Understanding how competitive the online search ads' market for your industry is, will help you determine your own marketing budgets and how much you may want to bid on your keywords.
Decide which tool you would like to use. You can start with one of the free basic PPC keyword spy tools, such as KeywordSpy (www.keywordspy.com), for basic budget and average CPC look-ups.
Enter a domain URL into keywordspy.com to get daily AdWords spend and average CPC estimates for a particular business.
Repeat this search for multiple businesses of various sizes to better understand the different spend ranges.
You can also use a tool like keywordspy.com to figure out average CPCs for keywords of interest and how many advertisers are showing ads on a particular keyword. Generally, the higher the average CPCs, the more competitive the industry. The more advertisers that show up in the auction, the more saturated the search ads' market is for a particular term. In some industries, advertisers are also more willing to pay for each click, driving up average CPCs, since a single lead can be very valuable. For example, in the legal industry, one ad click can result in a multi-million dollar settlement, making many legal terms competitive and expensive.
Another tool you can use to figure out how high the CPCs are for your keywords is the free AdWords keyword tool. Go to https://adwords.google.com/o/KeywordTool and enter a keyword of interest to see search volumes and competition denoted from low to high for keywords related to your search:
Tip
Check out the most expensive AdWords keywords in the following article:
http://www.wordstream.com/blog/ws/2011/07/18/most-expensive-google-adwords-keywords
The Google AdWords keyword tool uses historic data and provides estimates only, not exact numbers. Once you have an AdWords account and are logged in, you'll see additional information in the Google AdWords keyword tool, including average CPCs and local search trends, which provide a sense of seasonality and traffic volumes throughout the year. While logged into your AdWords account, you can import the keywords you are researching in the keyword tool directly into your campaigns.
Keep in mind that results will vary for different websites and that budgets should be consistent with your marketing goals. High spend advertisers typically have more comprehensive ad campaigns and are likely seeing a positive return on investment (ROI) from AdWords. However, low spend does not necessarily mean that AdWords is not profitable. A business could simply have budget constraints unrelated to AdWords' performance. Also, just because a competitor is investing a lot into AdWords does not mean that you will not be able to compete without a large budget. I recommend starting with conservative spend as you figure out what works for you and test the various options that AdWords has to offer.