What Is Performance Marketing?
Performance marketing refers to online marketing and its platforms in which advertisers pay after successful results like leads, sales, clicks, and other conversions.
Its a marketing strategy and a guiding mindset within digital marketing that focuses solely on the performance of marketing activities.
In performance marketing, you, as the advertiser, are always on top of your spending. And the results you’re getting for that spending.
If you can track the marketing efforts’ results and pay for them accordingly, you can consider it a performance marketing strategy.
The most crucial aspect of performance marketing is the definition of goals and metrics, their performance, and their optimization in every marketing campaign.
These goals depend on the nature of a business, the campaign type, and the desired results.
To put it bluntly, in performance marketing, we want to see the growth of the metrics we decided upon, and are ready to pay for that growth to achieve a higher ROI on marketing.
In this article, we are going to talk about the mindset of using performance marketing as a tool and as well explore what it is.
The Role Of Performance Marketing In Online Marketing
Online marketing enabled the tracking of the performance of all online-based marketing campaigns and allowed for paying for said performance.
This fact alone changed how a marketer can approach every marketing question in a company in a more data-driven and cost-effective matter.
While we still rely on the data provided to us by most online ad platforms. The availability of different data sources helps us make better data-driven decisions to improve our growth rates online.
As we can use the data sources through the lens of our unique business problems and goals, we can create modern marketing campaigns customized to every business’s needs.
To this day, there are online marketing channels whose data might be unreliable for tracking actual performance. Still, we don’t necessarily have to rely on the said data, as we can have our tracking opportunities.
For example, buying ad space from an online newspaper, which dictates ad prices and data themselves and not through a platform, we can still track these campaigns’ right performance through tracking data on our websites.
While you can track almost anything of online marketing opportunities, performance-based marketing is still possible in traditional marketing, especially nowadays, as traditional marketing channels become more digital.
It usually depends on the scale of the marketing channel. The larger the channel, often the better for performance-based marketing it is. And for the smaller marketing channels, you will need more of a hands-down approach to achieve performance marketing better.
Who Benefits From Performance Marketing
Any company looking to advertise online will find performance marketing methods super viable for them as the techniques themselves are scalable.
For example, you create a winning ad campaign, which starts producing a couple of leads from a small budget, and you find it profitable, then you would find the best way to scale that method from prior earnings.
The more data you can collect in your campaigns, the more you can optimize the campaigns to fit your needs better.
This does lead to a minor problem. The smaller marketing budget you have, by default, is less data you can acquire, which would mean less optimized campaigns, which can lead to canceling a perfectly great campaign early on. As data showed us, this campaign might not be profitable.
Heavy-handed performance-based campaigns when using the wrong goals will lead to false interpretations of what we have now.
And the smaller your company is, the more prone to make this mistake you are. As the larger you are, the scale of testing errors won’t hurt the bottom-line as severely.
That is where the essence of performance marketing, which is testing comes in.
The more we can test different methods and have universal goals with universal data, we can compare the performances of every action we take in marketing.
But the beauty in performance marketing is that testing new methods by itself won’t require more money as you can change goals and targeting on a whim to divert to new ideas quickly.
And never forget a core benefit, the ability to track spending, and seeing how far your budget can take you.
Performance Marketing vs. Brand Marketing
Brand marketing is about increasing brand awareness, and it’s expanding a brand’s value to build long-lasting relationships. For example, in brand marketing, we are not actively trying to sell products.
So the bigger question is, can you do brand marketing with the mindset of performance marketing?
Yes, you can.
If you choose to grow a brand with performance marketing, you have to have the right goals and KPIs to track the growth of brand awareness across your marketing activities.
The problem in performance marketing in brand building is that we might find it more profitable to use sales or lead-based campaigns to improve return on ad spending further.
But doing so, we forget our initial goal, to grow a brand.
Increasing revenue and brand awareness go hand-in-hand, as of course, the more you’re seen, the higher chances of a sale you will have.
But it can lead to having a smaller impact on audiences as we go deeper into our sales-based campaigns. In some cases, we can’t reach new heights when optimizing an existing audience to its maximum potential.
Sometimes we just need to grow our base. And in this case, the right metrics for brand building comes to play in performance marketing.
Performance Marketing Metrics and KPIs
Within performance marketing, there are many different metrics that marketers and platforms alike use to measure the performance of online marketing campaigns.
The names for these metrics may vary per platform, but as an underlying rule, the purpose is the same.
Here are the most common metrics that are available:
- CPM (Cost-Per-Mille) Cost per 1000 impressions
- CTR (Clickthrough rate)
- CPC (Cost Per Click)
- CPA / Cost Per Acquisition (Also called Conversion/Results) (Sales and leads)
The top marketers utilize strong KPIs in tandem with the common metrics, to establish a solid foundation of growth for a business.
Such common additional KPIs to keep in mind:
- Revenue per channel
- Customer Lifetime Value (CLV)
- Customer Churn Times
- Lead ratio
- Growth Rate of X (revenue, leads, audience size)
- Engagement and behavior-based metrics
When it comes to designing KPIs in your performance marketing campaigns, it’s crucial to understand your goals.
While using the common metrics to track ad spending is essential. The way we transform that information into valuable actions through KPIs is more helpful for any type of business looking for growth.
As every business is unique, using the same KPIs as everyone else will do you only more harm. Starting using common KPIs is a great way to start; just choose the most beneficial ones for you from the get-go.
Performance Marketing Platforms and Channels
In every marketing campaign, you can still achieve the methods of performance-based analysis.
When data isn’t readily available, you need to work a little harder to define the best ways to collect said data for your performance-based analysis for optimizing campaigns.
Usually, there are ways of achieving this depending on what you want to collect and track.
Nowadays, marketing campaigns from which you can’t see its real performance, are luckily pretty rare.
As increased utilization of digital methods is more viable for even the most traditional marketing channels.
The digitization of these methods increased ad spend across these channels. Traditional platforms are more incentivized to offer more digitized solutions.
The Common Online Ad Platforms in Performance Marketing
As performance marketing mostly uses platforms and methods from which you can see the actual performance of campaigns and their costs, online advertising methods are the most common.
The typical online ad platforms (you can learn more about these platforms and their benefits, by clicking the links):
- Search engine marketing (Google, Bing, and others)
- Social media marketing and advertising
- Native Advertising
An excellent performance marketing example is affiliate marketing. By default, affiliate marketing is one of the purest forms of performance marketing.
In affiliate marketing, you only pay directly for results. For example, the publisher or influencer promotes a product or service, and from each contributed sale or lead, they would get a commission. Therefore for the company, you achieved results before a payout.
How To Use Performance Marketing For SEO-Based Campaigns
By default, SEO-based campaigns aren’t performance marketing as you can’t pay for the results, and as you can’t have control on how you achieve the visibility on search engines.
But we can use a performance-based mindset to build better SEO campaigns for our business.
As for one, you can optimize the costs and performance of SEO-based campaigns. You just can’t pay for guaranteed results.
How to start?
Firstly, we need to consider every cost that revolves within our SEO-based campaigns such as content marketing cost, and the optimization itself.
The main culprits being the labor costs for content creation and optimization.
The result-oriented mindset helps us achieve a higher ROI for these marketing activities.
Depending on how you do SEO (internal or outsourced), you can pay for specific results for those who do the content and the optimization. Which technically would make SEO a performance marketing strategy.
But the core problem with SEO and content marketing is that gaining results is slow compared to online advertising, which makes defining its performance a little trickier, but not impossible.
But these channels provide so many benefits that not including them in a marketing strategy leaves more growth opportunities for your competitors.
Some helpful metrics to understand the performance of content marketing and SEO:
- Cost of content and cost of optimization
- Determining a page value
- Sales/Leads per content piece
- Measuring organic and social traffic per page
- Changes in audience sizes
Performance Marketing Tools and Software
Every platform and channel has its best tools to use to optimize each channel. Therefore to maximize results within a platform, you need to understand the main tools to grow in that specific channel.
For example, our guide on free SEO tools is perfect for optimizing your SEO campaigns, but you can’t take these tools to improve your Facebook ads results, for instance.
Before starting with marketing with a new channel or platform, look for the tools you need.
But let’s look at the core tool category you need to measure the overall performance of everything.
Web Analytics Is How You Measure Results
It doesn’t matter what platforms and channels you choose, as long as you have web analytics covered on your target website or landing pages.
What web analytics allows you to do is a performance-based comparison between every strategy, channel, or platform.
By comparing results actively, you can see which strategies are the best for you with your current goals.
Who Does Performance Marketing
Any online marketer has the tools and skills to become a performance marketer.
As we have discussed in this article, how almost every aspect of online marketing is performance-based, the key difference between a performance marketer and an online marketer is how they optimize their campaigns with data to match business goals.
But every online marketer or agency is not by default a performance-based one, but a performance marketer or agency is an online marketer.
When outsourcing to a performance marketing agency or hiring analysts and specialists: think of ways to promote performance-based compensation further as that is the core of motivating the use of performance-based models.
The more one gets done, the more you reward it.
It’s critical to understand that not every model is profit-based, and therefore not every compensation model can be taken off directly from the bottom line.
For example, if your goal is to increase brand awareness, you have to set a value for the actions that then you can use to create the compensation model.
But no matter how you do it, compensate for the growth in the metric you decided.
A Perfect Performance Marketing Strategy
Every performance marketing strategy has one thing in common: you will know how well or poorly you did, and you will gain the knowledge on how to make your next campaign better.
Through most online ad platforms, you can get a feedback loop from which you will quickly see how a new campaign performs against an old campaign.
This feedback loop will enable a performance marketer to quickly act on newly acquired data and enhance their strategies and goals.
How To Start? – Start With Goals
Start with understanding your business goals as profoundly as you can. You want to know why and what you want to achieve.
It might be simple to say, “I want to increase revenue,” which is excellent for sure, but you need to understand the why and what.
For example, “I want to increase revenue from category X 50% in the next six months from a new audience base because I have sourced better margins in that category and could support our brand awareness growth rate in the future”.
In the latter example, we can dissect the want more profoundly and create a performance-based campaign to cater to exactly that goal.
Breakdown the Goals Into Conversions
Next, we need to take our initial goal and break it down into steps, from which we take out our conversions for future campaigns.
As we build our funnels and plan how we measure the conversions in our campaigns, we need to decide on the tools.
Breaking down a funnel into critical steps and conversions has to be clear for us to understand the campaigns’ real performance later.
The tools we decide upon using largely depends on the platforms we end up using. But at the very least, tracking conversions on our website is essential.
Starting with Google Analytics and having the proper Goals set up as the primary conversion type from which we measure all the other types of conversions, helps us keep the data on a level playing field.
For example, if you use Facebook ads, the installation of the pixel and the conversion setup will be crucial. Or if you use Linkedin Ads, the importance of insight tag can’t be understated.
The point is, track the right conversion that matches your business goals.
Choosing The Right Channels
Every business is different, and not all marketing solutions will work every business the same way.
For example, even if your competitor did a strategy X and did well in it, it might not be the best solution for you, as goals may differ.
Going back to your goal you want to achieve, you need to understand what every platform and channel can provide.
Are you looking for a reliable lead-based B2B platform? Or are you trying to introduce your brand for new audiences at scale?
Our suggestion is to try as many different platforms, at least as many as possible. Those that match your goals, of course.
As we have standardized our performance-tracking earlier, we can see the benefits of every platform as these platforms’ results come in.
Testing, Testing, Testing
Testing in performance marketing is essential. As only through testing, we can find even better marketing campaigns and solutions for our business.
Never let a campaign go untested, and always have a couple of variables of the live campaigns to see how they measure against the first example.
And with testing, always have clearly defined schedules of when a test starts and when it ends. Otherwise, this impacts too much of your data and makes it harder to analyze.
And this doesn’t only mean testing within the same platform. After all, you’re trying to create an effective overall marketing campaign to reach your goal.
You’re testing your whole content distribution strategy at the same time to see which platforms perform the best.
Analyze Your Performance And Develop Your Goals
The vital thing to note here is to analyze your performance in the eyes of the goals you set up earlier.
It’s easy to start changing your goals during a campaign, especially if you’re running a low budget brand awareness campaign that suddenly started to gain sales.
The key is to analyze your goals with the performance you had. If you think it’s time to change gears and go for a more sales-based campaign, then utilize the data to create a campaign to reflect that on your next campaigns.
A question that you need to answer every time you measure your results is, would you do it again, or was it worth it?
For example, if the campaign wasn’t worth the investment, it’s time to create an entirely new campaign for trial with the data you had from the previous campaign.
Also every time you start a new campaign: think if you need to change your goals. In time goals always vary, and you need every marketing campaign aligned with your goals every time.
To summarize, performance marketing is all about measuring and optimizing results and knowing each result’s cost.
As a strategy for online marketing, it’s a crucial mindset to achieve your goals quickly and systemically.
The many elements it involves helps you create better marketing strategies which enable you to create:
- Profitable marketing campaigns through better conversion rates
- A higher ROI
- Build brand awareness cost-effectively
- Allows you to scale your marketing
- Find new marketing opportunities
We hope you understand what performance marketing is and how it can benefit your business while diversifying your online marketing strategies.