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As the Click-Through-Rate (CTR) goes up, your ad position improves and Cost-Per-Click (CPC) goes down.
Here are some simple tips to improve your CTR

1) Specific matching along with broad matching

Generally when you want to advertise for, say, online Games, you put online Games in the keywords list. I suggest that you all of these in the keywords list –

[online Games]
“online games”
online games

This way, when a searcher types just online games, the click is credited to the 1st keyword. If the searcher types a keyphrase including online games in that order but as part of a bigger term like free online games, it is credited to the 2nd keyword. And if both online and games are present but not together and in that order, like online singles games, it is credited to the 3rd keyword. This improves the CTR for certain specific keywords and helps to lower your CPC and also improves your ad position.

2) Use a variable title

Did you know that your clickthrough rate (CTR) goes up when the searcher sees his keywords (that he searched for) in your ad? This is because Google shows these words in bold.

But you don’t know what term this searcher has used. So how can you put the term in the title? Try this.

Put this string in the title field on the Adwords screen –

{KeyWord: Default Title} where you replace “Default Title” with a suitable text. Now Google will show the search term as the ad title if the searched term fits within the 25 character limit and your default title if the search term won’t fit.

Example – say you use {KeyWord: Online Games} as the title and games as the keyword.

If someone searches for games help, the shown title will be Games Help. However if one searches for free online games resources, Google will show Online Games because the search term won’t fit in the title space (25 characters).

Did you notice the capitalization? If you use Keyword, then only the first word would be capitalized. If you use keyword, all the letters will be in small case.

This tip alone can boost your CTR by 157% or more.

3) Variable destination URL

Did you know that Google now allows variable destination URLs? Why do you need that? Variable destination URL can help you identify the terms that the searchers are using and you can alter your page content to suit those terms for a much better conversion.