We think one of the smartest things that Google AdWords does is use a tool called the “Ad Discounter”.
Everyone wants their ads at the top of the page! To get there, you need to set your maximum cost per click at a reasonable, yet high figure, and your daily budget high enough to place your ad in the top 3 slots.
This is where the Ad Discounter kicks in. You only pay $.01 more than the highest current cost per click. So even if you said you would pay $5 as your maximum cost per click, and the going rate is $2.65, you will pay only $2.66 for your click.
The minimum cost per click is $.05, but be prepared to pay more depending on how popular your keywords are. Be cautious on setting your maximum cost per click too high as Google is able to charge you as much as your maximum figure for each click!
In addition to your cost per click setting Google will also evaluate your ad text, keywords, and landing page to assign a quality score. This score plus your maximum cost per click will determine your ad rank on the search query return page on Google.com.