconds) or Discovery ads

Structure:

• 0-5 sec: Recognition hook ("Still looking for...")
• 5-20 sec: Social proof/testimonials
• 20-45 sec: Product deep dive
• 45-60 sec: Comparison/differentiation
• End: Clear CTA

Creative Approach:

• Reference their previous engagement
• Show real customer stories
• Demonstrate product in use
• Differentiate from competitors

Tier 3 Creative: Conversion

Format: Skippable in-stream (15-30 seconds), Bumper ads

Structure:

• 0-3 sec: Direct hook ("Ready to buy?")
• 3-15 sec: Product focus + offer
• 15-25 sec: Urgency driver
• 25-30 sec: Strong CTA

Creative Approach:

• Lead with offer/discount
• Show the specific product they viewed
• Create urgency (limited time, low stock)
• Remove friction (free shipping, easy returns)

Creative Testing

Test by tier:

• Tier 1: Test hooks and value propositions
• Tier 2: Test social proof vs. product focus
• Tier 3: Test offers and urgency drivers

Run 2-3 variants per tier, measure view rate and downstream conversions.

How you allocate budget across tiers depends on your goals and funnel health.

Baseline Allocation

For balanced growth:

• Tier 1 (Cold): 30-35%
• Tier 2 (Warm): 35-40%
• Tier 3 (Hot): 25-30%

Growth-Focused Allocation

When prioritizing new customer acquisition:

• Tier 1 (Cold): 45-50%
• Tier 2 (Warm): 30-35%
• Tier 3 (Hot): 15-20%

Efficiency-Focused Allocation

When prioritizing ROAS:

• Tier 1 (Cold): 20-25%
• Tier 2 (Warm): 30-35%
• Tier 3 (Hot): 40-45%

Dynamic Reallocation

Shift budget based on performance:

If Tier 1 is performing (good view rates, low CPM): Increase to feed more into funnel.

If Tier 3 is crushing it (high ROAS): Increase Tier 1/2 to build more hot audiences.

If Tier 2 is stalling (low engagement): Improve creative before increasing budget.

Minimum Budgets

For each tier to collect meaningful data:

• Tier 1: $30-50/day minimum
• Tier 2: $25-40/day minimum
• Tier 3: $20-30/day minimum (limited by audience size)

Total YouTube minimum: $75-120/day for 3-tier strategy.

Scaling Budget

When ready to scale:

1. Scale Tier 3 first (highest ROAS)
2. Scale Tier 1 to feed more audiences
3. Scale Tier 2 as warm audiences grow
4. Maintain proportions or adjust based on goals

Budget Example

$300/day YouTube budget:

• Tier 1: $100/day (33%)
• Tier 2: $110/day (37%)
• Tier 3: $90/day (30%)

Each tier has different success metrics. Judging all tiers by ROAS misses the point.

Tier-Specific KPIs

Tier 1 Metrics:

• View rate (target: 15%+)
• CPM (target: <$15)
• Audience growth rate
• Brand search lift
• Website visits from YouTube

Tier 2 Metrics:

• Click-through rate (target: 0.5%+)
• Cost per engagement
• Add-to-cart rate
• Time on site from YouTube traffic
• Movement to Tier 3

Tier 3 Metrics:

• Conversion rate
• ROAS (target: 5-15x)
• Cost per acquisition
• Return on ad spend
• Revenue from YouTube

Attribution Considerations

YouTube rarely gets last-click credit. Consider:

• View-through conversions (important for video)
• Assisted conversions
• First-touch attribution for cold campaigns
• Multi-touch attribution if available

Data-Driven Attribution

If using Google's data-driven model:

• YouTube gets partial credit for assists
• More accurate for upper-funnel impact
• Shows true contribution across touchpoints

Halo Effect Measurement

YouTube impacts other channels. Track:

• Brand search volume increase
• Direct traffic increase
• Other campaign performance during YouTube flights

If brand search rises 20% during YouTube campaigns, YouTube is working even if direct ROAS is low.

Reporting Framework

Weekly report structure:

1. Tier 1 performance (reach, view rate, CPM)
2. Tier 2 performance (engagement, CTR, CPA trend)
3. Tier 3 performance (conversions, ROAS)
4. Audience pipeline health
5. Cross-channel impact

Blended YouTube ROAS

Calculate overall YouTube efficiency: Total YouTube Revenue / Total YouTube Spend = Blended ROAS

Healthy target: 2-4x blended Tier 3 carries the efficiency; Tiers 1-2 build the audiences that enable it.

Follow this guide to implement the 3-tier framework.

Week 1: Foundation

• Audit existing YouTube campaigns
• Create audience lists (all three tiers)
• Set up conversion tracking (including view-through)
• Plan creative needs by tier

Week 2: Tier 3 Launch

Start with remarketing (fastest results):

• Create Tier 3 campaign
• Target: Cart abandoners, product viewers
• Upload/create conversion-focused creative
• Set Target ROAS bidding
• Budget: 30% of YouTube budget

Week 3: Tier 1 Launch

Add prospecting:

• Create Tier 1 campaign
• Build custom intent audiences
• Add in-market and affinity layers
• Upload/create awareness creative
• Set CPM or Max Conversions bidding
• Budget: 35% of YouTube budget

Week 4: Tier 2 Launch

Connect the funnel:

• Create Tier 2 campaign
• Target: YouTube engaged, site visitors
• Add similar audiences
• Upload/create consideration creative
• Set Target CPA bidding
• Budget: 35% of YouTube budget

Week 5-8: Optimization

• Review performance by tier weekly
• Adjust creative based on view rates
• Refine audience targeting
• Optimize bids per tier
• Reallocate budget based on results

Ongoing: Monthly Reviews

• Assess tier-by-tier performance
• Check audience pipeline health
• Refresh creative (every 4-6 weeks)
• Evaluate cross-channel impact
• Plan next month's tests

Common Implementation Mistakes

1. Starting with Tier 1 only (no conversion path)
2. Same creative for all tiers
3. Judging Tier 1 by ROAS
4. Not excluding hot audiences from cold campaigns
5. Underfunding Tier 3 (where conversions happen)