Adwords Bidding Strategy?

[budbiss]

I am not sure how much to bid on my keywords. For example, lets say for one keyword, the "Estimated Avg. CPC" is "$1.96 - $2.93".

Does this mean that if I bid under $1.96 that my ad will not be shown?

Does this mean that if I bid over $2.93 that my ad will be given highest priority?

[phranque]

it's not really that simple as there are many factors involved.
ad and landing page relevance, others' bids&targeting, time of day, location, etc...

i think it is safe to say that if your destination url is relevant and you can get people clicking on your ad you'll probably eventually get a top 3 position for a $3 bid.
you may start out paying more and end up paying less.

the adwords learning center section on Optimizing Ad Performance [google.com] might be a helpful start.

[justshelley]

I never use Google's estimated information when I set up a new campaign or AdGroup.

I initially set bids according to client goals (priorities, positioning, easing into a new campaign or aggressively targeting a new audience, etc.).

I let my campaigns run a day or maybe two and then I go back and tweak my bids to get the positioning or results that I'm looking for or to deal with inactive keywords.