The most important thing to remember when creating your keyword list, is to think like one of your potential customers. What terms will they use to describe your products and services? Once you’ve finished generated a generic keyword list for your products and services you will need to expand it to include as many variations a possible. You can do this by adding alternate spelling (Light, lite), synonyms and plurals. The Google Keyword Tool will help you a lot with this exercise.
After running your ad campaigns for a while you will need to refine your keywords by removing the broad and irrelevant one’s. Broad keywords usually generate a lot of impressions but few clicks. You can do this by adding more descriptive language to your broad keywords, making them more specific, or use negative keywords to reduce irrelevant impressions. For example using the keywords “bags” for your luggage goods campaign can generate impressions for searches with “tea bags” and “paper bags” etc. These impressions are completely irrelevant to your product. This will help you to receive more qualified clicks.
Also make use of the keyword Matching Options provides by Google AdWords. These options will help you to generate more targeted keywords. This may reduce your impressions but could generate you more clicks. This can also reduce your cost per click (CPC) and in turn increase your ROI.