One of the most common problems I find with client accounts is that they've been too enthusiastic with their keywords. Hours have been spent carefully searching for words and phrases that have the least possible link to the product/service being advertised and by the time the list is finished, it resembles a reasonable extract from the Oxford English Dictionary. Not surprisingly, these clients often find that they're having difficulty managing their keywords.
What tends to drive this desire to have enormous lists of keywords is the belief that unless the list is comprehensive, the campaign will be 'missing' potential impressions and clicks and that this is undesirable. However, for almost all campaigns, this belief doesn't take into account the frequency of searched terms, the click-through-rate (CTR) or the return on investment (ROI). While it is often true that web visitors will use a wide variety of terms when looking for a particular product or service, it is usually also true that relatively few terms will account for a large proportion of searches made; in some cases a very large proportion.
There is little point in having one keyword that takes 95% of the impressions for the whole ad group and 80% of the clicks, and another 250 keywords that account for all the remaining impressions/clicks. You will find far better performance - and lower CPCs - if you concentrate your ad group on the words that work and dismiss those that don't. You're not 'missing' hits because Google has more than enough to go round anyway and you're very unlikely to have a sufficient budget to get even close to capturing all searches made.
It is always worth remembering that Google takes CTR and keyword quality score into account as two of the factors involved in calculating your minimum CPC. If your keyword list is long, it is highly unlikely you'll be able to get a decent CTR on all those words and that ALL of them have a 'Great' quality score. This means your group performance will be poorer than possible. It is quite possible to have an ad group with an average CTR well into double figures with all the keywords scoring 'Great'.
So, how do you choose the keywords to use?
The first thing to do is to go into your campaign, choose the 'Keywords' tab and sort the list by impressions. Make sure you choose a decent time period - at least a month. Look at the distribution of impression frequency - in English, see which words get the most impressions and how far removed they are from the others. You may well find that fewer than 10 account for most of the impressions in the entire group, what I'll call the '90% group'. I'd be inclined to delete any keyword not in this group.
Now look at the words remaining and examine their CTR. CTR is more tricky because it is substantially affected by ad copy - the words you use in your ads. It's often the case that an ad group really needs to be split into two or three additional groups to allow for ad copy that more tightly matches the keywords.
The next thing to do is to use a 'Search Query Report' to analyse the words actually used that generate clicks onto your site. This needs an article of its own, so stay tuned for more details.
Remember, it's quite possible to run a very effective Adwords campaign with just a single keyword. Sometimes it really can be that too many cooks spoil the broth.