Some quick observations regarding PPC strategies that I've been reviewing recently that may help your paid search ROI.
Many companies obviously seek out the highest performing (i.e. highest trafficked) keywords relating to their products and services in determining those keywords that they would like to ultimately bid on in Google, Bing, Yahoo, et al. The catch there is the more popular the keyword, the more difficult (and expensive) it is to 1) win it at auction and 2) gain a page one hit in a search engine.
Short tail keywords (definitions) are essentially broader search phrases, usually consisting of one or two terms (think 'running shoes'), that while being the most popular search phrase for a product or service will also be the most competitive and expensive search phrase in trying to win its' use as you bid for the phrase. If you're a small company competing in a large space (i.e. the aforementioned running shoes) you would have a very difficult time competing against the budgets of global brands for these phrases.
Long tail keywords are a longer string of terms, usually 3 or more words, that are much more specific and pinpointed to your product or service (think ' Nike running shoes size 13'). While long tails might not have nearly the volume of clicks as short tails, well-researched long tail keywords can have higher conversion rates than short tails and be a cost-effective way to drive more highly-qualified traffic to your site. They are usually much less expensive, and you are more likely to be able to gain a page one result for your ad.
A large part of your paid search strategy then is to do detailed ROI analysis to determine which of those types of short tail and long tail keywords convert - to a click, to a page view, to a form completion/response, to a lead, to an opportunity, to revenue. Use tools like the Google Traffic Estimator, Wordtracker and Trellian to help you uncover keywords that would resonate with your targets and drive traffic, as well as give you an idea of their approximate cost as you bid to use them. Go to some of your competitors websites and take a look at their page code -- you can see the keywords they are using in their own title, description and keyword meta tags, which can also help give you ideas for your own terms.
Relative to your industry or space, you may find it cost efficient to in fact bid on a higher-priced short tails if the business case is there after conversion. Or perhaps you'll find that you are in a niche market and short tail keywords aren't all that expensive to begin with. You may also find that the opportunity cost of the research it takes to find and maintain enough suitable long tails to make a good strong list is simply not worth it in the long run. Additionally, as (ideally) you are matching your landing page copy to your keyword/ad copy for optimum conversion, maintaining a larger inventory of long tail keywords/campaigns requires a significant uptick in time and energy.
The trick is to find the right balance in your keyword strategy and purchase. As always with any marketing investment, test and experiment to determine the optimal blend of those tactics that reap the highest results.