You know I recommend a strategy of one adgroup per keyword. This strategy allows you to have a landing and ad tailored to your keyword. This creates relevancy between the keyword, the adgroup and the landing page. Relevancy translates into higher quality scores. Higher quality scores mean lower CPC, which saves you money. Higher quality also translates to higher ad positions, thus getting you more traffic.
We've gone over what it takes to create relevant landing pages. You optimize a page for Adwords relevance the same way you would optimize for Search Engines (SEO). You use the keyword in the page filename. You use the keyword in the page title and meta tags. You use the keyword in the heading tags. You use the keyword within the content of the page.
But do you know how to create a relevant ad? There is one technique. That technique is to use the keyword in the ad as much as possible. Adwords wants to see the keyword in the ad, plain and simple.
You might be thinking you'll just use Dynamic Keyword Insertion (DKI) and that will get your keyword in the ad. But it won't work. First DKI works with the consumers the search term, not your keyword. Unless you are using exact match, this two may not be the same thing. Second, DKI doesn't count toward quality. Adwords is doing the substitution; they know you are using DKI. Adwords has made it clear that DKI won't boost the quality of your ad.
On a side note, the beauty of the one ad group per keyword strategy is you know what the consumers search term is without DKI. If you sue phrase and exact matches, you know the search term is your keyword or at the very least contains it.
Regardless of that fact, when you work with one ad group per keyword, you can literally put the keyword in your ad. This is what will signal Adwords that you have highly relevant ad.
For example, imagine your keyword is "Rome Hotels". Your ad could then look something like this...
headline: Rome Hotels
description 1: Planning a trip to Rome?
description 2: Find hotels now.
display url: www.MyDomain.com/Rome-Hotels
dest. url: http://www.MyDomain.com/Rome-Hotels.html
For our purposes here, you can ignore the description 1 and description 2 lines. You'll need good sales copy there. You refine that copy with split testing. But sales copy is a different topic.
For now, notice how many time the keyword Rome Hotels appears in the ad.
First, you see it in the headline. Were you to use DKI, you'd also put it in the headline. The idea is that the consumer is likely to click the ad when the headline matches the search term. With one adgroup per keyword you get the exact same benefit.
But, the ad above also gets a quality score boost from Adwords. Why? Because the keyword is literally appearing the ad itself. It is not sales copy or DKI.
Second, the keyword is the display url. The display url has to be a valid url, and spaces aren't valid. Therefore the spaces have been replaced with dashes. Both Adwords and a consumer can still identify the keywords with dashes. That means we again get a quality score boost from Adwords when it sees the keyword. Plus, we display the keyword to the consumer again, further compelling them to click.
Finally, the keyword is in the destination url. The consumer won't see the destination url but Adwords will. Both the ad and landing page will get a quality score boost for having the landing page filename the same as the keyword.