Statistically speaking, the phone book is becoming less relevant everyday.
In a very big way, local SEO can be more competitive than just going after the entire world, not because its easier to rank on those terms, but because you have a tight area to get your message across.
Some things to think about.
How fast a page loads these days is becoming a huge factor in how friendly a site is with being listed in the Search Engine. Google, for instance, makes the bulk of its money off of advertising, and providing relevant links that its customers like is a big key to that success, so they put weight on sites that can deliver content quickly, along with the content being quality and relevant.
Do not hire a designer/developer who hasn't ever heard of w3.org
. this site is responsible for the standards on the web, if you meet a someone who says they can build a site and doesn't know this, there is a real good chance his site can look pretty but hurt your chances at being competitive on the web. That's not to say there are not reasons to break the rules, but if you don't understand the standards, how could you understand when a rule is not relevant in a special case?
Websites don't guarantee contact with anyone. Lots of people go I need a website and treat it like a business card, never doing anything to promote themselves in the way the web works. When I meet clients who refuse to understand this, I don't take them on because I know they will have false expectations on the benefits of a website. Truly, a successful site has three parts involved, design, development (including optimization at the server level), and SEO.
Local Business need to focus quickly on sites like Google Places, Yelp, etc. Follow through with clients and encourage them to leave reviews. Site owners need strategies for producing content periodically and link strategies that help strengthen their spot on the web. Some of this is a lot less important when an area is less populated, but in denser populations, these things definitely matter a lot.
There is also social strategies. A lot of business think that means just having a twitter account or a Facebook page. While that is a start, coming up with creative ways to get true interaction with other people on these networks is where a social presence pays off.