A lot has been written on keyword research. This is the criteria I use to analyze keywords and decide whether they’re worth pursuing.
Do They Convert?
This is the most important factor to consider. Before doing SEO, it’s always a good idea to do a PPC campaign and test your keywords. I can guarantee that half of the keywords you choose by doing keyword research will not make you any money. Don’t waste a year doing SEO for them. Run a PPC campaign and see what keywords make you money before targeting those terms with SEO.
Are They “Action” or “Research” Keywords?
Some keywords indicate that people are ready to take action and others indicate that they’re just doing research. A person will start by doing research and then possibly take some sort of action. You want to attract people in this last stage. For example, someone who wants to buy a car will start by searching for something like “best cars of 2010”. They’ll find a few cars they like and they’ll do research on them. In this stage they’ll search for something like “Audi S4 2010”. Once they decide they want to get that car, they’ll search for “Audi dealership in Seattle”. That’s the keyword you want.
Do They Have High Search Volumes?
Obviously, keywords with a lot of searches are better than keywords with just a few. But, keep in mind it’s all about conversions. If keyword A brings you 1,000 visitors and 1 conversion a day and keyword B brings you 200 visitors and 5 conversions a day, you should choose keyword B.
Are They Hard to Rank For?
I don’t discard keywords just because they’re hard; I know that I can get a top ranking for pretty much any keyword I choose. But I do consider how much time and money it’ll take for me to get there and sometimes it just doesn’t make sense.
Current Ranking
With SEO, you see a bigger traffic increase from going from position 8 to position 2 than you do from going from position 300 to 12. Therefore, checking where I am in the rankings for each of my keywords is crucial. If I see a keyword in position 11 (second page) that is getting a lot of traffic, I know that by getting to position 10 (first page) I’ll see a nice boost in traffic. I use Google Analytics to check what keywords send me traffic and I check my current positions for those keywords. If I see keywords between positions 11 and 50, I know those are great opportunities.
Tools I Use
For initial keyword research:

keyword research