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You can win a higher ad position in the auction with a lower cost–per–click (CPC) bid by:
All of the listed answers
creating high-quality ads and landing pages
creating ads that link to a generic landing page
creating ads that include terms or phrases people are searching for
Explanation:
The most important thing to remember is that even if your competition bids higher than you, you can still win a higher position - at a lower price - with highly relevant keywords and ads.Since the auction process is repeated for every search on Google, each auction can have potentially different results depending on the competition at that moment. Therefore it's normal for you to see some fluctuation in your ad's position on the page and in whether or not your ad shows at all.
Ad position is also influenced by the expected impact from ad extensions and other ad formats, such as sitelinks. This means that if two competing ads have the same bid and quality, the ad with the better expected impact from extensions will generally appear in a higher position than the other.
Read more here: https://support.google.com/adwords/answer/6300?hl=en
