With permission from the Google AdWords Guide: Novice to Expert to Superhuman -
http://www.AdwordsCampaign.net
Most AdWords campaigns are managed poorly, through either lack of knowledge or an aversion to tedious work. This makes it possible for you to get targeted traffic extremely quickly and easily, using clever strategy together with automated tools.
2. TARGETING
There's no point in advertising anything unless the ad reaches a person who might be interested in it. That sounds obvious, but the number of advertisers who waste money on "catch-all" ads with a "shotgun" approach, hoping for the best, is astonishingly high. If you follow their example, you'll lose a lot of money fast with Google AdWords. The secret of success with Google AdWords, as with any advertising medium, is accurate targeting. With Google AdWords, though, you can home in on your target market with pin-point accuracy.
If you sell a machine with a specific model number, that model number should be your main keyword. If you sell it only in a certain town or county, that town or county should be a keyword in the Ad Group. If it relates to a particular season or festival, that should be a keyword.
Keywords can be combined with each other or with incidental words, such as prepositions like "in", "for", "with", to form 2-word, 3-word or 4-plus-word phrases in various ways and different word orders. Ideally, every conceivable phrase that a surfer might type as a search term would be desirable to have in an Ad Group as an exact match keyword phrase. Then your cost per click for each of those keyword phrases would be minimal. If you're creating your Google AdWords campaign manually, such a task would be totally impractical, of course, if not impossible. For such jobs specialist software that applies "brute force" algorithms is a sound investment. You get what you pay for, and even the high-end software pays for itself, usually many times over.
Negative keywords have a great impact on a targeted AdWords campaign. If you sell software, for example, and don