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Performance marketing is a digital marketing strategy that focuses only on the performance, outcome or results of marketing campaigns. This strategy is redefining how countless companies advertise and sell their products!

Born out of a need to cut cost per acquisition and increase ROI, performance marketing continues to enable companies to measure everything from brand reach, to conversion rate, down to a single ad.

What is performance marketing?

In simple terms, performance marketing is a combination of both brand marketing and paid advertising that only pays once the completed desired actions take place. In other words, you first determine the action and only pay when the action has been completed.

What sets performance marketing apart from more traditional forms of marketing?

  • With performance marketing, you only pay for ads after the results of a marketing campaign, or after successful transactions.
    • In other words, you will only pay after you see the outcome of your campaign, and you’ll often pay a smaller fee for each conversion rather than a larger flat fee.
    • Performance marketing also allows businesses to pay marketing companies or third-party promoters when they help accomplish a specific action, such as when a sale is made using their campaign.
    • This cost-effective approach enables a greater focus on meeting marketing and sales goals, compared with paying flat fees.
    • In contrast, with more traditional marketing campaigns, an advertiser pays an upfront fee for ad space, independent of the performance or outcome of the campaign.
    • This involves paying even without seeing the results or conversions, meaning money may be wasted.

Performance marketing vs. affiliate marketing

Before we go any further, it’s important to differentiate performance marketing from affiliate marketing.

Affiliate marketing pays approved third parties every time someone makes a purchase from your brand using a link they place on their website, blog, or social channel (known as an affiliate link). They receive a portion of each sale, known as a commission, in cash.

Some people use “performance marketing” and “affiliate marketing” interchangeably because both forms of marketing pay a third party for each conversion rather than a flat fee.

While affiliate marketing is a form of performance marketing, it’s just a single marketing tactic under the larger umbrella of performance marketing. Any tactic that involves paying for marketing based on results, after a task is complete, counts as performance marketing. We’ll cover some of these examples below.

Common uses of the term performance marketing

While performance marketing is used in digital marketing, it is good to note sometimes areas why it is applied can differ slightly. Below are the common areas in digital marketing, where performance marketing is used:

Social media marketing

This type of performance marketing involves the usage of social media platforms, such as Facebook and Instagram, to showcase content and gain brand awareness and traffic. Clicks, sales generated by the platform, lead generation, likes, comments, and shares are the best way to measure engagement on social media platforms.

Sponsored content

Sponsored content is a form of performance marketing mostly used by content sites and third-party content creators. This marketing occurs when influencers and brand ambassadors promote a product, service or brand in return for some form of compensation such as free product.

Sometimes, content creators write sponsored blog posts, or other long-form articles, to promote a brand on their own websites. And of course, we can’t forget the countless social media posts that influencers and brand ambassadors create for campaigns! This sponsored content enjoys great success because influencers’ and ambassadors’ followers trust what they have to say. Even though this content is advertising, it feels organic.

When executed well, sponsored articles and posts have proven to be a financial win for both advertisers and publishers.

Native ads

Native ads match the look, feel and function of the media format in which they appear. The common payment models for native ads are pay per click or pay per impression.

Search engine marketing (SEM)

Search engine marketing can either be organic or paid, depending on the approach an advertiser chooses.

  • For paid options, an advertiser pays for clicks to ads on search engines like Yahoo, Google and Bing.
  • The organic (unpaid) option, which is very rewarding when done in the right way, involves using methods such as relying on the search engine’s algorithm to boost a page’s rank and leveraging SEO.

As an advertiser, you can measure your performance often—monthly, quarterly, and/or yearly.  Alternatively, you can partner with and pay commissions to outside SEM agencies based on the results they generate.

Affiliate marketing

As covered above, performance marketing and affiliate marketing are related. Since affiliate marketing pays the affiliate for each conversion they help create, performance marketing is affiliate marketing at scale.

Advantages of performance marketing

There are many benefits associated with running performance marketing campaigns. Below we take you through some of those benefits:

  • Performance marketing is low-risk. By paying when a specific action is completed, you feel your money is being well spent. This automatically reduces the risk of spending and not seeing the desired results.
  • Performance marketing is 100% measurable. This is one of the main advantages of performance marketing. Modern technology makes it easier to track your campaign’s performance. It is possible to monitor all your campaign metrics and make any necessary adjustments based on the data collected.
  • Performance marketing is fully focused on ROI, or return on investment. Thus, this marketing strategy makes it easier for businesses and marketers to target campaigns based on high ROI.
  •  Performance marketing allows you to build and grow your own brand through third-party partners with their own budgets and audiences. The outcome is increased targeted traffic, increased audience, and more market share.

Potential difficulties with performance marketing

Like all types of marketing, performance marketing brings its own set of challenges. You must make sure to follow regulatory rules, and ensure ad placement transparency, especially when it comes to working with brand representatives. And you may deal with publisher fraud. Challenges will come and go, but the most crucial thing is how you address them. Fortunately, there are ways to overcome most of the challenges of performance marketing.

Starting a performance marketing campaign

Before getting started with a performance marketing campaign, you must first clearly define and understand your campaign goals.

  • Your goals play a crucial role in determining where your ads will show, who will see them, and so on.
  • Besides, by establishing your goals, it becomes easier to choose ad platforms that target those specific goals.

Consider setting goals based on these metrics, which are among the most popular digital marketing objectives overall:

  • Leads generated
  • Sales
  • Engagement (likes, comments, and shares of content pieces)
  • Website traffic
  • Repeat website visits

Remember that performance marketing will take a lot of work, especially to track your progress towards these goals—but the work is well worth it.

Pre-launch plan

Make sure your performance marketing strategy is based on your overall business goals. Don’t be tempted to cut corners— if you do cut corners, performance marketing will not work for you.

  • Know the strategies that will best help you accomplish your objectives. Understanding that a strategy for brand awareness is totally different from a strategy for lead generation will help you define your goals and tactics well.
  • Also, evaluate your team. Rating your team helps you understand their weaknesses and strengths. Additionally, this helps you to work toward constant improvement.
  • Once your campaign goals have been established, begin to research ad opportunities.

Launching the campaign

Once you have a stable team and a sound strategy, you are ready to launch your performance marketing campaigns.

Post-launch plan

This is the stage where the real work starts, where campaigns begin to generate data. Marketers will be more focused on optimizing individual campaigns for performance, and advertisers will have the task of optimizing for top-performing ad sources. It is a step that is quite involved, but one that allows advertisers to grow sales and increase ROI.

How does performance marketing work?

Four crucial groups come together for performance marketing to work. Below is a breakdown of these groups:

Retailers/merchants/advertisers

The businesses that are looking to promote their products and services through publishers or affiliate partners.

Affiliates or publishers

The best way to describe affiliates or publishers is by referring them to as marketing partners. They come in many forms such as product reviewers, coupon websites, online magazines, blogs, and so on.

However, with affiliate marketing shifting towards an all-encompassing performance marketing model which includes content sites, social influencers, product review sites, artificial intelligence, mobile apps, complimentary merchant partnerships, remarketing ad managers and personalization applications, it is prudent to have a strategy and an understanding of what each marketing partner needs from a merchant to succeed.

For example, influencers are publishers that mainly promote through their blogs, social groups, and social channels. The main focus of influencers is to guide others through reviews, personal experience, and often you will find them being the first to announce about new product releases, sales and offers.

Affiliate networks/third-party tracking platforms

Affiliate networks or third-party tracking platforms are critical to the merchant/affiliate partnership.

They offer a one-stop-shop for information and tools such as banners, text links, product feeds, promotions and payouts.

For both the affiliate and merchant, these networks and platforms are a way to keep track of clicks leads, and conversions.

Below are examples of leading affiliate networks and tracking platforms within the Performance Marketing industry:

  • Commission Junction
  • Rakuten Marketing
  • Partnerize
  • PepperJam
  • AWIN
  • Avantlink
  • Impact
  • HasOffers

Keep in mind that different affiliate networks and tracking platforms have different strengths, weaknesses, vertical merchant expertise, cost structures, and other features. Research these platforms carefully before reaching a decision.

Affiliate managers or outsourced program management companies (OPMs)

Between merchant and affiliate, OPMs are considered to be the main driver. Affiliate managers can be in-house, or brands may decide to work with outside companies to either manage the entire program or give the in-house team a hand.

Affiliate managers within companies make sure everything the affiliates need is within reach for both the merchant and partner within the network, as well as that everyone is supported with brand strategy and approach.

Outsourced agency partnerships tend to be more beneficial, though. In most cases, in-house teams have limited market reach, expertise, resources, and limited existing affiliate relationships. So, working with another company can help fill these gaps and accelerate results.

Tasks that agencies can support often include growth strategies, partner recruitment, long-tail program optimization, campaign management content creation, and so on.

Robust partner databases, technical and strategic expertise, and existing proven processes in place all add to the benefit of working with a company, such as Global Excellence Award winners.

Consider these and other variables when deciding whether to work with an affiliate program management company or OPM:

  • Goals
  • Budget
  • In-house team size
  • Vertical expertise
  • Timeframes
  • Brand alignment

Common performance marketing payment structures

Now that we have gone through the four groups involved in performance marketing, let’s examine the four most common payment structures used within performance marketing

  1. Pay Per Sale / Cost Per Acquisition: In this case, a merchant or retailer pays a publisher or affiliate for the sales generated once the transaction is complete, often as a percentage of each sale. Note that, in commerce, this is the kind of payment model often set up by merchants.
  2. Pay Per Click: This is yet another payment model where retailers pay an affiliate for every person they refer to the desired landing page. It is good to note that although this model exists, it is less used in performance marketing.
  3. Pay Per Lead: Within the context of performance marketing, a lead is a consumer who has completed a sign-up form that contains specific information about them, or who has shared identifying information with a merchant via another outlet. Information a lead might share includes their name, email address, phone number, and information about their professional role.
  4. Pay Per ‘X’: For this payment model, the ‘X’ can represent whatever the merchant defines as the desired action outside of a lead, click, or sale. Upsells within apps, downloads, and rewards program sign-ups are examples.

Platforms in performance marketing: an overview of how they operate

Basically, every channel has a specific audience and offers different types of advertising platforms to reach them.

For example, Google displays your ads in search results pages and across the Google Ads network.

Facebook, one of the leading social media channels, offers various options to show your ads to people visiting the Facebook or Instagram platform

Taboola, which is a leading content discovery network, allows advertisers to reach the readers of tens of thousands of leading online publications.

Remember, though, that no channel shows all the ads available, all the time, to everyone. So how do these platforms choose what to show? They use a combination of the following factors to show those ads:

  • Quality and relevance: In any form of advertising, trust is such a big thing and one that contributes to ad performance. This means you have to make sure your ads work or are relevant. Otherwise, they will earn a low rating, which will result in your network getting less exposure.
  • Target audience and segmentation: Each ad platform now offers ways for you to target your audience in the form of audience segments.
  • Bid: Today, the modern advertising landscape allows you to choose ads to display, who to show, and what time to show them based on what you have agreed to pay.
  • Conversion: The economics of performance marketing is based on consumers taking action. When the required action fails to take place, this means the network doesn’t get paid. So, your ad gets displayed more when it works.

 

Best performance marketing tips

You’ll find there are some great tips out there, here are a few of the most common in this space.

  • A/B test and optimize for revenue-driving KPIs: It is obvious to any marketer testing, and measuring are essential for any marketing strategy to work. With performance marketing, trying different techniques and strategies for traffic, optimization of conversions and click-through rates is crucial. Conduct A/B testing until you are certain about what is and is not working for you.
  • Choose your traffic sources wisely:  Always make sure your traffic is coming from reputable sources.
    • When most of the traffic is coming from less reputable sources, consumers usually think twice about a brand. You don’t want your visitors to have second thoughts about your brand.
  •  Craft an enticing affiliate offer:   If you are running an affiliate program or a similar model, make sure the offer is enticing. Otherwise, you may deter partners from working with you.
    • Are your offers attractive enough to grab the attention of potential publishers (affiliates)?  Do everything possible to motivate publishers to market you, through valuable rewards.
  • Focus on an excellent landing page: While focusing on performance marketing, it is crucial to pay keen attention to your landing page (where visitors end up if they click on an ad, affiliate link, etc.)
    • If your landing page is too cluttered, or is unclear about what your business offers the potential customers who visit, you will decrease the likelihood of conversion.
    • So, clearly state the benefits of your business to your target audience, offer them something valuable, and make it clear about what you want visitors to do. And streamline the layout of your landing page.
    • Audit your website for any problems your visitors might encounter when they arrive on your landing page.
  • Track and monitor your performance:  Periodic monitoring of your performance, based on your campaign goals, will help you make the necessary changes, build your brand and grow your ROI.
  • Comply with regulations: Performance marketing is driven by rules which must be followed. These rules define the relationship that exists between brands and publishers in performance marketing. When you and your publisher adhere to these regulations, you can be confident your efforts will pay off.

Performance marketing examples

  1. French jewelry manufacturer and designer PANDORA worked with Taboola on a recent native advertising campaign to boost branding and conversions via content discovery and display advertising methods. These efforts led to shoppers spending more time on the PANDORA website, and over time, increasing the conversion rate up to 130%.
  2.  Hear.com reached out to Taboola to partner on a performance marketing campaign utilizing sponsored content to create awareness around hearing loss and possible solutions. The overall campaign resulted in a tenfold increase in conversions for Hear.com in just two years, and helped them successfully enter three new markets.

The evolution of performance marketing

Over the years, performance marketing has evolved, and more changes are yet to come thanks to technology and consumers’ behavior. The amount of time that customers spend on mobile devices keeps increasing—consumers interact with brands twice as often on mobile, as compared to other mediums.  This evolution has led to marketers to focus more on reaching potential customers on mobile, as compared to reaching those on a desktop.

SEO and SEM professionals equally have also been forced to adjust to fit in the new and promising mobile landscape. For SEO professionals, keyword optimization and link building are no longer sufficient. Instead, they must now look for ways to create and use compelling mobile content, which motivates current and potential customers to stay engaged.

For SEM experts, this means learning how to leverage Product Listing Ads (PLAs), how to optimize for mobile, and how to navigate sophisticated enhanced campaigns to fit in the performance marketing environment.

Performance marketing trends to watch

Every form of marketing is constantly changing, and performance marketing is no exception.

The continuous development of artificial intelligence (AI) and machine learning are strong examples of trends driving sales.  Automation, segmentation, personalization, and optimization are some areas in which AI and machine learning are making dramatic progress.

Other new developments to watch for within tracking and attribution are multi-touch, position-based, time decay, and linear options. These new technologies will make monitoring and focusing on ROI even easier.

The development of performance-based technology companies and content sites that are creating for advertisers to promote in the performance marketing space is yet another thing to watch. As performance marketing has become a mainstay, the number of these businesses and avenues is sure to keep increasing.

Wrapping things up

As long as technology advances, performance marketing will continue to create room for businesses to thrive. And since technology keeps advancing rapidly, there will always be room for your business to advance with performance marketing.

Ready to leverage performance marketing? It’s never too late to get started!

 

Jessica Huhn

Posted by Jessica Huhn

Jessica Huhn is a content writer and strategist at Referral Rock. When she is not writing, there is a good chance that Jessica is singing, arranging songs, sharing and enjoying content on social media, or hanging out with her mini Goldendoodle. She believes that it's always important to cultivate gentle strength.