My company would like to start a PPC advertising campaign. Whilst I understand the concept and how to set everything up from a technical point of view, this is something I've never done before.

Logically, we'd like to test out a wide range of keywords that we think would lead to conversions, which we've put together through brainstorming and with some help from Google's External Keyword Tool.

Sub-question whilst I remember - am I correct in thinking that in Google's keyword tool, keywords that we think will perform well that have a low competition yet high monthly searches are good since there will be less advertisers, meaning our bid per click will be less?

Is there a common benchmark or process of doing a round of tests with keywords? Should we wait for 100 clicks on each keyword, see which ones have lead to the most sales (or rather, sales that are sustainable with the cost per click of that keyword), then drop the ones which aren't converting and put that budget onto the converting keywords?

We realistically have a few hundred keywords/phrases we would like to test, but spending $100 per keyword/phrase is going to work out as quite an expensive test. It would be nice to be able to spend $5-10 per phrase, but I don't think the sample size would be great enough to determine anything usefully reliable.

Another approach might be to setup all the keywords, and those that bring the most sales within x hours/days would be the ones we use.

What is the common procedure with things like this?

I know there are a plethora of companies that specialize in exactly this, but this is something we anticipate doing a lot in the future, so it would make sense to do it in house if at all possible.