Why do Internet marketers geo-target? Isn't it obvious?...maybe not.

One of the capabilities search engines provide marketers is the ability to segment buys by geography. The engines use the IP address to lookup the location of the connection to determine the proximity of a user’s location. While there are some issues with proxy servers and firewalls, it is a fairly accurate way of determining a user’s location. So, what’s the benefit of this and who should be using it?

Let’s begin with Captain Obvious. If your business offering is predicated and or dependent on the location of the user, i.e. a dental practice, then you would use this feature to target only the individuals who actually could benefit from your offering. A dentist in Los Angeles, California, would not want his or her ad displayed for a user in Kansas City. There would be very little value, if any, in the click. In this example, the user would target only Los Angeles users and exclude all other locations, ensuring minimal media shadow (having your advertisement be exposed to individuals that are NOT part of your target market, with little or no propensity to convert). Another frequent use of geo-targeting by companies is to serve a national market but the slightly vary the product offering per market. Therefore, you use the geo-targeting feature to display an appropriate offer. For example, a real estate website may have listings all across the United States but has determined through their analytics that 92% of people search for real estate listings are looking within 10 miles of their IP. With this insight, the campaign should evolve to show relevant listings for general search queries. For example, a user searches “MLS Listings”. By the query itself, the user has shown no intent to find local listings...does this mean the intent is not local? The research for this particular case obviously says. “NO” (our agency research shows that a general search query does not mean there is no geographic intent to the search itself in a variety of industries). The user has just not added the filter to the query. Instead, he/she will use the Search Results Page or the Website itself to filter for the geographic location desired. If you are savvy enough to know (though your analytics) the user is indeed looking for a specific geographic location, then you can show a geographic listing and use a geo landing page, which will satisfy this user’s intent before any of your competitors are able to compete for the opportunity.

Ok, those are pretty obvious examples of why Internet marketers geo-target. Now let’s focus on something you may or may have not considered. Does a national advertiser without any differentiated product offerings based on geography need to segment media by geographies? Is there any potential benefit?

Simple answer. YES.

This is a technique that many of the top SEM media buyers have been aware of for quite some time. It’s one of the easiest ways to turn around an underperforming campaign. Have you been tracking your conversion rates by state and city? Do they vary and what are the associated cost per clicks of each location (yes, they absolutely differ)? The reality is if you do not segment your media, it’s really difficult to tell but there will likely be some variances causing inefficiencies or less than optimal sales volume.

Still with me? Let’s look at a real example. A website that sells furniture to the United States needed to improve ROI without sacrificing volume. The problem was that they were currently averaging position 3 in Google which has their ads on the left (above the organic) as opposed to the right side where CTRs have a tendency to plummet. If we lowered the bids on top keywords, we of course would increase the efficiencies but also would significantly hurt the total volume. It was agreed the keyword itself needed to be segmented to determine what parts of the targeted keywords were effective and what parts were ineffective. After segmenting the keyword by state, we realized that 1 state in particular drove 20% of the clicks but only 2% of the sales. This was great news. Now we were able to save 20% of our media by only sacrificing 2% of our sales. We then looked for ways to reinvest a portion of the 20% in savings to make up for the 2% in decreased sales volume.

At the end of the day, we actually drove more sales for a lower investment. This is only one example of many that illustrate the power of geo segmentation for national advertisers. It’s a lot of work and it helps if you have tools (like WebMetro has built out) but in the end, even if it takes a little investment of time, the financial rewards can be staggering.

One of the questions I often get regarding this topic is WHY? Why would one state convert better than another? There really are a variety of reasons. Some reasons I have seen have to do with distribution (shipping costs, speed of shipping, offline accessibility to a similar product) and also with brand awareness. Many organizations will have greater awareness and equity based on their traditional marketing plans, retail locations, and alignment with any differentiating cultural issues. Other issues revolve around disposable income. As you know, it does vary by state and so do the allocations of what people use their disposable incomes on. According to a March 2007 study by the Bureau of Economic Analysis, disposable income by state can vary as much as 67%. For instance, the projected disposable income for a household in Mississippi in 2006 was about $24,000, while the average disposable income per household in Connecticut was projected at just over $40k. If you take the time to dig a little deeper into the analytics, you’ll be surprised at the variances. Before executing this strategy, why not open up your analytics platform and see if you can isolate any obvious opportunities?

Note: Some of the distribution partners in search do not accept geo-targeted ads, so your reach could negatively be affected. AOL is the biggest partner for Google and does not accept geo-targeted ads. You may want to consider another national campaign to take advantage of this traffic.