In order to optimize ad spend and conversions on AdWords, you need to track your site information regularly. Google Analytics has some great tools for this, if you choose to go through Adwords — which makes sense, since Google has about seventy percent of the market. But the important thing is that you track your site’s statistics, no matter how you do it.
Check to see which keywords are getting the highest click-through rates. How much traffic is entering your site via alternate sources, and what sources are they?