Become an Expert on Google Shopping, Chapter 6: Six Ways to Profit from the Power of Custom Labels (and Hack COGS!)

December 20, 2016 Joe Hall

In our previous chapters on mastering Google Shopping and Product Listing Ads (PLAs), we've covered Google Shopping basics, clean data feeds, feed optimization, account structure and PLA bidding for Google Shopping. In Chapter Six of our seven-part series, we'll get advanced with the power of Custom Labels...and show you how to hack your PLAs to incorporate COGS!

Become an Expert on Product Listing Ads: Six Ways to Profit from the Power of Custom Labels (and Hack COGS!)

Congratulations - you’ve arrived at Chapter Six of our series on Product Listing Ads (PLAs). We’ve already covered Google Shopping basics, cleaning your data feed, optimizing your Google Shopping feed, structuring your account and bidding for Google Shopping.

Now, we’ll start heading into a new direction - how advanced SEM professionals use Custom Labels to drive specificity and powerful testing...and even factor in Cost of Goods Sold (COGS) - something that Google doesn’t normally cover. Master these tools and put yourself ahead of the pack!

So, what are Custom Labels, again? 
While we briefly touched on them in our chapter on keeping your Google Shopping data feed clean, Custom Labels are descriptors that you can use to further classify product groups. You can create up to five Custom Labels, but each one can have 1,000 different values.

Typically, Custom Labels are used to mark things like seasonality (for instance, creating a “season” Custom Label with four values: “Winter,” “Spring,” “Summer” and “Fall”) and sales promotions (for which you will also need a separate promotional column created in your feed as well by your engineering team). However, as we’ll cover shortly, Custom Labels have many, many other uses. 

And why do I care about Custom Labels, again?
Oh, you care, all right. Or at least, you will once we’re done here. Here’s why: Custom Labels, by default, exist outside of your account structure - all promotional copy is created in Google Merchant Center - which means that you can make changes, reclassify products and test exhaustively without risk of breaking your account structure and while keeping your feed clean. However, you can then mirror your Custom Labels in your account structure to unlock additional, powerful benefits - which we’ll cover below.

Here’s where things get interesting - Custom Labels let you reclassify your product groups using modifiers that don’t even exist in standard Google parameters - custom modifiers that mean the most to you. For instance, you can use them to label new SKUs versus old SKUs to quickly and easily compare the new product line’s performance head-to-head with last year’s models - we’ll cover a specific example of this shortly.

And here’s the really cool part - you know how Google typically doesn’t factor in COGS in your Google Shopping calculations? Here’s how you can set a workaround - use Custom Labels to break out your products by margin levels.

Over time, as you pull your weekly and monthly reports comparing your 10% margin products against your 15% margin products, you can run a regression analysis incorporating your revenue and ad spend figures (which Google does give you) to approximate COGS calculations (which Google doesn’t give you).

Become an Expert on Product Listing Ads: Custom Labels provide huge flexibility outside the confines of Google's standard parameters.
Custom Labels are set at the product level group, but allow great flexibility for tracking ad hoc performance.

Six key best practices for Custom Labels 
Have we got your attention yet? Here are six powerful Custom Labels tactics you can start using today:

  1. Use Custom Labels to track values not covered by Google - As we discussed above, there are a huge variety of different modifiers that Custom Labels can be set to track, including non-Google values such as margin, seasonality, and new vs. old SKUs. We strongly encourage you to use Custom Labels to get more out of the exact modifiers that are relevant for your specific business - whether you’re a specialty beverage retailer that peddles products in such categories as “single malt,” “blended malt,” “corn” or “rye”...or a gourmet vegan snack shop that needs to break out products listed as in categories such as “tofu,” “quinoa” or “gluten-free.”
     
  2. Use Custom Labels for large-scale testing - As we mentioned, the conventional use of Custom Labels is to handle large-scale modifiers, such as with seasonal labels for each of the four seasons, or simply “on-season” and “off-season.” In this regard, you can add an additional basic layer of tracking to the tools Google already gives you. Mirroring your Custom Labels within your account structure for testing purposes in this and other cases does require some extra work, but once you’ve finished the tough task of implementing this once, you’ll be able to reap ongoing benefits.
     
  3. Use Custom Labels for fine-tune testing to mitigate data scarcity - While the broad testing of Custom Labels for basic modifiers such as season is helpful, keep in mind that each of your Custom Labels can have up to 1,000 modifiers. Once you have your Custom Labels mirrored in your account structure, you can use their specificity to carry out some heavy-duty testing. Here’s a sample use case:

    An apparel retailer already has a set of designer blue jeans that it knows sells well and brings in good margins. However, it receives a new set of jeans, which are untested but might have a few SKUs that could become bestsellers. In order to justify carrying this new line of products, the retailer sets a goal that 35% of sales must come from this new inventory to justify the investment, while breaking out the known bestseller jeans into a separate campaign - setting it to be excluded from the new jeans campaign (or setting at a minuscule bid that will get no traffic).

    Here’s a sample account structure:

    Campaign 1 - All SKUs
         Clothes
              Jeans -
                   Custom Labels (New Jeans) - $10 bid with a CPA target of $100
                   Custom Labels (Old Jeans) - $10 bid with a CPA target of $45
                        Designer Group A - $5 bid
                        Designer Group B - $3 bid
                        Designer Group C - $7 bid
                        Bestseller Jeans - Exclude from Campaign 1 (or set to $0.01)
                   All Other Jeans - $2 bid
    (Where: 
    - Designer Group A gives us a 35% cut of sales
    - Designer Group B gives us a 25% cut of sales
    - Designer Group C gives us a 75% cut of sales)

    Campaign 2 - Bestseller Jeans
         Clothes
              Bestseller Jeans - $15 bid
              All Other Jeans - Exclude from Campaign 2
     
  4. Use Custom Labels to inform your bidding strategy - While we’ve discussed bidding strategy for Google Shopping previously, one of the finer details that separates great SEM managers from good ones is the ability to use incrementality - making gradual performance improvements here and there to effect a massive net lift in performance. By using the granularity of Custom Labels to identify better-performing SKUs by season or by margin levels, you can then take those insights directly into bidding. By using Custom Labels to break out your pharmacy items by seasonality and approximate dates versus traffic, you might observe that bidding on summer-themed keywords picks up a week before Memorial Day - and now you know exactly when to start bidding up on “suntan lotion” and “mosquito spray.”  
     
  5. Use automation to verify your Custom Labels - While Custom Labels offer you a powerful level of sophistication and specificity - especially when you mirror them in your account structure - this power comes at a price. We recommend looking into an automated solution to add and double-check your Custom Labels. This is because once you’ve set up your campaign structure to mirror your Custom Labels, any errors or improperly categorized products may get tossed into your Everything Else group, causing it to get buried and not surface. In a worst-case scenario, this may lead to a big drop in revenue if the incorrectly categorized product just happens to be one of your important bestsellers. Example:

    Campaign 1 - All Widget SKUs
         Items for Sale
              Widgets -
                   Custom Labels (15% margin widgets)
                   Custom Labels (10% margin widgets)
                   Custom Labels (5% margin widgets)
              All other widgets

    Campaign 2 - Bestseller Widgets
         Items for Sale
              Bestselling Widget (erroneously missing a Custom Label)
              
    Everything Else - Exclude from Campaign 2

    In the above example, if the “Bestselling Widget” accidentally doesn’t get tagged with a Custom Label, Google will likely assume that this SKU belongs in your everything else category. This could mean that suddenly, your bestseller might become a no-seller that never gets surfaced at all!
     
  6. Once Custom Labels are in place, take advantage of more-frequent, ad hoc reporting - Once your Custom Labels have been implemented, you can then use them to more-frequently check performance of different product groups. Instead waiting for the quarterly business review (QBR), you can check performance of various labeled groups monthly, weekly and even daily.

    This increased speed of reporting will you isolate problematic SKUs (and exclude them, if need be) or elevate bids for rising stars. This could mean the difference between either setting-and-forgetting a quarterly Google Shopping campaign and coming up with underwhelming numbers at the end of three months...or alternately, checking your campaigns daily or weekly, heading off potential problems at the pass (by quickly identifying a low-margin SKU that’s eating up too much traffic or a high-margin SKU that accidentally got buried) and finishing out the quarter strong!

    Become an Expert on Product Listing Ads: Seasonality is just the beginning with Custom Labels for PLAs
    Now you know that breaking out Shopping by season is just the beginning.

    I recall working with someone, who knew someone, who had a client that wanted to track the previous year’s best-selling SKUs against the current year’s new SKUs. With Custom Labels in place, this intrepid SEM professional was able to quickly tell, week over week, which SKUs were gaining momentum and was also able to much more quickly provide comparison reports among the different products.

    By proactively setting up a Custom Label structure for this merchant, the certain someone I’m talking about quickly became a hero with a very, very grateful client. Let’s just say they were really happy with me. With him. I mean, with the anonymous SEM professional I mentioned. (I don’t like to brag, but I think I covered that up well.)

That about does it for Chapter Six of our series on Google Shopping. Please check our previous chapters and stay tuned for the final chapter, coming soon!

About the Author

Joe Hall

Joe Hall is a product marketing manager at QuanticMind. He uses his subject matter expertise to help companies take their advertising to the next level. Joe previously worked at the prestigious agency 3Q Digital as an Account Lead and earned his Bachelor’s of Science in Commerce, Marketing from Santa Clara University.

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