Performance marketing is a digital marketing strategy that is reinventing how companies advertise and sell their products. And as it sounds, this strategy is only based on performance or results.
Born out of a need to cut cost per acquisition and increase ROI, performance marketing has continued to give businesses the ability to measure everything from brand reach, to conversion rate, down to a single ad.
Performance marketing also allows businesses to pay marketing companies when a specific action is completed. For example, when a sale is made rather than paying for the full or set price of advertising.
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 are the benefits of performance marketing?
There are many benefits associated with running performance marketing campaigns. Below we take you through some of those benefits:
- Measurable: One of the main advantages of performance marketing is that it is 100% measurable. Modern technology makes it easier to track performance. In other words, it is possible to monitor all your campaign metrics and make necessary adjustments based on the data collected.
- 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.
- ROI-focused: Performance marketing is ROI-focused. This fact makes it easier for businesses and marketers to target campaigns in a high ROI way.
- Allows you to build your own brand: This is one of the obvious benefits this strategy guarantees. Basically, performance marketing allows you to build your brand through third-party partners with their own budgets and audiences. The outcome is increased targeted traffic, increased audience, and more market share.
What makes it unique?
Traditionally an advertiser pays a fee upfront for ad space independent of the performance or outcome. This involves paying even without seeing the results or conversion, meaning money may be wasted. When it comes to performance marketing, this is not the case. You only pay after the results or after successful transactions.
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 for making this possible. This evolution has led to marketers to focus more today on reaching potential customers on mobile as compared to reaching those using desktops and laptops.
SEO and SEM professionals equally have also been forced to adjust to fit in the new and promising landscape. For SEO professionals, link building and keyword optimization are no longer sufficient. They must now look for ways to create and use engaging content.
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.
Challenges will come and go. The most crucial thing is how you address them. Performance marketing is not an exception. It has its own challenges such as publisher fraud, regulatory rules and placement transparency. Luckily, there are ways to solve most of the challenges that exist.
The first thing before getting started is making sure you clearly 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. Here is a list of the most popular digital marketing goals you may want to consider:
- Repeat visits
- Website traffic
- Lead generation
Before real works kick in, you need to make sure you are ready for the actual work. Basically, what you are doing is making sure your strategy is based on your business goals. There is no cutting corners here, and if you do, performance marketing will not work for you. For example, understanding that a strategy for brand awareness is totally different from a strategy for lead generation will help you define your goals and strategies well.
Once your campaign goals have been established, begin to research ad opportunities. And yes, there are many opportunities out there to consider. At the same time, remember you need to evaluate your team. Rating your team help you understand their weakness and strength. Additionally, this helps you to work toward constant improvement.
Once you have a stable team and a sound strategy, you are ready to go live (launch your performance marketing campaigns.)
We talked about real work kicking in, right?. This is the stage where the real work starts. Campaigns will 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 source. It is a step that is quite involving 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 or merchants or advertisers
We have used the term advertisers before in this article, did you understand what this word means? If not, keep on reading. These three words refer to 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 products reviews, 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 influencer been to guide others through reviews, personal experience, and often you will find them being the first to announce about new products releases, sales and offers.
Affiliate Networks and 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
Note, different affiliate networks and tracking platforms have different strengths and weaknesses, vertical merchant expertise, cost structures, and so on. So be sure to do your homework well 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 where brands may decide to work with companies to either manage the entire program or give the in-house team a hand.
These types of agency partnerships tend to be more beneficial because in most cases, in-house teams have limited expertise, resources, market reach, and limited existing affiliate relationships. So, working with a company can help fill these gaps that exist and drive much faster results.
Basically, 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.
Tasks that agencies can support often include growth strategies, partner recruitment, long-tail program optimization, campaign management content creation, and so on.
Affiliate managers within companies do their very best to make sure everything the affiliates need are within reach for both the merchant and partner within the network and everyone is supported with brand strategy and approach.
There are various variables to consider when deciding whether to work with an affiliate program management company or OPM. Below we have listed a few of them:
- In-house team size
- Vertical expertise
- Brand alignment
Now that we have gone through the groups involved in performance marketing let’s have a look at the four most common payment models used within the performance marketing space.
- 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. Note in commerce; this is the kind of payment model often set up by merchants.
- Pay Per Lead: A lead in performance marketing is basically a sign-up or a completed form that contains specific information about a consumer. Personal traits, email address, phone number and name are a good example of a lead.
- Pay Per Click: This is yet another payment model where retailers pay an affiliate for they refer to a desired landing page. It is good to note that although this model exists, it is less used in performance marketing.
- 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.
A quick overview of how most platforms operate
Basically, every channel has a specific audience and offers different types of advertising platforms to reach them. See the examples below for more information:
Facebook, one of the leading social media channels, offers various options to show your ads to people visiting the Facebook or Instagram platform.
Google displays, on the other hand, displays your ads in search results pages and across the Google Ads network.
Taboola, which is a leading content discovery network, allows advertisers to reach the readers of tens of thousands of leading online publications.
One thing to note is 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:
- Target audience and segmentation: Each ad platform now offers ways for you to target your audience in the form of audience segments.
- Bid: Today, 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.
- 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.
- Conversion: The economics of performance marketing is based on consumers taking action. Now 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.
Facebook is a good platform that focuses heavily on the advertiser’s ad quality and relevance, bid and estimated the amount of actions.
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:
There exists a correlation between performance marketing and affiliate marketing. Affiliate Marketing is a type of marketing that is affiliated with the advertiser and paid out after the desired action takes place. Basically, performance marketing is affiliate marketing at scale.
This is the use of paid ads that match the look, feel and function of the media format in which they appear. The common payment models for Native Advertising are pay per click or pay per impression.
This is a form of performance marketing mostly used by content sites and influencers. This marketing involves a dedicated article or post promoting a product, services or brand in return for some form of compensation such as free product.
When executed well, sponsored articles have proven to be a financial win for both advertisers and publishers. For example, 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.
Social Media Marketing
This is yet another type of performance marketing that involves the usage of social media platforms to gain brand awareness and traffic. For example, when you showcase content on Facebook. Clicks, sales, lead generation and likes are the best way to measure engagement on social media platforms.
Search Engine Marketing
Search engine marketing can either be paid or organic. It depends on the approach an advertiser chooses. For paid option, an advertiser pays for clicks to ads on search engines like Yahoo, Google and Bing.
This is an organic option and is very rewarding when done in the right way involves using unpaid options such as relying on the search engine’s algorithm in rank as well as leveraging SEO.
As an advertiser, you can measure your performance often, let’s say after three months. Alternatively, you can partner and pay out commissions to SEM agencies based on results.
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.
- Focus on an excellent landing page and offer: While focusing on performance marketing, it is crucial to pay keen attention to your landing page and offer. Make sure there are enticing; otherwise, they will deter your visitors from click-through as well as deter partners from working with you. Are your offers attractive to grab the attention of potential publishers? Basically, do everything possible to make sure publishers get enticing offers that will help them to market and audit your website for any problems your visitors might encounter when they arrive on your landing page.
- 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. Now when it comes to performance marketing, it is crucial you try different techniques and strategies for AOVs and traffic, optimization of conversions and click-through rates, by doing A/B testing until you are certain about what is working for you and what is not working.
- Choose your traffic sources: It is very crucial to always make sure your traffic is coming from reputable sources. When most of the traffic is coming from less reputable sources, in most cases, consumers tend to think twice about a brand. You don’t want your visitors to have second thoughts about your brand.
- Track and monitor your performance: Today it is possible to monitor your performance. Periodic monitoring your performance will help you make the necessary changes, build your brand and grow your ROI.
- Be compliant: Performance marketing is driven by rules which must be followed. These rules define the relationship that exists between brands and publishers in performance marketing. Once you and your publisher adhere to them, you can be sure your efforts will pay off.
Performance marketing trend to watch
There is no stagnant form of marketing. Every form of marketing is always changing, and performance marketing is not an exception.
The continuous development of artificial intelligence (AI) and machine learning are a good example of trend driving sales. Personalization, automation, segmentation and optimization are some of the areas AI and machine learning are making significant progress.
Other new developments to watch for tracking and attribution are multi-touch, position-based, time decay, and linear options.
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.
Performance marketing example
For example, a 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%.
Performance marketing will continue to create room for businesses to thrive as long as technology advances. And of course, technology keeps on improving each day. This simply means no matter where you and your brand stand today; there is room to grow and develop.
Ready to leverage performance marketing? It is not too late to get started with performance marketing.