Depends on how people search. Would they use a city and/or state abbreviation for your product? Maybe not if in Boston but they may if in Springfield, MA (they may use Mass too). People tend to use city and/or state for localized services, not so much for physical products, although the more common a product is, the more it is used. If I'm looking for an old rare book, chances are I won't find it in my small city and won't care where I find it. On the other hand, I'm less likely to search and order a muffler for my Honda Civic from another state when chances are I can find it here.
Lucid you seem to be right by side so thanks. This is a local service so I would imagine the answer being yes I should include the city state abbreviation. I've heard that more people are using Google's autocomplete feature which will actually fill in the state abbreviation if you start typing in the city so it may be wise to include both. I'm just looking for confirmation from other Local SEO consultants who utilize the same practice.
Best thing would be running a test campaign for couple of days to see if you are getting impressions on those type of keywords, if you do get impressions than yes people are using it. You can then go ahead and run a fully optimized campaign
Note that AdWords has a "search intent targeting" feature: Campaign settings --> Locations and Languages :Advanced location options --> Target using search intent: Location terms in user queries
That's less of a campaign boost option and more of a filter to only show ads when there is a location in the search query.
You're right, I didn't recognize your purpose. Since the location list is extremely "long-tailish" it might be useful to: 1. Follow Google's keyword tool results 2. Use Modified Broad match for some time, for some of the keywords, in separate ad groups 3. Use Phrase match keywords like "(your product) in"... Then add new keywords according to the newly-accumulated search terms Note that state/city abbreviations might have double meaning like in the case of ME, CA , CO, LA etc.