Using Canonicals lead to a substantial drop in traffic
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The best way for me to address this is to tell you how I would structure the products.
I would have non state specific category pages for each product. These pages would talk about the product in general. Within these category pages, I would have a product page for each state. On these pages I would have content that explains what is different about that particular state.
I would have a separate category for each state. This page would talk about the states issues in a general way. This page would link to all the same state specific items.
document type - document A - Alaska docA
- Ohio docA
document B - Alaska docB
- Ohio docB
States -Alaska -Alaska docA
-Alaska docB
-Ohio -Ohio docA
-Ohio docB