Most local businesses set up Google Ads, pick their city from a dropdown, and assume they're targeting correctly. They're usually not. Google's default location settings are designed to maximize impressions for Google, not conversions for you. I've audited hundreds of local service campaigns, and bad location targeting is the #2 budget killer after missing negative keywords.
This guide covers exactly how to target local customers properly, including the one setting that wastes 20-30% of most local businesses' ad spend.
What's the difference between radius, city, and zip code targeting?
Google Ads offers three main ways to target local areas: radius targeting (a circle around a point), named locations (cities, metro areas, states), and zip/postal code targeting. Each has different precision levels and trade-offs, and the right choice depends on your service area.
| Targeting Method | Precision | Best For | Limitations |
|---|---|---|---|
| Radius (miles/km) | High | Businesses with a defined service radius (plumber, HVAC, electrician) | Circle doesn't follow city boundaries, may include/exclude areas awkwardly |
| City/Metro | Medium | Businesses serving entire cities or metro areas | City boundaries can be large; "New York City" includes all 5 boroughs |
| Zip Code | Very High | Businesses targeting specific neighborhoods or income demographics | Tedious to manage at scale; some zips have very low search volume |
| State | Low | E-commerce or statewide services | Too broad for most local services |
| County | Medium | Rural markets where city targeting misses outlying areas | Less common, good for service businesses covering entire counties |
For most local service businesses (plumbers, roofers, HVAC, electricians), I recommend starting with radius targeting around your shop or office. A 15-25 mile radius covers most reasonable service areas without bleeding into markets you can't serve.
If you serve specific neighborhoods or want to exclude certain areas, zip code targeting gives you the most control. It's more work to set up, but you can target affluent zip codes or exclude areas with low close rates.
What does "presence" vs "presence or interest" mean in location targeting?
This is the single most important location setting in Google Ads, and getting it wrong can waste 20-30% of your budget. "Presence" targets people physically located in your area. "Presence or interest" targets people located in your area OR anyone anywhere who has shown interest in your area.
Google defaults to "presence or interest," and this default is a trap for local service businesses.
Here's what happens: you target "Austin, TX" for your plumbing business. With "presence or interest," your ads also show to someone in Chicago who searched "Austin TX plumber" because they're researching for a rental property they own, or they're moving soon, or they just Googled out of curiosity. You pay $25 for that click. They'll never hire you.
Always change this setting to "Presence: People in or regularly in your targeted locations."
To find it: Campaign Settings > Locations > Location options. Change "Target" from the default to "Presence."
This one change typically reduces wasted spend by 15-25% for local service businesses. I've seen it save some businesses hundreds of dollars per month.
One exception: if you're a real estate agent or a tourism business, "presence or interest" might make sense because people research your market from afar before visiting or buying. For every other local service, use "presence" only.
How do I exclude non-service areas in Google Ads?
You should exclude geographic areas you don't serve to prevent your ads from showing to people you can't help. This is done through negative location targeting, which works alongside your positive targets to refine exactly where your ads appear.
There are three layers of exclusion I recommend:
1. Exclude states you don't serve. If you're a roofer in Dallas, exclude all states except Texas. This catches people using VPNs, traveling, or whose location Google misidentifies.
2. Exclude nearby cities outside your service area. If you serve the north side of a metro but not the south side, exclude those southern cities or zip codes specifically.
3. Exclude entire countries (if applicable). Google Ads can show your ads internationally even if you target a US city. Excluding non-US countries is a safety net against accidental international clicks.
| Exclusion Type | How to Set It | Why It Matters |
|---|---|---|
| Non-service states | Campaign > Locations > Exclude | Prevents cross-state leakage from VPNs and location errors |
| Non-service cities/zips | Campaign > Locations > Exclude | Refines your metro targeting to actual service area |
| Non-target countries | Campaign > Locations > Exclude | Blocks international traffic entirely |
At VibeAds, we automatically compute negative locations when you set up a campaign. If you target 3 cities in Texas, we exclude the other 49 states plus all non-US countries. It sounds obvious, but most advertisers don't do this and end up paying for clicks from people 1,000 miles away.
For a comprehensive list of location targeting mistakes and how to fix them, check our 37 Google Ads Mistakes Checklist.
How do location bid adjustments work?
Location bid adjustments let you increase or decrease your bids for specific geographic areas based on their performance. If leads from certain zip codes convert at 2x the rate, you can bid 20-30% more there. If an area generates clicks but no calls, you can reduce bids or exclude it entirely.
Here's how to use them effectively:
- Run your campaign for 2-4 weeks with uniform bids across all locations
- Check geographic performance data in Google Ads (Reports > Predefined > Geographic)
- Identify patterns:
- Which cities/zip codes generate the most conversions?
- Which areas have high spend but zero conversions?
- Where is your cost per lead lowest?
- Apply bid adjustments:
- +15-30% for top-performing areas
- -20-40% for underperforming areas
- Exclude areas with significant spend and zero results
| Performance Signal | Recommended Action | Bid Adjustment |
|---|---|---|
| High conversions, low CPA | Increase bids | +15% to +30% |
| CPA below average, 3+ conversions | Moderate increase | +10% to +15% |
| CPA above 2x average, 20+ clicks | Reduce bids | -20% to -40% |
| 30+ clicks, $50+ spend, 0 conversions | Exclude location | Remove entirely |
| Low CTR (<50% of average), 50+ impressions | Investigate, possibly reduce | -10% to -20% |
A critical nuance: don't make adjustments too early. You need at least 30 clicks per location before the data is statistically meaningful. Making bid changes based on 5-10 clicks is just reacting to noise.
How do I analyze geographic performance in Google Ads?
Pull your geographic report from Google Ads (Reports > Predefined Reports > Geographic > User Location Report) and look at three metrics per location: cost per conversion, conversion rate, and total spend. This tells you where your money is working and where it's being wasted.
The user location report shows where people were physically located when they clicked your ad. This is more accurate than the "geographic report," which also includes "interest" locations.
Here's what to look for:
Red flags (wasting money):
- A city with $200+ spend and zero conversions
- An area where CPC is 2x your account average
- Locations far outside your service area appearing in the report (sign your exclusions aren't working)
Green flags (double down):
- A zip code with cost per lead 50% below your average
- An area with consistently high conversion rates month over month
- Neighborhoods where your average job value is highest
How to act on it:
- Export the report monthly
- Sort by cost (highest first) to find your biggest spend areas
- Calculate cost per conversion for each meaningful location
- Apply bid adjustments to the top and bottom performers
- Exclude any location that's been spending without converting for 30+ days
Pro tip: cross-reference your geographic data with your CRM. Google Ads shows you where leads come from, but your CRM shows which leads become paying customers. A zip code might generate lots of leads but low close rates --- that's a different problem (maybe price sensitivity in that area) but still worth adjusting bids for.
Should I use demographic targeting for local ads?
Demographic targeting (age, gender, household income) can improve performance, but it should be used as a bid modifier, not as a hard filter. Excluding entire demographics can dramatically reduce your reach and may cause you to miss good leads.
Google Ads offers these demographic targeting options for Search campaigns:
- Age: 18-24, 25-34, 35-44, 45-54, 55-64, 65+
- Gender: Male, Female, Unknown
- Household Income: Top 10%, 11-20%, 21-30%, 31-40%, 41-50%, Lower 50%
- Parental Status: Parent, Not a Parent
For local services, household income is the most useful demographic signal. If you're a high-end kitchen remodeler or a roofing company, bidding more for top 30% income zip codes and less for lower income areas can improve your cost per qualified lead.
But be careful with hard exclusions. I've seen businesses exclude "age 18-24" for home services and miss all the young homeowners and property managers in that bracket. Use observation mode (bid adjustments) rather than targeting mode (hard filters) for demographics.
The honest limitation: Google's demographic data isn't perfect. About 30-40% of searches fall into "unknown" categories, especially on mobile. If you exclude "unknown" demographics, you lose a huge chunk of your potential audience.
How specific should my local targeting be?
Start broad and narrow down based on data. A 15-mile radius around your business is a good starting point for most local services. After 30 days, use your geographic performance data to cut underperforming areas and boost the ones that convert.
Here's my recommended approach by business type:
Emergency services (plumber, locksmith, towing): 10-15 mile radius. These customers need someone fast. They're not waiting for a plumber to drive 30 miles.
Scheduled services (roofer, painter, landscaper): 20-30 mile radius. Customers will wait a day or two for a good contractor, so wider targeting works.
Specialty services (pool service, tree removal): 25-50 mile radius. Fewer competitors, customers travel further for specialized work.
Urban markets: Use zip code targeting to focus on profitable neighborhoods. A 15-mile radius in a dense city like Chicago might cover millions of people, which is too broad for a small budget.
Rural/suburban markets: Use city + radius targeting. Zip codes in rural areas can have very low search volume, making granular targeting ineffective.
The golden rule: never target an area you can't service within the timeframe your customer expects. If your ads promise "same-day service" but your service area is so large that you can't realistically get there same-day, you're setting up bad customer experiences and wasted ad spend.
What about targeting "near me" searches?
You don't need to bid on "near me" keywords specifically. Google automatically matches "near me" searches to businesses in the searcher's vicinity based on your location targeting. If you target a 15-mile radius around Dallas and someone in that radius searches "plumber near me," your ad is eligible to show.
In fact, adding "near me" to your keyword list can sometimes backfire. Google treats "plumber near me" as a distinct keyword from "plumber" and may give it a different Quality Score. Your best bet is to target the core service keyword ("plumber," "emergency plumber," "drain cleaning") and let Google's location targeting handle the proximity matching.
What does help is including your city name in your ad headlines: "Dallas Plumber - Same Day Service." This signals local relevance to both Google and the searcher without relying on "near me" keyword matching.
One more thing: make sure your Google Business Profile is claimed and up-to-date. "Near me" searches increasingly trigger the Local Pack (map results) alongside paid ads. Having a strong GBP listing gives you a second chance to appear even if your ad doesn't win the auction.