Get the Biggest Bang for Your PPC Test Budget

A lot of people I know get creamed on AdWords, some of them lose a couple hundred bucks on the first couple of days alone when they first start testing a campaign… and they complain they spent that much and did not even get one sale or one conversion.
What is worse, a good number of them go off and rant about how PPC does not work.
The main reason they burnt a hole in their pockets? Starting with too many keywords.
When you start a test campaign with too many keywords:
you get too few clicks for each of the keywords to be able to see which keywords will actually convert
long tail keywords will cost you more because they have lesser search volumes and are more competitive, the ratio of ads for the keyword against the number of daily searches is high compared to the broad keywords which have huge search volumes
you don’t have any ad history nor previous CTR data so your Quality Score will generally be low, and will cost you more to get your ads at a good ad position
your Quality Score per keyword or ad will be low because it is affected by the overall Quality Score of your other ad groups, other campaigns and your entire AdWords account overall, again it will cost you more to get your ads at a good ad position.
My advice..
Start out with a few broad and lateral keywords. These are two-word keywords; one word keywords might just not work.
This of course would also depend on the niche/market you are in.
Broad keywords have the highest search volumes that help guarantee that your ad does get shown, and if you wrote good ad copy, it will get clicked more times than the other ads, and this improves your Quality Score and you get lower cost on clicks for better ad position.
You need to be tracking to see the actual keywords that convert for you, and I am not talking about the keywords you bid on but the actual phrase (when you are phrase matching) and the synonyms or other related keywords (for broad matched keywords).
I use Affiliate Prophet for this purpose.
Once you see what other keywords (synonyms or long tail) have good CTR, start adding them to your campaign. At this point, you will likely have a better Quality Score because of the history of your previously running broad keywords that by now, you must have optimized to an acceptable CTR.
Another approach is to simply add long tail keywords that you discovered by digging deeper for each of the broad keywords you started with. Again, your Quality Score will be much better on account of the campaign history.
Keep on adding more lateral keywords.. always going broad before you go deep. Add keywords in batches, this gives you a chance to optimize each batch to optimal CTR and Quality Score levels, in the process deleting keywords and ads that perform poorly and affect your Quality Score adversely… that by the time you are ready to add the next batch of keywords, your previously added keywords, ads, ad groups and campaigns are all running at optimal levels that your new keywords will likely also get better ad position for lower costs per click.