Split test; Split test; Split test!!!
This is how I do it...
1) I use a program called Tracking202.
http://www.tracking202.com
2) Throw out a broad set of related keywords in one adgroup in Yahoo. I prefer Yahoo because Google will rank your "account" based on it's performance, typically you don't want to screw up. Yahoo doesn't have the volume of Google, but the conversion rate should be higher.
3) Using T202, find out which keywords are converting for your site.
4) Reconfigure your adgroups with the converting keywords in mind.
5) Converting keywords = Increase in CTR = Lower price you pay = More conversions.
Hope this helps.