Small Area Google adwords Targeting

In my experience, zip code targeting on AdWords isn't the best. Are you targeting only the zip codes you want calls from? Assuming you are, but you didn't mention that.

If you are using something like Invoca to track/record the phone calls then this is likely what's happening:
Google determines the user's location based on where the caller is physically located (if you are targeting zip codes the caller should be from within one of them). Invoca then determines the user's location based on the area code of their cell phone number to see if they are in region for that buyer. As you can imagine, people move all the time and take their cell phone number with them. This means someone could call from within your zip code targeting, but have a phone number from a different region, resulting in that caller being unqualified according to you call tracking software.

IMO the best solution to this problem would be to find a national buyer for the types of calls you are generating where you can direct the calls that aren't in region for this smaller local business you mention.

IF in_region AND during_hours
-> Sell to local business

ELSE:
-> Sell to national buyer

This will result in all of your calls being answered, which should dramatically improve your success. It's never good to have calls hitting a dead end with the line just terminates.

Maybe those calls you are getting are from people in the area you are targeting but they have an out of state number? I say this because I'm retired Army and when I moved around I kept the same number.

I agree with Roger and Nick. Do you have any updates? They really could be in your area just out of state numbers. Fine tune your demographic too, doesn't hurt to check it.

Thanks for the responses folks! I guess in this case I should have been more specific in saying the kind of calls I was getting.

These were phone calls for a towing company. I was in fact targeting the zip codes and excluding certain zip codes.

It was immediately evident the calls were out of the target area when the customer calling would say they are looking for a tow truck and they are in one of the excluded zip codes.

No confusion with phone numbers and area codes going on. This was verified locations of people needing a tow or roadside assistance.

Pretty much right, you could say in the ad "Servicing only (area)".