Is your prospecting budget
spent on retargeting
& existing customers?
Google Ads prospecting and retargeting blur together in three common ways: existing customers are not separated into dedicated campaigns, high target ROAS settings push spend towards warmer audiences, and retargeting audiences are left on observation instead of targeting. The fixes are dedicated existing-customer campaigns with Customer Match exclusions from prospecting, a target ROAS set against contribution margin and new customer acquisition cost, and audiences switched to targeting with Optimised Targeting and Audience Expansion turned off.
Should existing customers have their own Google Ads campaigns?
Existing customers should have their own Google Ads campaigns, with a separate setup and strategy from new customer prospecting, so they can be won back profitably while being excluded from prospecting.
There's not much wrong with having existing customers re-convert via Google Ads. A lot of CMOs might read this and think, "why are we not only going after new customers?"
The harsh truth is: if they searched again for a product without using your brand term, they weren't your customer to begin with. You were simply borrowing them.
Having dedicated campaigns solely for targeting existing customers - with a separate setup and strategy from your new customer prospecting - helps win those customers back and keeps your cash flowing.
Yes, you need to re-acquire them cheaper than the first time. Yes, this is possible with a higher tROAS target, but we Google Ads experts still need to think about the whole ecosystem including your retention strategy outside the platform to lower CAC. Think loyalty programmes, automation flows, SMS win-back campaigns.
You can take it further in Google Ads by creating distinctive new vs. returning conversion goals - so smart bidding gears more towards existing customers within those campaigns. Flip side: you should be excluding or down-weighting existing customers (hello, Customer Match lists) from your new customer prospecting campaigns.
High tROAS targets
As you start increasing tROAS targets, Google Ads progressively adjusts the auctions it enters to find warmer audience pools who are more likely to convert. After all, you've raised the efficiency target - the algorithm needs to meet it.
In order to do this, it goes warmer: going after site visitors, cart abandoners, existing customers, email subscribers and so on. A high tROAS target will inadvertently dilute your new customer prospecting, increasing the proportion of retargeting as the audience pool gets progressively warmer.
The solution is to understand your breakeven margins and measure contribution margin in relation to NCAC. This way you can adjust the tROAS target as a directional signal - pushing towards warmer or colder audiences - based on your actual campaign profitability and new customer acquisition rate. Every Google Ads audit I conduct starts here.
You can read more about tROAS as a directional signal and how to set targets against real margin data in the Google Ads KPI guide.
Should Google Ads retargeting audiences be set to targeting or observation?
Google Ads retargeting audiences should be set to Targeting, not Observation, because Observation only reports on the segment and does not restrict who sees the ads, so the retargeting campaign ends up prospecting to everyone.
If you've created dedicated retargeting campaigns in the account, that's great - but it's not enough. You need to actively confirm that the audiences you're targeting (basket abandoners, email subscribers, promo purchasers) have their audience targeting option set to Targeting, not Observation.
Observation simply tells Google Ads to report performance insights for that segment - it does not restrict your targeting to solely that audience base. Your "retargeting" campaign is effectively prospecting to everyone.
Make sure you turn off Optimised Targeting and Audience Expansion within your campaigns. You run into the same problem as observation audiences, but it's an even deeper black box - Google can silently broaden your audience well beyond your intended targeting without a clear audit trail.
For more on diagnosing and optimising campaigns beyond audience settings, see the Google Ads Campaign Optimisation & Troubleshooting Hub.
Further reading
Why is new customer acquisition stalling?
Diagnose the reasons your account is cycling through warm audiences rather than generating genuine new demand.
Diagnose key Google Ads account issues in 20 mins
Before touching bids or budgets, a logical order to work through when diagnosing what's actually broken in the account.
Should you bid on your own brand terms?
How to prove whether branded spend is incremental or just harvesting traffic you would have won anyway.