One of the most critical steps to a campaign is optimization. Anybody can grab keywords and throw together a campaign. The thing that separates the contenders from the champions is how those keywords are managed, and the champs know that historical data makes the difference.
The only way to truly know how to optimize a campaign is by using the historical data you accumulate over time, including both your keyword conversion data and Web logs. In order to do this effectively, you must bid high enough to rank and accumulate volume, but low enough to stay under your budget. The best thing you can do at the beginning is to launch your campaign, bid appropriately, and then sit back and wait for the data to come in before you make changes.
Accumulate a large enough sample size to be able to make good optimization decisions. Once you have reached this size, pull your report, check out your conversion rate per keyword and multiply it by your conversion payout. Now you know your breakeven CPC for that keyword.
Next, be aware of your position and how it affects your conversion rate. Take into account how overbidding on one keyword and underbidding on another may help you hit the volume you need and still maintain your profitability. Analyze your weblogs to find new exact/negative keyword queries and so on.
Don’t try to optimize using just your gut. We all have an urge to do so because we want our campaigns optimized yesterday. Let your CEO know a campaign cannot be truly successful without building historical data. The results will speak for themselves.