Google Merchant Center Custom Labels: How to Use Them for Smarter Bidding

Published: 2026-06-09 | Category: Campaign Optimization

Custom labels are one of the most underused features in Google Merchant Center. They let you tag products with your own values, which you can then use to create campaign segments and apply different bids to different product groups. Done well, they turn a single shopping campaign into a precisely targeted bidding strategy.

What Custom Labels Are

Google Merchant Center gives you five custom label fields: custom_label_0 through custom_label_4. You populate them with any string value you want. Common uses include: margin tier (high-margin, low-margin), seasonality (summer, winter, evergreen), sale status (on-sale, full-price), inventory level (clearance, in-stock), or product performance (bestseller, slow-mover).

Setting Custom Labels in Your Feed

Add custom_label_0 (or any number 0-4) as a column in your feed with the value you want. The value must be consistent across products in the same group. If you use "high-margin" in one row and "High Margin" in another, Google treats them as different labels. Keep values lowercase and consistent. Feed rules can also assign custom labels based on other attributes, which is useful for rule-based segmentation like "if sale_price is less than price, set custom_label_1 = on-sale".

Using Custom Labels in Google Ads

Once your labels appear in the feed and Google has processed them, you can create product groups in your Shopping campaigns segmented by custom label. This lets you set a higher bid for high-margin products and a lower bid for products with thin margins. Without custom labels, you can only segment by category, brand, item ID, product type, or condition, which often does not align with your actual profitability structure.

Practical Segmentation Strategies

Margin-based bidding is the most common use case. Segment products into three or four margin tiers and bid proportionally. High-margin products can absorb a higher cost-per-click because they generate more profit per conversion. Sale status is another strong use case: products on sale typically convert at a higher rate, so a higher bid during a sale period can capture more volume while maintaining target ROAS.

Seasonality Labels

If you sell seasonal products, labeling them with their season lets you increase bids before the season starts and reduce them after. A swimwear label applied in March allows you to set a higher bid multiplier as summer approaches without manually adjusting thousands of products. Combine this with Performance Max asset group strategies for more control.

Reviewing Label Performance

In Google Ads, segment your Shopping campaign reports by custom label to see which segments are generating the most conversions, the best conversion rates, and the lowest cost-per-acquisition. Review this quarterly and adjust your label values and bids based on what you find. Custom labels are not a one-time setup: they require ongoing review to stay aligned with your actual product economics.