Location is emerging as a crucial personalization signal, with nearly 90% of consumers preferring personalized advertisements. Spending on location-targeted campaigns reached at least $57 billion in 2025, far outpacing the general advertising market growth.

Technological advancements now allow for granular targeting, such as delivering different ads to neighboring households via Connected TV and IP-based methods. Major retailers like Kroger and Albertsons are leveraging partnerships with media companies, including Disney Advertising and Omnicom Media Group, to utilize first-party customer data for greater precision.

The Flaw in Default Geotargeting

The Dominance of Simple Radius Targeting

Despite sophisticated technology, most location-based advertising strategies remain simplistic. The standard approach involves drawing a radius around a store and targeting everyone within it, operating on the assumption that proximity directly translates to consumer response.

While this intuition—that lower travel costs increase responsiveness—is sensible, it overlooks crucial dynamics of physical retail competition. This default method is offered by major platforms like Google Ads and Meta.

Challenging the Proximity Assumption with New Research

A comprehensive new study analyzed millions of U.S. retail store visits mapped against consumers’ home block groups and their corresponding TV ad exposures. Spanning over six years across industries like grocery and home improvement, the research questioned the efficacy of uniform radius-based targeting.

The analysis concluded that the location of competitive rivals has a more significant impact on customer response to advertising than simple closeness to the advertiser's store.

Relative Proximity: A Superior Predictor of Ad Success

Home Improvement Case Study: Lowe’s vs. Home Depot

In an initial examination of the home improvement sector, where competition is often based on location convenience, researchers measured relative proximity instead of absolute distance. They assessed which store a consumer lived closer to within a competitive radius.

The findings showed that ads were most successful when targeting customers who lived closer to the advertising retailer than to its direct competitor. This targeting segment yielded substantially higher store visits compared to simple proximity targeting.

Wider Industry Validation

The gap in responsiveness between customers closer to the advertiser versus those closer to the rival was far greater than the gap between customers simply deemed “close” versus “far.” Furthermore, the strongest ad effects were observed among customers far from the focal store but relatively closer to it than to the rival—a group typically excluded by standard radius strategies.

This pattern was replicated across mass merchandisers, pharmacies, grocery stores, and department stores, confirming that relative proximity is a critical factor across diverse retail categories and geographic settings.

Implications for Ad Platform Design

This result exposes a significant limitation in current advertising infrastructure. Existing geotargeting tools allow radius setting around one's own store but lack the crucial filter for customers who are closer to the advertiser than to a competitor.

Secondary Spatial Factors Influencing Ad Effectiveness

The Non-Linear Effect of Absolute Distance

The study identified three other spatial dimensions impacting ad effectiveness beyond competitive location. The relationship between absolute distance and ad response was found to be an inverted U-shape, not a steady decline.

Customers in the closest distance quartile often showed weaker ad effects than those at moderate distances. This is due to two factors: travel cost dampens response at very far distances (over 14 miles), but very close proximity causes redundancy.

For nearby customers, the physical store acts as a constant advertisement (the “billboard effect”), meaning new ads provide little novel information. This effect is pronounced in categories with stable assortments like grocery stores.

Adjusting Targeting Zones

In categories with frequently refreshed inventory, such as department stores, the conventional pattern holds because customers face uncertainty about current stock. The practical implication suggests that the optimal targeting zone might resemble a donut shape, excluding the innermost ring of redundant exposures and focusing on the moderate-distance band.

Ad Type Dictates Spatial Strategy

The content of the advertisement also alters the spatial strategy. Price-promotional ads are most effective among customers relatively close to the store, as time-limited discounts motivate those with low travel costs.

Conversely, brand-building ads are ineffective near the store due to the billboard effect. Their peak effectiveness occurs at moderate distances among customers who are spatially predisposed but need a reminder to visit.

The Importance of Work Location

Most targeting focuses on home addresses, but the research confirmed that work-location proximity is equally relevant. Customers whose workplaces are relatively closer to a store than to a rival show increased ad responsiveness, regardless of their home location.

The Path to Advanced Location Targeting

These findings are actionable now because the necessary technology is available. Connected TV and IP targeting enable household-level delivery, and retailer data partnerships are making first-party data accessible.

Emerging AI tools can dynamically adjust targeting zones by integrating competitor data, movement patterns, and campaign type. The precision of this data is paramount; broader approximations like zip code-level proximity significantly obscure the vital spatial patterns identified in the research.