The most important and first step in any successful SEO campaign is keyword research. Keyword research lays the road map for the rest of an SEO project.
A client usually has no trouble coming up with what seem like *great* keyword phrases for their site. The question is, are humans typing them into search engines? If not, all your efforts are for nothing. Reason being, you want to target and optimize your site for phrases people ACTUALLY type in search engines. Those will be the ones that bring you traffic. To accomplish this, SEO professionals use a variety of tools; Wordtracker and KeywordDiscovery, the too best keyword research tools in the industry. Once you have a list of keyword phrases that pertain to your service/business/product, you can start doing competition analysis as having a list of phrases that people type in is simply not enough. You don't want to optimize your site for a phrase that has a 80 million SERP count when you type it in a search engine. You want to find niches. As stated above, this is the most important part of the SEO process and once it's completed you'll have a list of phrases that'll target your niche without having to wait years to achieve ranking on as you usually do with more competitive phrases.
If your SEO company doesn't ask you for a seed list (a list of keyword phrases you start researching on, provided by YOU, usually what you want your site to rank on) to begin their research with, be wary. In order to get an idea of what a client wants to have their site rank on, this list is imperative.
Related Links and Resources
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Free Keyword Research Tools