The fundamental principle of performance marketing is straightforward. Only marketing performance, such as ad clicks, lead generation, conversions, and so on, is charged for. While this may appear to be a new concept, performance marketing has been around since the mid-1990s with the introduction of Pay-Per-Click campaigns. Performance marketing, also known as performance-based marketing, is on the rise, thanks largely to new technology allowing businesses to collect more traffic and campaign performance data. This data access enables them to better attribute value to the most successful efforts and optimize advertising accordingly. If you're ready to learn more about one of 2019's hottest marketing trends, we've put together a comprehensive guide to performance marketing.
What is Performance Marketing?
"Performance Marketing" is a broad term that refers to online marketing and advertising programs in which advertisers and marketing companies are paid when a specific action, such as a sale, lead, or click, is completed. In more traditional marketing models, you pay upfront for the desired effort, hoping it results in your desired action. This could imply paying for your ad space in a magazine with an estimated reach in the hopes of driving customers to your website or store. The results of traditional advertising can be assessed, but they are never guaranteed.
This model is turned on its head by performance marketing. With performance marketing, you pay for the marketing partner's actual performance, not just the effort they put in to promote your product or the reach they have.
How does Performance Marketing Work?
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Four groups are involved in developing and implementing successful performance marketing campaigns, and they all collaborate to achieve the desired results.
These brands or companies that sell goods and services are advertisers. They seek to promote their offering to achieve specific goals, such as increasing sales or leads, with the assistance of affiliate partners or "publishers." Companies in fashion, food and beverage, health and beauty, and others stand to benefit significantly from performance marketing.
∙ Publishers and Associates
This term refers to companies that own and operate media channels that promote digital ads, such as websites, blogs, or social media accounts. They are also referred to as "marketing partners." The publishers employ various strategies (such as display banners or search ads) to promote the brand and its products/services to achieve their objectives.
∙ Platforms and Networks
Third-party platforms, also known as affiliate networks, connect brands and publishers by providing a one-stop-shop for resources and tools such as banners, text links, campaign performance tracking, and payment management. When it comes to tracking leads, clicks, conversions, and other key performance indicators, they keep both the merchant and the affiliate on the same page (KPIs).
∙ Program Managers Outsourced (OPMs)
This applies to companies and agencies that provide full-time performance marketing services to businesses that do not have the workforce to do it in-house. OPMs assist businesses in developing a performance marketing strategy, manage publisher recruitment, oversee campaign design, and ensure that each campaign runs smoothly. These agencies can use other online marketing best practices, such as landing page optimization, search engine optimization (SEO), content marketing, and more, to optimize campaign performance for maximum results.
Performance Marketing Strategy
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If performance marketing is about paying for action, it pays to be well-versed in the various performance marketing strategy and actions that are most commonly measured.
- Cost Per Impression (CPM): The amount an advertiser pays a publisher for every thousand times their advertisement is shown.
- CPC (Cost Per Click): The amount paid by an advertiser only when their ad is clicked on.
- Cost Per Sales (CPS): The amount an advertiser pays only when an advertisement directly generates a sale.
- Cost Per Lead (CPL): The amount paid by an advertiser when a consumer signs up as a direct result of their advertisement.
- Cost Per Acquisition (CPA): The amount paid by an advertiser when a specific action occurs, such as a sale, form completion, or click.
It's worth noting that each of the actions, as mentioned earlier, is an advertising objective and thus a metric of performance marketing effectiveness. To evaluate and continue refining your options, consider your campaign goals, platform selection, costs, and, of course, results.
Effective Methods To Measure Performance Marketing
Consider how many marketing channels you use regularly. Consider the sheer volume of content you publish in a single month.
These pieces of content are potential marketing touchpoints with which a potential customer could interact. How do you track how these channels, campaigns, and content pieces interact to generate new leads, close sales, and build customer loyalty?
To effectively measure performance marketing, you must keep track of the following:
- Sales and revenue
- Lead generation
- Customer retention
- Lead management and nurturing
- Brand awareness
Why is Performance Marketing so Important?
As advertising has become more sophisticated over the years, so have tracking methods to measure performance marketing. The rise of digital marketing channels such as display, email, and social media makes it easier for marketers to track and optimize campaign results.
Here are five key advantages of performance marketing strategy over traditional approaches to consider:
1. Improved Planning
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Performance marketing campaigns are simple to budget for because marketers must first identify goals and an ideal cost per action.
This makes determining the appropriate budget for a campaign simple. A $5,000 budget, for example, is reasonable if a marketer expects to pay $0.50 per click and has a goal of 10,000 website visits.
Another advantage is that throughout performance marketing campaigns, goals are prioritized. Ads are optimized based on the campaign's goal, whether viewable impressions, clicks, leads, or something else.
2. Pay for Outcomes
The ability to pay for results without undefined overhead is the most apparent advantage of performance marketing campaigns. This is especially important for lower-funnel campaigns based on specific conversion metrics. Setting a goal and sticking to it is critical in performance marketing. Media campaigns that optimize for conversions before shifting to clicks may underperform in both categories.
It's important to note that some performance marketing channels may charge more than what marketers have set as a target cost. For example, suppose a marketer offers a $5 cost-per-conversion for an email sign-up but has a very low conversion rate or a highly defined audience. In that case, the platform will almost certainly raise the costs to meet the demand for the impressions required to get the conversion.
3. Keep Track of Performance
Because performance marketing is overwhelmingly digital, marketers benefit from near-instant results and performance insight. This includes the amount spent and the number of impressions, clicks, and conversions. Marketers can use these metrics to track campaign performance and determine the return on investment. If a campaign isn't performing as expected, it can be paused and the budget reallocated elsewhere.
4. Real-time Pivoting
Most platforms categorize performance based on individual advertisements. Knowing how each creative performs with a target audience is a huge asset for marketers, allowing them to adapt and respond to feedback throughout the campaign. If an ad with a specific headline has a higher click-through rate than others, smart marketers will use that headline with other media to see if the conversion rate can be optimized further. Reacting to this performance throughout a campaign can result in more favorable results while staying within the campaign's original budget.
5. Learn about New Formats
Performance marketing can be done through single placement channels like Twitter, but marketers can also collaborate with performance marketing networks to broaden their reach.
These networks provide one-of-a-kind ad opportunities to provide new insights into valuable audience placements. Performance marketing networks are beneficial for marketers targeting difficult-to-reach audiences such as developers, who avoid display ads and can be challenging to find on social media. Through a native performance campaign, Rollbar, for example, received twice the number of clicks among developer audiences.
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Strikingly is an excellent place to start. Strikingly's website options make it easy to get started with your business website. Using Strikingly will show that developing a website is not complicated or technical. You can integrate your marketing campaigns into a fully functional website that your customers can access using Strikingly.
Don't worry if you lack technical knowledge in website development; Strikingly's user-friendly interface makes it simple to learn. Strikingly provides a variety of website templates with varying styles and layouts. Each has its own functions built into the template, which you can change based on your needs. Strikingly also provides a set of tools for customizing the look of your website. You can choose any visual style and add more sections as needed.
Strikingly allows you to create marketing campaigns that work across multiple devices. This is possible because all Strikingly websites are automatically responsive for mobile and desktop users.
Performance Marketing for Your Company
Performance marketing and all it has to offer should pique the interest of marketers looking to up their advertising efforts and improve results. As opposed to traditional methods, performance marketing allows advertisers to plan better, pay only for results, track performance, respond to feedback, and discover new placement opportunities.
With all of these advantages, it's no surprise that performance marketing is quickly becoming the new standard in advertising.