Google Merchant Center Custom Labels: The Complete Strategy Guide

What Are Custom Labels and Why Do They Matter?

Custom labels are free-form attributes you add to your product feed to organize products into groups that make sense for your business — regardless of how Google categorizes them. You define the values; you decide what they mean.

Here's why this matters: Google Shopping campaigns don't let you bid differently by profit margin, by customer rating, or by stock level. But with custom labels, you can create those distinctions yourself and use them to build targeted Shopping campaign structures that bid higher for your most profitable products and lower for your worst performers.

Without custom labels, your Shopping campaigns treat a $400 margin product the same as a $10 margin product. With custom labels, you can isolate your best products and give them the budget and bidding they deserve.

The Five Custom Label Slots Explained

Google allows five custom label attributes per product: custom_label_0 through custom_label_4. Each can hold a single value (string) up to 100 characters. There's no required naming convention — you define what each label means.

Think of each slot as a dimension for segmentation:

• custom_label_0 — Margin tier (high-margin, mid-margin, low-margin)
• custom_label_1 — Seasonality (year-round, summer, holiday, clearance)
• custom_label_2 — Performance tier (bestseller, new-arrival, slow-mover)
• custom_label_3 — Promotion status (on-sale, full-price, bundle)
• custom_label_4 — Inventory status (high-stock, low-stock, backorder)

You don't have to use all five. Start with one or two and build from there. The key is choosing segmentation dimensions that actually inform bidding decisions.

7 Custom Label Strategies That Drive Real Results

1. Margin-Based Labels

The most impactful use of custom labels. Calculate gross margin for each product and assign tiers:

• high-margin: 60%+ gross margin
• mid-margin: 30-60% gross margin
• low-margin: under 30% gross margin

In your Shopping campaigns, bid aggressively on high-margin products and more conservatively on low-margin items. This is especially powerful with Smart Bidding — you can set different target ROAS values per product group based on margin labels.

2. Bestseller vs. Long-Tail Labels

Segment products by historical sales volume:

• bestseller: top 20% of products by revenue
• mid-performer: next 30%
• long-tail: bottom 50%

Your bestsellers deserve more impression share and more budget. Put them in a high-priority campaign with tighter bidding control. Long-tail products can run in a catch-all campaign with lower bids — they might surprise you with niche traffic.

3. Seasonality Labels

Tag products by their peak selling window:

• holiday: November-December peak
• summer: June-August peak
• back-to-school: August-September peak
• evergreen: consistent year-round demand

Use scripts or manual updates to increase bids on seasonal products as their peak season approaches, and pull back during off-season. This avoids wasting budget on seasonal products when their demand is flat.

4. Price Tier Labels

Shopping behavior differs dramatically by price point. Customers browsing $20 items behave differently than those looking at $200 items.

• budget: under $50
• mid-price: $50-$150
• premium: $150+

Segment these into separate campaigns or ad groups. Premium products need higher bids to compete for buyers with commercial intent — they're worth it because conversion value is higher.

5. New Arrivals Label

New products have no performance history. Google's algorithms don't know yet whether to show them prominently. Help them by creating a "new-arrival" label and running a dedicated campaign for new products with sufficient budget to gather data quickly. After 30 days, remove the label and let performance data guide bidding.

6. Clearance / Sale Labels

Products going on clearance behave differently than full-price items. Tag clearance items with a "clearance" custom label and route them to a separate campaign. You can bid lower on clearance (since margins are compressed) while still maintaining visibility.

7. Return Rate / Problem Products

If you track return rates by product, use custom labels to flag high-return products. Some stores create a "review" label for products with return rates above a threshold. This is less about bidding and more about a workflow trigger — products in this bucket get reviewed monthly for description accuracy, sizing guidance, and quality control.

How to Add Custom Labels to Your Feed

Option 1: Supplemental Feed in GMC

This is the cleanest approach for most stores. Create a Google Sheet with two columns: your product ID and the custom label value. In GMC, go to Products → Feeds → + Feed and select "Supplemental feed." Upload your sheet and map the column to the appropriate custom_label attribute.

Format example:

id | custom_label_0
ABC123 | high-margin
DEF456 | low-margin
GHI789 | high-margin

Option 2: Add to Primary Feed

If you control your primary product feed (via a feed app or direct API integration), add custom label columns directly. Most feed management tools (DataFeedWatch, Feedonomics, Channable) support custom label fields natively.

Option 3: Shopify / WooCommerce Tags

If you tag products in Shopify or WooCommerce, many feed apps can map product tags to custom label attributes automatically. For example, tag a product "high-margin" in Shopify and have your feed app push that tag to custom_label_0.

Using Custom Labels in Google Ads Shopping Campaigns

Once your labels are in your feed and syncing to Google Ads, here's how to use them:

1. In Google Ads, open your Shopping campaign
2. Go to Product Groups and click the "+" to subdivide
3. Select Custom label 0 (or whichever label you want to segment by)
4. Google will show you the values present in your feed for that label
5. Select each value to create separate product groups
6. Set different bids for each group based on your strategy

For Performance Max campaigns, custom labels work through asset groups. Create separate asset groups for different product segments (using custom labels as the subdivision criteria) and tailor your bidding and assets per group.

Common Custom Label Mistakes

Mistake 1: Too Many Label Values

If you create 20 different custom label values for a single label, you end up with 20 product groups that are too granular to manage effectively. Keep each label to 3-5 values maximum.

Mistake 2: Labels That Don't Change

Custom labels only provide value if you actually use them to bid differently. If all your products get the same bid regardless of their label, you're adding complexity with no benefit. Commit to different bid targets per label value before labeling anything.

Mistake 3: Not Updating Labels

A "new-arrival" label on a 12-month-old product, or a "clearance" label on a product that's back to full price, creates incorrect campaign segmentation. Set a calendar reminder to audit and update labels monthly.

Mistake 4: Ignoring Margin Labels

The single most impactful use of custom labels is margin-based bidding — yet most store owners never calculate margin per product. Take the time to do this math. It's the difference between campaigns that grow profitably and campaigns that generate revenue but no profit.

For more on feed strategy, see our guide: Product Feed Optimization: 15 Tactics That Move the Needle