Google said that Location targeting helps you tailor your ads towards specific markets, analyze your AdWords campaigns by market, and optimize your campaigns for higher return-on-investment. Now, you can go a level deeper and optimize the performance of your AdWords campaign at the city level.

Now you can:

• Run an AdWords geographic report or Analytics report to find out the location of your users and where your most valuable traffic comes from.
• Run a campaign targeting the cities with best-performance, and then increase the bids on the keywords in that campaign to maximize your ad impressions in those cities.
• Set up a campaign targeted at a region (country) that has lower bids on the same keywords, in order to get more traffic from outside the cities with best-performance, at a lower cost.
• Raise or lower bids to optimize, for the highest campaign return-on-investment.

Below is the campaign-level analysis of a clothing company with multiple stores in Mexico, cited as an example by Google.

For any more information and help regarding the location targeting feature you can visit the Help Center.