You can win a higher ad position in the auction with a lower cost-perclick (CPC) bid by:
- creating ads that include terms or phrases people are searching for
- creating relevant ads and keywords, but not using ad extensions
- creating ads that link to a generic landing page
- creating relevant keywords and ads, and using ad extensions
Explanation: 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