The unsolved dilemma:
To use or not to use diacritical marks (especially “German umlauts”) in your title and URL?!
There is a known issue about the use of diacritics and how Search Engines are able to handle them. It is often referred that for example Google Sitemaps URLs can’t handle them. This would cause major problems for a lot of German websites which are in heavy use of “umlauts” in their URLs.
The solution of using “ae, oe, ue” or even only “a, o, u” instead of “ä, ö, ü” will most likely lead to another issue.
Even though Google is saying that the search for [Muenchen] or [München] will lead to the same results (Google search basics – German), this statement can easily be disproved. For example when searching for [bürgschaft] (which is German for “guarantee”), the site “buergschaft.de” is not shown in the first results page. For the query [buergschaft] on the other hand the site is ranked in no 4.
Considering that the queries by German users (using the German keyboard) always contain umlauts, it might help your rankings to use these exact keywords.
Bottom line: On the one hand it might be more serachbot friendly not to use umlauts; on the other hand you might lose ranking position if you don’t use them.
It might be worth a trying “ae, oe, ue” in the URL and links and exact matching keywords in the title.