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Product groups are used to specify which products from your Microsoft Merchant Center catalog should be included in a particular ad group.
After you create a shopping campaign, you want to create an ad group. That ad group includes a product group containing all of the products in your Microsoft Merchant Center catalog feed. However, you don't typically want an ad group to contain all products. Instead, you likely want each ad group to contain only very closely related products in order more effectively manage which ads show, and when. With product groups you can narrow down that default group to a customized list of specific products.
You can use the following attributes from your catalog feed to choose the specific products you want to include in any particular product group.
You can use multiple attributes to narrow your group even further. For example, you can create a product group based on brand and condition.
The best way to understand product groups is to see an example.
Let's say Matt is the owner of a small toy store and his catalog includes the following items:
|Merchant Product Identifier||Title||Brand||Category 1||Category 2||Product Type||Custom Label 0|
|1111||Toy 1||Tailspin Toys||Toys & Games||Indoor||Paint||Ages 1-5|
|2222||Toy 2||Wingtip Toys||Toys & Games||Indoor||Stickers||Ages 1-5|
|3333||Toy 3||Tailspin Toys||Toys & Games||Outdoor||Chalk||Ages 6-12|
|4444||Toy 4||Wingtip Toys||Toys & Games||Indoor||Glitter||Ages 6-12|
|5555||Toy 5||Tailspin Toys||Media||Indoor||DVD||Teens|
|6666||Toy 6||Wingtip Toys||Toys & Games||Outdoors||Sports||Teens|
|7777||Toy 7||Tailspin Toys||Media||Indoor||Books||Ages 1-5|
|8888||Toy 8||Wingtip Toys||Toys & Games||Indoor||Paint||Ages 6-12|
He wants his ad group to contain only toys for ages 1-5. To do that he would simply narrow the default product group down to a product group where Custom label = Ages 1 -5.
As another example, assume that Matt wants to create an ad group that contains only toys from Tailspin Toys for ages 1-5. He simply needs to create a product group where Brand = Tailspin Toys and Custom label = Ages 1-5.