Analytic software, such as Google Analytics, can provide you with valuable information as to where your customers are located, thus enabling you to target your marketing campaign directly to those users. Utilizing geo-specific keywords and ad copy will filter your audience and make your ads more enticing.
So what are your targeting options..? You can geo-target PPC ads by Country, State, City, ZIP, even DMA's. You can also take a radius surrounding a city or state. Converesly, you can also exclude regions in the same fashion.
At the end of the day, we suggest taking an educated attempt at targeting your audience by location, run your campaign for 60 - 90 days, clooect and analyze the reports, adjust your campaign targeting for better results, and start the process over again.