In keeping with the goal of improving your Return-On-Investment (ROI), make sure to utilize negative keywords at your campaign and ad group levels.

What are negative keywords?
Google defines negative keywords as a core component of a successful keyword list.  Adding a negative keyword to your ad group or campaign means that your ads won’t show for search queries containing that term.  By filtering out unwanted impressions, negative keywords can help you reach the most appropriate prospects, reduce your cost-per-click (CPC), and increase your ROI.

If the objective of your site is to attract as many visitors as possible, maybe negative keywords are not right for you, but if you are interested in driving more qualified, converting traffic to your site, you should take a serious look at them.

It is also an interesting exercise for your company. It forces you to think about your site and company in a whole new way. You know your business, you know how people find you, you know who your customers are, BUT, are you paying for traffic that can be avoided because someone out there doesn’t know what they are looking for or how to find it?

For example, if your site sells gift baskets filled with fruit and one of your best sellers is a basket of oranges, you would want negatives of –county, -choppers, -festival, etc… In this case, you are telling AdWords that you do not want your ad to show up for your keyword orange when someone searches for orange county choppers or orange county or orange festival.  Another example is if your company sells horse barns, you could have negatives of –noble, -and noble, etc… I can’t begin to tell you how many people search for the bookstore Barnes and Noble as Barns and Noble. By adding these negatives, you will ensure that when someone is searching for the book of the month, your horse barn does not show up in the sponsored search.  An ad that shows up for a horse barn when searching for Barnes and Noble is so far fetched, someone may even click on your ad even though that is the farthest from the content they were looking for, just because it is so off the wall.

Start brainstorming about negatives today! If anything, you may learn something new about your company and/or your customers.

Click here for official information from Google on how to use negative keywords with Google.

FYI, Yahoo Search Marketing refers to this keyword matching strategy as Excluded Words.