Are you looking for a method to promote your business or products without breaking the bank? If yes, look no further than performance marketing. It’s one of the most effective and budget-friendly ways to generate revenue for any business. If you don’t know anything about it, don’t worry. We’re going to tell you everything about performance marketing in this article from start to end. Let’s start!
Performance Marketing: Definition
As its name suggests, performance marketing is any type of marketing in which investment is linked to performance. You pay and spend more only when a marketing activity is helping you achieve certain goals (i.e. clicks, sales, leads, etc.) and delivering results.
Performance marketing is also possible only in digital content and platforms, such as social media platforms, video sites, etc. In simple words, it’s part of the digital marketing ecosystem. However, not all digital marketing is performance marketing.
How Performance Marketing Differs from Other Types of Marketing
Here we have compared performance marketing with other types of marketing.
Performance Marketing vs Print/Electronic Ads
Traditional print or electronic advertising requires significant upfront investment in order to promote your brand or product. While it also generates a lot of indirect ROI by building your brand, its results are not directly measurable, and sometimes take a little while to come.
Performance marketing, on the other hand, doesn’t require you to have a big marketing budget like print or electronic ads. It can be started only with a couple of dollars, and its results are directly measurable, which gives you a clear understanding of your ROI.
Performance Marketing vs Influencer Marketing
Influencer marketing requires you to collaborate with social media influencers for promoting your product or brand in exchange for a per-post fee. These influencers are usually popular Instagram users with thousands (or even millions) of followers or YouTubers with hundreds of thousands of subscribers who create content related to your niche.
Performance Marketing and Influencer Marketing both are a part of the digital marketing ecosystem. But as we said above, not all digital marketing is performance marketing. Unlike print and TV ads, Influencer marketing doesn’t require you to have a sizable budget to get started. In that department, it’s much like performance marketing because you can get started with a small budget by choosing to collaborate with an influencer who charges less.
But that’s where the problem begins — how much influencers charge is directly linked to how popular they are. If they are more popular they charge more, if they are less popular they charge less. So if you choose to collaborate with an influencer who charges less, then your ROI will also be less as your sponsored post will reach only as many followers as your influencer has.
Then, there’s the problem of tracking. Whether you’re able to track and measure the revenue generated by your Influencer marketing campaign or not depends on the platform you’re using. While YouTube has some tracking features under its Creators Program, the Instagram Influencer market is largely devoid of such functionality. So it’s going to be very difficult for you to directly track how many of your sales came because of Influencer marketing, especially if you are running a bunch of marketing campaigns.
Those things don’t happen with Performance Marketing. You can get started with a small budget, yet track how many of your sales came from the performance marketing campaign, and then increase your budget as your sales grow. Also, your ROI is higher than it is with influencer marketing.
Performance Marketing vs SEO
While SEO is an important element of any brand’s overall marketing strategy that can’t be replaced by any other type of marketing, initially you’ll be better off focusing your efforts on performance marketing instead of SEO.
The main reason behind this choice is that it takes some time before SEO starts generating any meaningful traffic and sales for your business. Initially (for the first 1-2 months at least) you don’t see any measurable difference in your website traffic, which means no new sales.
While it pays off in the long term by building your brand and driving lots of organic traffic, if you’re looking for quick revenue then only performance marketing can deliver it in a reliable manner. So if your budget is stretched, and you’re in the early stage of your business, you’ll be better off generating some profit first through performance marketing and then reinvesting it into a properly planned SEO campaign.
Advantages of Performance Marketing
There are several advantages of performance marketing over other traditional marketing methods. However, the four major ones among them are as follows:
- Efficiency: Performance marketing offers unmatched efficiency for your marketing budget and resources. You pay only for what you get in results. No other marketing strategy can deliver this level of efficient utilization of your marketing resources and budget.
- Better ROI: Performance marketing offers better ROI than other methods of marketing because the link between earnings and results is direct. This pushes marketers as well as platforms to deliver results, something which doesn’t happen as much with other types of marketing.
- Lower risk: Performance marketing can be started with a fraction of what you’d have to spend on other types of marketing. And you increase your investment only as you get the results, which means you pay out of your earnings instead. This low investment requirement significantly reduces the risk element of your marketing campaigns. You can try a campaign, see if it’s delivering the results, and increase or decrease spending on that campaign solely on the basis of results.
- Ease of tracking: Since compensation is directly linked to results, performance marketing platforms come with extremely detail-oriented ROI tracking features. This makes measuring the results and taking decisions based on them much easier and simple compared to other types of marketing.
Bonus: We have covered agencies that are at the top of providing performance marketing services. Check out these highly-regarded performance marketing agencies and the services they offer.
Performance Marketing Channels And Types
Each type of marketing relies on certain marketing channels in order to work. And each type of marketing also has certain types and subtypes that are suitable for achieving certain objectives. Performance marketing is no different from this phenomenon. Given below are its various channels and types:
Performance Marketing Channels
There are mainly four channels that can be used for performance marketing. They are:
#1. Search Engines
Search engines such as Google and Bing are among the most popular choices for performance marketing, mainly because of the high ROI of customers that they can refer. Performance marketing on them can be done by utilizing the ad platforms of these search engines, which place your ads among search results for relevant keywords. The traffic that comes through those ads usually converts the best, which is why Search Engines are considered by many marketers as the best channel for performance marketing.
#2. Social Media Platforms
Social media platforms such as Facebook, Twitter, and Instagram, are other major channels for performance marketing. Like search engines, they too can be utilized by placing various types of ads created through the ad platforms of those channels. The ads, however, are not placed among search results in this case — instead, they are placed in the news feeds of users, in between the posts of accounts they are following.
#3. Blogs And Publishers
You can also utilize blogs and publishing platforms relevant to your industry for performance marketing. In each industry, there are some reputed publishers and bloggers who command the respect and authority of customers. In addition to that, there are blogs and websites of mainstream media organizations too. Placing ads on them and then paying them on the basis of how your ads perform can help you acquire a lot of customers at very competitive costs.
#4. Video Sharing Platforms
Video-sharing platforms such as YouTube, Vimeo, and others are also amazing channels for performance marketing. They offer unmatched ad engagement levels as you can put ads between videos that are hard to skip, and also can be used to educate your customers regarding your product or brand.
Performance Marketing Types
All the marketing channels mentioned above also have their own types of performance marketing methods that can be leveraged to drive sales. They include:
#1. Affiliate Marketing
In affiliate marketing, you pay a fixed commission to others for driving your sales. You pay them on a per-sale basis, which means they need to drive more sales to your business to increase their earnings. The affiliates can use whatever marketing channels they want to use for driving their sales.
#2. Content Marketing
This type of performance marketing is done by publishing content that educates your customers. In the process of educating, you can also introduce them to your brand and products. This type of marketing, as you can expect, works for blogs and publishers.
#3. Native Advertising
Native advertising is advertising made to be embedded in the content of a marketing channel. They are often exactly like the main content that’s being consumed by the user, which helps them become more engaging than other types of ads. You can often find such ads on e-commerce websites, where sponsored products appear between main products in the search results. YouTube ads are also an example of such advertising.
#4. Search Engine Marketing/Advertising
In Search Engine Marketing/Advertising your ads are placed on search result pages of relevant keywords, often on the top of search results to maximize the clicks on them. Since people search for whatever they need using a search engine, your ads in their search results can introduce your brand or product to them at a very opportune time.
#5. Social Media Advertising
This type of performance marketing leverages the addictive nature of social media platforms to drive your sales. People spend a good chunk of their time on social media, but unfortunately, the organic reach of social media platforms has reduced significantly in the last few years. However, paid advertising on social media platforms still generates the best possible ROI, which is why it’s used by so many brands globally.
Performance Marketing Metrics
Now it’s time to take a look at some of the metrics that can help us measure the ROI of our marketing campaigns. Because as we’ve emphasized till now, performance marketing is all about results. So when we talk about it, it’s also important to take a look at some of the metrics and KPIs that help in measuring and tracking those results:
#1. Cost Per Mile (CPM)
Cost per mile, also known as cost per thousand impressions, is the amount of money you spend in an advertising campaign to generate 1,000 impressions for your landing page. This metric tells you the cost of having your ad merely show up on the platform of your choice. That’s why some marketers focus less on this metric and more on other metrics listed below that tell about a concrete action.
#2. Cost Per Click (CPC)
This metric tells the cost of getting a visitor to click on your ad. It’s calculated by dividing the number of clicks generated through an ad by the cost of running the ad. This is a better metric to track in comparison to CPM because the visitor has taken some action (i.e. clicking the ad) to learn more about your brand or product.
#3. Cost Per Action (CPA)
Cost Per Action tells how much it costs to get the viewers of your ads to perform a certain action, such as downloading an ebook, subscribing for updates, making a purchase, etc. As you can guess, it’s an even more reliable measure of ad performance than both CPM and CPC. It’s calculated by dividing the number of actions (i.e. clicks, subscriptions, purchases, etc.) generated through an ad by the cost of running the ad.
#4. Life Time Value (LTV)
This metric tries to predict the lifetime revenue that can be generated by each customer you acquire through an ad campaign. It’s calculated by the use of advanced methods like predictive analytics and ongoing user activity.
#5. Return On Ad Spend (ROAS)
This metric serves as a measure of your overall advertising ROI. To calculate it, you divide your Gross revenue from an ad campaign by the Cost of the ad campaign. Like CPA, this is another important metric for any ad campaign.
Conclusion: What Is Performance Marketing
So this was our detailed overview of performance marketing. We hope we answered all of your questions in detail, and now you’re in a better position to get started with performance marketing for your business. If you still have any questions, feel free to share them in the comments and we’ll try our best to answer them.