What would you recommend is the best way to use adwords? Should I target a large group with single keywords (they are getting about 4% click-through, I was reading some earlier posts that said this was about average, ?) and some phrases or should I take the time to make a large list of key phrases? How far is it worth taking? Are there any dangers in making a large list?
I think the key to ad words is limiting. A large list might get you worthless impressions that cause you to not meet the .5% minimum click rate, or it might get you worthless clicks (like if you sell blue widgets but get clicks from somebody looking for red widgets).
Most people selling something should at least exclude -free. I exclude everything and only appear for one exact [keyword]. This act alone, I think, allows me to maintain a minimum click ratio whereas competitors can't because they get worthless impressions.
This might get this section of my post deleted but it is a perfect (and funny) example about ad words. There is a fairly famous person nicknamed Amarillo Slim. Unfortunately for some un-savvy Ad Words users the past few months, their ads for weight-loss "slim" programs and their ads for the city of Amarillo have appeared when his name is searched for! No one searching for this guy's name cares about weight-loss or that Texas city. Those are wasted impressions. Don't make that mistake.
I suggest you set up a new AdGroup for the new set of key phrases and see how it goes. Just add 5 keyphrases for now and run the AdGroup for a couple of weeks. Depending on the results, you may add more keyphrases (or delete poorly performing key phrases).
Thanks for the advice. I think I understand what you are saying with not going on a too broad keyword. So what I have done is narrowed down my keywords and phrases to a list of about 150 (about 10 adjectives mixed with about 10 items). These are things like:
blue widget red widget green widget tall widget blue thingy red thingy green thingy short thingy
I couldn't find anywhere anything about a maximum keyword count, so should I just put in the whole list?
Also, will "blue widget" also show up under a search for "blue widgets"?