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It would be better to do some testing with much lower bids. You'll start with less traffic, of course, but you can watch how well it converts to sales and get a better idea whether bidding higher to get more traffic would be cost-effective.
You might indeed end up paying 1.50 per click, but rather than starting there it's safer to work your way up to it based on proven cost-effectiveness.
If you are not happy with the amount of traffic, do some more keyword research and bid for new keywords. If you have used all your keywords, move on to the next pay per click search engine.
That doesn't really work. SERP position plays a huge role in conversion. If you make decisions on which keywords you should bid higher on based on the conversion rate of a listing that is sitting at number 20 on Overture's site, you will miss the boat on dozens of phrases.
Instead, you should start by having a tracking system in place so you can track both the keyword phrase, and the specific partner that sent the visitor.
Once you have your tracking system running, do time-measured tests of each of the phrases in the top 3 spots. And don't overlook the bigexpensive words just because they are expensive. Quite often, they are expensive for a valid reason.