What are custom labels and how can they help segment my feed for better bidding or reporting?

After running countless Google Shopping campaigns for both large and small eCommerce brands, I’ve noticed one thing: campaigns that leverage custom labels consistently gain a strategic advantage.

These little-known attributes, also referred to as “five open slots” in Google Merchant Center, allow me to group products in a way that fits how I want to bid, report, and ultimately drive results.

This blog post explains what custom labels are, how they work behind the scenes, and practical strategies for using them for better bidding and more accurate reporting. My goal is to share the insights I have gathered while refining campaigns and testing what truly delivers.

Understanding Custom Labels

Custom labels are special attributes you can assign within your Google Merchant Center feed. You can have up to five of them: custom_label_0 through custom_label_4. Think of them as blank fields you can tailor to segment your products by whatever factors matter most to your business.

How Does It All Work?

• You create rules or logic within your feed to populate custom labels (for example, labeling your products by price tiers, seasonal tags, performance, or any other characteristic).
• You then break these product groups out in your Google Ads Shopping or Performance Max campaigns.
• This grouping lets you analyze performance in more detail and adjust bids for each subset.

These labels do not alter your product titles or descriptions. They simply add extra data points behind the scenes so you can clearly see which items belong to which category or priority.

Adding all attrributes can be a lot of work, especially done manually. With a feed optimization tool you can get the attributes, product highlights, titles and descriptions written and optimized in minutes.

Why Custom Labels Matter for Feed Segmentation

I have found custom labels indispensable for gaining more control in campaigns. A single feed without segmentation misses opportunities to refine performance.

Initially, I relied on brand or product type segmentation. That method worked only partly. But once I used custom labels to mark bestsellers, high-margin items, or seasonal favorites, my ability to check performance and adjust bidding strategies improved dramatically.

Just one line:

Custom labels give me the tools I need to organize and optimize at exactly the right level.

How Custom Labels Improve Bidding and Reporting

Below are some key ways custom labels fit into broader strategies.

1. Better Bid Control

• Focus on star performers: If certain products have consistently produced a high Return on Ad Spend (ROAS), assigning a label like “high_roas” lets me isolate these items and bid more confidently.
• Reduce costs on underperformers: I might set lower bids on items with low margins or high CPAs.
• Seasonal campaigns: During busy periods, items labeled “holiday” can receive a budget boost, ensuring I outbid competitors for top-converting items.

2. Granular Performance Analysis

• Reports at scale: Instead of grouping solely by brand or category, I can filter by any factor that matters.
• Comparisons: It becomes simple to compare how discounted products perform against full-priced items when they’re labeled clearly.
• Quick decisions: I can immediately see whether discounted items achieve a better return than standard inventory.

3. Strategic Budget Allocation

• Prioritize profitable segments: It doesn’t make sense to keep your entire product line under one daily budget when some items generate much higher profit.
• Justify reallocations: If one brand exceeds another according to the custom label segmentation, I direct more spend to the better-performing segment.

4. Better Campaign Organization

• Easy to read: Custom labels keep campaigns organized. I don’t need to memorize every product or SKU because I rely on my labeling system.
• Layered structure: I can combine labels such as one for “high margin,” another for “best seller,” and another for “seasonal favorite.”
• Scalable: As the product catalog grows, I can add new products under existing labels or create new ones without reworking the entire structure.

Case Studies and Real-World Impact

It is one thing to discuss labeling in theory; it is another to see how it works. I recall a Danish client with a vast product catalog ranging from hats to luxury watches. They segmented by multiple criteria—price level, bestseller status, and time of year—and witnessed a 21% increase in conversion rate.

They achieved this by:

• Applying a label for price (for example, “price_range: under_50”).
• Tagging top-selling items with “best_seller: yes.”
• Using a “seasonal: holiday” label for items that perform best at specific times.

Their Shopping campaign then recognized that $300 watches merited higher bids than $15 hats while still noting that hats sold well before winter. That level of detail made a real difference in their conversion rate.

Key Strategies I Love

I have tried various approaches. Here are my favorites.

Strategy 1: Performance-Based Labeling

Using actual performance data is the most straightforward method. If a product consistently earns a high ROAS, I give it a label like “top_roas.” Conversely, if an item struggles with a high CPA, I might mark it as “low_perf.” This clear link between performance and bidding helps me fix inefficiencies and focus on the items that perform best.

Some common breakdowns include:

• ROAS Tiers: For example, “high_roas,” “medium_roas,” “low_roas.”
• CPA Tiers: For example, “under_10_cpa,” “10-20_cpa,” “above_20_cpa.”

Strategy 2: Price Bucket Labels

When a store has items ranging from $5 to $5,000, treating them all the same isn’t effective. A product priced at $50 may behave differently from one priced at $500.

Common buckets:

• Under $50
• $50–$150
• $150–$300
• Over $300

These aren’t fixed categories; many feed management tools let you set them up however you prefer. I enjoy slicing by price because it is straightforward. Also, it’s easy to see how different price points affect click volume and conversion rate.

Strategy 3: Profit Margin Labels

Profit margin labeling is an advanced extension of pricing segmentation. With margin-based labels, I allocate more budget and higher bids to items that deliver better profit margins.

Example:

• A baseball cap might sell for $20 but net only $5 in profit after production and shipping.
• A leather watch might sell for $150 and net $80 in profit.

If both items are treated the same, there is a risk of underbidding on the watch and overbidding on the cap. Margin labeling helps correct that imbalance.

Strategy 4: Seasonal Labels

For items that follow predictable cycles—like winter coats, swimsuits, or holiday decorations—seasonal labels are very useful. Label your holiday decor as “seasonal_winter” or swimsuits as “seasonal_summer” so you can pause, boost, or lower bids based on the season. This method lets you adjust bids without constantly reworking your feed structure.

Strategy 5: Sale or Promotional Labels

If you often run promotions, mark these products in your feed with a label such as “promo” or “on_sale.” When I see these labels in performance reports, I can quickly decide if the discount is driving enough conversions to justify spending more on ads. In many cases, on-sale items bring in better conversions, which makes a temporary bid increase worthwhile.

Here’s a single-line paragraph that sums it up:

A sale label is like turning the volume up in a crowded room.

It is something that can be quickly deactivated once the promotion ends.

Common Implementation Considerations

I have learned a few lessons along the way.

Dynamic vs. Static Labels

• Static labels: Assigned manually and updated infrequently. This is simple but requires regular review as product details change.
• Dynamic labels: Created using automated rules based on inventory data (for example, stock levels, margin, or sales pace). While setting them up takes more effort, they save a lot of time as your catalog grows.

Testing and Iteration

• Keep it flexible: I always revisit the labeling system monthly or quarterly to ensure the logic still meets current business objectives.
• A/B test: If unsure whether a price-based, margin-based, or performance-based approach works best, run tests comparing different setups and measure the resulting ROAS and CPA.

Automation Requirements

• Use feed management tools: For large catalogs, manual labeling can be overwhelming. Tools like DataFeedWatch, WakeupData, or Feedonomics let you create rules (for example, “IF price < $50 THEN custom_label_0 = under_50”).
• Multiple data sources: Sometimes I combine data from CRM systems or shipping costs to get a more accurate profit margin before feeding that into the label logic.

Using a Table for Data Organization

Here is a sample table that shows a basic structure for custom labels in a feed. It is simplified but illustrates how labels can match your business needs:

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In a live setting, you would define your own naming conventions and possibly use attributes in your feed management system to assign labels automatically.

Steps to Implement Custom Labels in Google Merchant Center

Some may feel overwhelmed by the idea of adjusting feed attributes, but the process is quite straightforward.

1. Identify Key Business Drivers
   • Does a product’s margin drive most sales?
   • Is it important to boost seasonal items?
   • Do you need to quickly spot bestsellers?
   • Focus on your top one to three factors.
2. Plan Out Your Labels
   • Start with a few labels so the feed does not become too complex.
   • Use a consistent naming system. For example: “price_range_low,” “price_range_mid,” “price_range_high.”
3. Set Up Feeds or Rules
   • In your feed management tool, create rules that assign these labels.
   • Alternatively, add them manually if your catalog is small.
4. Upload and Validate
   • Check that your feed displays the new labels in the correct format.
   • Look for any errors in Google Merchant Center.
5. Adjust Your Campaign Structure
   • In Google Ads, separate products by the custom labels (for example, create ad groups for “high_margin” versus “low_margin” items).
   • Modify bids or budgets based on these segments.
6. Monitor and Optimize
   • Keep an eye on performance data.
   • Tweak bid multipliers, budgets, or even label assignments if results differ from expectations.

Avoiding Common Pitfalls

Even though custom labels offer many benefits, here are some issues to watch for:

1. Label Overload
   Avoid creating too many labels. An overloaded feed is hard to manage and interpret. Keeping it simple often works best when starting out.
2. Inconsistent Definitions
   For instance, if “high_margin” is defined as a product with more than a 50% gross margin, stick to that definition consistently.
3. Neglecting Seasonal Updates
   Seasonal labels only work if updated regularly. Do not use “winter” tags all year if they are only relevant during certain months.
4. Forgetting to Revisit the Strategy
   As products and markets change, make sure your label strategy remains current.