I imagine most of us don't have an infinite marketing budget and need to set daily budgets for our campaigns. Every day my budget is met (or often exceed, funny that Google never comes in under budget eh!), so with that in mind, the obvious strategy is to separate my products into their own AdGroups; so Gloves have their own AdGroup, Shoes have their own AdGroup, etc etc.
For each AdGroup I run a bunch of ads and keywords for a couple of months. At the end of that period I see which Ad has the lowest CPA, delete all the rest. Then look at which keyword has the lowest Avg. CPC and pause the rest. If I'm not hitting my daily budget then I can add more of the best performing keywords until I am hitting the budget.
That way, as far as I can see, I'm getting the biggest bang for my buck; I'm displaying the ad that converts the best, and using the keyword that costs me the least amount of money, so I get more clicks for my outlay.
Is that a sane/sensible strategy? Or is there a massive pitfall that I'm not seeing?