Position preference was the choice of very few advertiser. It was mostly used for ego satisfaction to always grab the first impression of the users. Not anymore, it is the necessity on few search result pages. You know, first fold of SERP has been occupied by big box of Local Listing. So, on these pages if you rank low, you are out of sight. Some queries have the tendency of very low click through down the order. These are the queries where users do little research work before taking the final action. If you are an advertiser advertising on those keywords, you cannot afford to remain low. In such type of circumstances, position preference becomes necessity. Also, your CTR may get spoiled if you absorb most of the impressions below the fold. Moreover, there are definite advantages of remaining higher in the order, because clicks and conversions follow the the Zipf's Law. So, higher the rank, higher the clicks and higher the conversions and the degree of difference has the propensity to increase as you go higher up the order, that is to say no.3 is more beneficial than no.4, no.2 is more beneficial than no.3 and proportion of benefit between occupying no.2 and no.3 is more than no.3 and no.4. Hence, in circumstances where you have clear cut evidence of low conversion rates at the bottom, it is wise and pofitable to cut down the impression from these positions. Hence, a florist may find, impressions below position 4 is useless because so many sponsored link and Local listing are already present above them that users have little incentive to go any further. Blocking these impressions would not only cut down low converting clicks but would also boost CTR and hence Quality score and hence lower cost per click. So, there are definite advantages of not advertising below certain positions.
Google has made it clear that bottom preference of your ad is treated as hard limit, which means if you have chosen 1-3 as position preference, your ad would never show below 3. However, if you have chosen 2-4, your ad may show above 2 (See:Position Preference Failures). Google's policy of honoring bottom preference as hard limit, is sufficient to block unwanted below the fold impressions, which is required in some situations.
Biggest mistake, while choosing position preference is to choose 1-1. Although most tempting, this position can be very easily beaten by your immediate competitor, andworse for you, he won't feel the heat of your bid because what he pays is based on the bid of the next ad showing! The bid of the ad not shown is not taken into account while calculating the actual CPC an advertiser pays. To understand this situation let us take the case of Advertiser A, B and C. Suppose for the sake of simplicity, they have almost equal quality score and positioning is determined by the bid alone. Let A is bidding Rs100 with pp 1-1, B is bidding Rs150 with pp 1-3, C is bidding Rs50. in this case a won't show at all while B would show at Top and would be paying only Rs51 or something around that. Strategy of B is much better in this case compared to A which does not show at all. If A changes its strategy and decides to become flexible and opts for position preference 1-3 just like B, the game changes. In this case, B would still be at the top, but A would occupy the second position and also, determine the actual CPC paid by B. So, B would now be paying something around Rs100 to occupy the top slot, and would start feeling the heat of A's bids and may be tempted to lower the bid if it gets too hot to resist. The wisdom, is in judiciously choosing the bottom limit.