To arrive at the set of keywords that:

Describe business correctly (are relevant) Attract traffic (are popular & are searched for) Have less competition (are relatively un-optimized for )

Steps

Step I: Lets start by saying that the for the keyword finalization of a web site the first step is to device the theme of the web site. The keywords then should be generated which are in sync with the themeing structure of the site. The home pages & the other higher level pages should target more general(main theme)keywords. The deeper pages (embedded in subdirectories or sub domains) should target more specific & qualified keywords.

Once the sites themes & sub-themes are done, lets start by looking for the keywords

StepII:

The finalization of the keywords for any given site can be done in the following way:

Generation of the seed keywords for the site (theme keywords).

Expansion of the seed keywords into key-phrases by adding qualifiers (sub theme keywords)

Generating a larger set of keywords by word play on the key-phrases generated in step II.(sub theme targeting)

Lets take them one by one:

SEED Keywords/Primary keywords:

The seed keywords can be generated by either of the ways mentioned below:

The client provides the terms he feels are relevant to his business.

The SEO firm generates the seed words by understanding the business domain & the business model of the client.

Some outside domain consultant provides them.

Another way of generating seed keywords is to look for the meta tags of the competition web sites.

WARNING: do not place any unnecessary emphasis on these tags. Use them just to generate you seed keywords list.

If one has certain set of keywords then tools like WT & Overture can also be used to arrive at the other relevant seed keywords.

Typically seed keywords are single word. A good number of seed Keywords is between 10-12.

SUB theme Keywords (add Qualifiers)

Now to these seed keywords add qualifiers.

These qualifiers can be anything location/sub-product/color/part no/activity/singular etc.

By utilizing these qualifiers one can expand the list of the seed keywords. Say a good number would be anywhere between 20-30.

Typicaly a sub theme key phrase could be of 2-3 -4 word length.

One recent study suggests that

The typical searcher often uses longer queries. Many contain more than three words. Within three different search engines, keyword distribution data tells a compelling story:

Words in Query      LookSmart (%)      Ask.com (%)              Teoma (%) 1                   27.00              12.76                    38.04 2                   33.00              22.46                    29.59 3                   23.00              19.34                    18.13 4                   10.00              11.89                     8.00 5                   7.00*              7.86                      3.51 6                   -                  6.19                      1.39 7                   -                  5.47                      0.63

LookSmart does not report beyond 5 search terms, instead grouping five or more terms into one category.

Approximately 40 percent of queries in LookSmart have three or more words. About 32 percent in Teoma have three or more. Ask Jeeves has an even higher skew, nearly 62 percent, because of its natural language focus. Within FAST, the database that powers Lycos and others, the average is 2.5 terms. That suggests a similar frequency distribution to LookSmart and Teoma.

Hence we can keep the average length of sub theme keywords at around 3.