How to Choose Keywords
The key to understanding the SEO game is being effective at managing your resources. You only have so much time in the day, plus you don't want to spend more money than you have to or you won't make as much in profit as you could.
Most of the traffic you will see from the search engines comes from being on the first page. This article on SEO Black Hat shows AOL data that shows almost 90% of all click throughs take place on the first page. You will also see just how important it is to be no. 1 as 42.1% of all clickthroughs are for the first result. It's great to be no. 1, but you also have to be realistic. Getting on the first page for even competitive keywords is a goal that you should be able to reach with a little hard work.
Now that you know how important it is to reach a first page ranking, how do you choose which keywords to go after? This depends on how much you can make for a first page ranking.
I do not like it when people throw hard numbers out there that is a cutoff for what is worth their time and what isn't. If a keyword has 1,000 searches per month but those visitors spend about 5 cents per click, would you rather target that keyword over another with 100 per month and $5 per click?
Let's just say you can get onto the first page for whatever keyword you want. I'll round the estimate up to a 5% clickthrough rate for a first page result, since we aren't really taking position into account. If you go to Google's Keyword Research Tool, enter your keywords and check their search volume. How much profit would you be making if you had 5% of those visitors each month? If you don't know your profit margins or earnings per lead then use the PPC cost for those keywords to give you a rough idea.
After you have your list of keywords check for the ones with the highest return on investment. That is how keyword targeting should work, based on profits and not just traffic numbers.