When you enter your business in either Google’s Local Business Center or in Yahoo Local Listings you are limited to entering your business in 5 categories. It is not clear whether Google prioritizes these categories but Yahoo definitely does, allowing you one primary listing and 4 secondary listings.
Since both Google and Yahoo over a very limited number of choices, it becomes critical that you choose categories that are true representations of your business. While Google doesn’t state that there is a priority I think that you want to enter the most important ones first.
But how do you choose when you have more than five categories in which your business plays? My suggestion would be to go to Yahoo/Overture’s Keyword Selector Tool and search on your place identifier (i.e Olean NY) and determine if any of the categories in which you do business is searched with any greater frequency than the other categories. Be sure that your place identifier is the one with the most searches by the searching public. Do they search on your town name (i.e. Olean, NY or Olean, New York) or on your zip code (14760)?
In a recent article at SEOMOZ.org a group of leading SEO experts identified “Keyword use in Document” as the third most important overall factor in ranking of web page in the organic search results (behind Title Tags and Anchor Text Links). In the Local Search world the database is much more structured and much more limited. It appears that the business category fills the role of keyword use.
If at all possible it appears that using category titles in your business name provides critical “authority” improvements and significantly improves your ranking. There are obviously marketing and branding issues with this approach but if you can swing it, it sure helps.