Custom Labels:
The Hidden
Segmentation Tool

In the high-stakes world of UK eCommerce PPC, the difference between a scaling brand and a stagnant one often comes down to one thing: data granularity. While your competitors are busy tweaking their bids by ±5%, the elite players are restructuring their feeds to ensure that every single penny of ad spend is directed toward products that actually deliver bottom-line profit.

The primary vehicle for this control is the Custom Label system within Google Merchant Center. There are five of them (custom_label_0 through custom_label_4), and together they form a multi-dimensional matrix that allows you to segment your catalogue by margin, seasonality, product velocity, and even geographic constraints.

As a specialist eCommerce PPC agency, we view custom labels as the "logic layer" of a Google Ads account. In this deep-dive, we'll share the exact five strategies we use across our client accounts-from Shopify Plus giants to high-growth scale-ups-to turn generic Shopping campaigns into precision profit engines.

What custom labels are (and why Google gives you 5)

Technically, custom labels are five optional attributes in the Google Merchant Center product specification. Unlike the title, description, or google_product_category, custom labels are never shown to users. They are purely internal markers designed for the advertiser's benefit.

Google gives you five because that is generally the maximum number of dimensions an advertiser can manage before the campaign structure becomes unwieldy. In our experience, most brands only need 3 or 4 to achieve total control. The key is assignment consistency. You must decide what each label represents and apply it across your entire feed.

Without these labels, you are forced to use "everything else" catch-all campaigns, or segment by brand and category alone-neither of which accurately reflect the financial health of your business.

Strategy 1: Margin tier

This is the single most important strategy in this guide. Most retailers have a wide range of margins. Selling a £100 item with a 50% margin (£50 profit) is vastly different from selling a £100 item with a 15% margin (£15 profit). If you have a global account tROAS of 5.0, your cost-per-sale is £20.

In the first scenario, you've made £30 net profit. In the second, you've lost £5 after advertising costs alone-before you've even touched shipping or taxes.

We use custom_label_0 to divide the catalogue into three bands:

• High Margin (e.g., 40%+)Apply a lower tROAS (aggressive). We want to dominate impression share here because the return on investment is safe.
• Standard Margin (20-39%)Apply the account baseline tROAS. This is where most of your volume will likely sit.
• Low Margin (<20%)Apply a high tROAS (defensive). Only spend money here if it's incredibly efficient, or use these as "loss leaders" if you have a high Lifetime Value (LTV).

*Client Case Study: A UK home decor brand implemented margin-tiering and saw a 22% increase in net profit despite a 5% drop in total revenue. They stopped wasting money on high-revenue, zero-profit SKUs.

Strategy 2: Seasonality

Seasonality isn't a switch; it's a wave. We use custom_label_1 to tag products by their "peak" relevance. This is particularly vital for fashion, gifting, and outdoor sectors.

The mistake most brands make is using "Summer" or "Winter" labels. We recommend more granular labels that include the year or the "drop" name. For example: ss24_core, ss24_high_fashion, aw24_preview.

This strategy also prevents "inventory bloat." You can quickly identify which seasonal products are lingering in stock and apply a clearance label to move them at a lower margin but higher volume.

Strategy 3: Hero-SKU flag

The Pareto Principle (80/20 rule) is alive and well in Google Ads. Usually, a tiny fraction of your catalogue generates the majority of your sales. We use custom_label_2 to flag these "Heroes."

Why? Because Google's automation is greedy. If you put a Hero SKU in a campaign with 1,000 other products, the Hero will eat 90% of the budget. This is fine if it's profitable, but it means you're never gathering data on the other 999 products.

We recommend refreshing this label monthly. A "Hero" in December is rarely a "Hero" in February.

Strategy 4: New arrival vs evergreen

As mentioned, Smart Bidding relies on history. This creates a "Chicken and Egg" problem for new products. Google won't show them because they don't have conversion history, and they don't have conversion history because Google won't show them.

We use custom_label_3 to break this cycle. Any product launched in the last 30 days is tagged new_arrival.

Strategy 5: Geographic availability

For UK brands, shipping to Northern Ireland, the Highlands, or the Channel Islands often comes with a significant surcharge. If you're selling high-weight, low-value items, the shipping cost can completely negate the profit.

We use custom_label_4 to tag products as uk_mainland_only or zone_shipping.

In Google Ads, you can then exclude the uk_mainland_only segment from any campaign targeting the "Islands and Highlands" locations. This is a far more robust way of managing regional profitability than trying to set up complex shipping rules in Merchant Center alone.

Combining custom labels with campaign structure

The true power of custom labels is unlocked when you move from 1D segmentation to 2D or 3D matrices. Imagine a segment where:

• custom_label_0 = high_margin
• custom_label_2 = hero
• custom_label_3 = evergreen

This is your Golden Segment. These products deserve their own campaign, their own budget, and their own Performance Max Asset Group with high-quality video and image assets. They are the engine of your growth.

Setting up custom labels on Shopify, WooCommerce, Magento

You should never, ever rely on Merchant Center "Feed Rules" for your primary custom label logic. Why? Because Merchant Center is a downstream tool. If your source data changes, or if you switch feed providers, your rules can break silently, leading to thousands of pounds in wasted spend.

Common custom label mistakes

In our audits of over 500+ GMC accounts, we see the same patterns of failure. Avoid these to ensure your labels remain an asset, not a liability.

Reporting on Custom Labels: Measuring What Matters

Once your custom labels are live and your campaigns are segmented, the real fun begins: reporting. Most Google Ads reports focus on campaigns or ad groups. But with custom labels, you can run cross-campaign reports that show you the financial health of your entire business model.

In the Google Ads Report Editor, you can add "Custom Label 0" as a row and "Conv. Value / Cost" (ROAS) and "Profit" (if you have uploaded conversions with profit data) as columns. This will show you exactly how your margin bands are performing regardless of which campaign they sit in.

We also recommend setting up a custom dashboard in Looker Studio that pulls GMC data. This allows you to see "Feed Coverage"-what percentage of your products are missing labels-and ensures your automation isnt flying blind.

Frequently asked questions