If you own a service-based business that only serves a local area or region, then the geotargeting tools in Google's AdWords may be very helpful. To activate the geotargeting features in your AdWords account, click on the "Campaign Management" tab, and then go to your Campaign Summary. Click on any of your campaigns, and you should see an "Edit" link next to the Targeting area.
Once you've clicked Edit, you'll get a popup window with a seemingly ordinary Google Map to the right. Within this window, you can choose precisely where you want your ads to reach. Perhaps you want to advertise lower prices to areas closer to you and higher prices to areas farther away. Maybe you want to avoid residential areas and focus on dense business areas or vice versa. With focused targeting, your options are endlessly customizable.
Under the Search tab, you can type in any location that you're interested in by ZIP code, address, city, state or some combination thereof. By default, you will see a blue circle with a radius of 20 miles displayed on the map. Simply click "Show ads here" to make your campaign active within this area.
The Browse tab is particularly useful if you're targeting an area that you're not too familiar with. For example, maybe you're targeting Spanish speakers with your ads. So, you'd like to make your campaign visible in parts of South America, but you've never been there. Then you can browse all the countries by name and make your selection from this menu. You can be as specific as you'd like to be all the way down to the city level.
Click on the Custom tab to really fine-tune your selections all the way down to the neighborhood level. You can type in a location just as in the Search tab, but here you can choose the radius with the box "Show my ads within __ mi." Instead of a simple circle, you can also click points on the map to form a closed polygon around the area that you want to cover. This is a great way to take into account business areas, geographical features, or transportation considerations.
If you're ever unsure of whether or not you are targeting the right area, the Satellite feature of Google Maps comes in handy here. Maybe your business caters to wealthy residences. Factoring this in issimple. Just go into Satellite mode. Zoom in, and look for golf courses, large rooftops, or other indicator that say that this is a "good area" for you. Then simply draw a polygon around this area.
Keep in mind that geotargeting is imprecise. So, try to make your selections more inclusive rather than too pinpointed.