If you're a local business on a tight budget, you can save money on your advertising budget by targeting only specific locations with your AdWords campaigns.

It's pretty easy and straight-forward to use the geo-targeting feature in AdWords. Simply log into your campaign setting, the specify the areas you want to target. Your ads can be limited to certain countries, to certain states, to certain cities, or even a specific geographic radius, such as a 5-mile circle around your store. One of the neatest features is that you can draw your own target area using the map and your mouse. This is a great option when the radius feature just won't do, such as if your store is bordered by a lake to the north, or maybe a big industrial park to the east. This shape feature allows you to get extremely specific about exactly where you want your ad to appear.

Another great feature is the ability to exclude certain areas within your selected location. First, you chose the areas you want to target, then click the "exclude areas.." link and make your selection. So, if you want to run an ad offering free overnight shipping, you can target the entire United States, and then exclude the states of Hawaii and Alaska. Or, let's say you own a franchise. Many franchise agreements allow you to advertise only within a specific location, so you can easily exclude certain trade areas in your AdWords campaign.

So how exactly does this work? Actually, it's relatively simple: geo-targeted ads are shown based on the web surfers IP address. If I want to advertise my same-say-delivery flower shop, I can chose to display my ads only to surfers with IP addresses within a 3-mile radius of my store.

I definitely suggest you give geo-targeting a try. It's very easy to set up, and it provides a great testing opportunity for future marketing campaigns.