First, there is not so much a "formula" for getting this right, but more of a process.
As far as what you're missing, here are two biggies:
1. Negative keywords. these are powerful. Probably more powerful than regular keywords because they keep you from wasting money, and narrow down your target audience. For instance, if you were looking for jobs or monster.com, you'd want negative keywords for monster trucks and monster the drink.
2. Content network. The content network will produce most of your traffic because they are placed on relevant pages with relevant content to what you're selling.
What you're doing right:
* Exact match is good. Broad match can also be good, but requires more time and testing.
* $0.05 cents / click is a dreamy place to start, but may not give you the traffic you need to get meaningful impressions and CTR. You have to test this. $0.05 would be great, but you may need to boost it a little in order to get some play. It depends on your market.
* Catchy ads with call to action... not sure what "Catchy" means. I'll tell you right now "cute" doesn't work unless you're selling puppies. Try "relevent" and "meaningful" ads more than catchy.
* Call to action like "click here" is not allowed on some of the PPC engines. It is more worthwhile to give them a powerful offer. That's always allowed.
* Do not include the phone number. It's counterproductive, and can actually decrase your CTR.
Above all else, test, test, test, and test. If you don't have good metrics on what is working and what is not, then you're just wasting money.
