Identifying effective marketing strategies are essential to growing your business. They help you tap and connect with your target audience, build brand recognition, cement brand affinity, and influence consumer behavior. It’s like a roadmap that guides business owners to achieve their goals and grow their business.
Apart from content marketing, SEO, paid advertising, and the like, Performance Marketing is rising to the occasion and changing the game because of how it impacts the way businesses advertise and sell their products and services.
For those who aren’t quite sure about what performance marketing entails, keep scrolling. Below, we breakdown what it is, how it works, why it’s important, and the channels used for this strategy.
What is Performance Marketing?
You’ve probably come across a performance marketing campaign while scrolling through websites or watching videos. Performance marketing is a type of digital marketing where brands only pay marketing service providers once their business goals are met or when specific actions are completed, such as a click, sale, or lead.
As the name suggests, it’s marketing based on performance.
So, what makes performance marketing special? It gives power to the advertiser, since they only pay after the desired goal is achieved. Because of this, they can be confident that their marketing budget is spent only on successful campaigns.
More importantly, the success rate of performance marketing campaigns is generally higher since all campaigns are highly targeted, and marketers make data-backed decisions and optimize their campaigns based on the results. This serves as a win-win for both merchants and affiliates.
How Does Performance Marketing Work?
Four groups are involved in creation and execution of successful performance marketing campaigns, and they all work together to achieve the desired results.
- Retailers or Merchants
Otherwise known as advertisers, these are the brands or companies that sell goods and services. They look to promote their offering to accomplish specific objectives, such as generating more sales or leads, with the help of affiliate partners or “publishers.” Companies in industries like fashion, food and beverage, health and beauty, and more have everything to benefit from performance marketing.
- Publishers or Affiliates
This refers to the companies that own and operate media channels, like websites, blogs, or social media accounts, that promote digital ads. They are also called “marketing partners.” The publishers utilize different strategies (like display banners or search ads) to promote the brand and its products/services to accomplish their goals.
- Networks and Platforms
Third-party platforms or affiliate networks connect brands and publishers and provide a one-stop destination for resources and tools, including banners, text links, campaign performance tracking, and payment management. They serve as a way to keep both the merchant and affiliate on one page when it comes to tracking leads, clicks, conversions, and other key performance indicators (KPIs).
- Outsourced Program Managers (OPMs)
This pertains to the firms and agencies that offer full-time performance marketing services for companies that don’t have the workforce to do it in-house. OPMs help businesses devise a marketing strategy, manage publisher recruiting, take care of campaign design, and comply with regulations to ensure that each campaign runs smoothly.
These agencies can also optimize campaign performance for maximum results through other online marketing best practices, such as landing page optimization, search engine optimization (SEO), content marketing, and more.
Performance Marketing Platforms vs Performance Marketing Agencies
Before discussing the various channels utilized for performance marketing, let’s settle the difference between performance marketing platforms and performance marketing agencies first.
Affiliates or publishers earn based on the number of clicks, leads, or sales they generate. Performance marketing platforms make this process seamless and more orderly for them. These affiliate networks have built-in analytics and tracking tools that monitor those actions and allow automated payments to websites that install links to sell third-party products. Often, publishers make more money with sale commissions than PPC ads.
On the other hand, performance marketing agencies focus and specialize in pay-per-action digital marketing strategies that result in conversion, which can be an inquiry for lead generation or a sale for eCommerce. Businesses work closely with an agency for recommendations and solutions to meet their specific goals. Agencies also utilize analytics and tracking tools to report the results.
Channels Used for Performance Marketing
Now that you know what performance marketing is and how it works, let’s talk about the different channels that can be used as part of a performance marketing campaign.
Social media marketing
A lot of brands can find and tap into their audience on social media channels, including Instagram, Facebook, Twitter, Pinterest, LinkedIn, and TikTok. Using these platforms for your performance marketing campaigns tends to involve either influencer marketing or paid advertising strategies.
Of course, you must first determine where most of your audience is. LinkedIn mainly caters to professionals; Pinterest acts as a discovery platform for shoppers with specific interests; TikTok generally attracts younger user groups, while Facebook and Instagram have a diverse and massive user base.
The performance metrics commonly monitored for social media marketing are likes, shares, comments, clicks, sales, and checkouts.
Native advertising is a type of ad content designed to adapt and blend well in the medium it’s published on—in other words, it doesn’t look like an ad. Based on the content the user is reading, native ads appear as contextually relevant content, and it’s been proven to work. In fact, studies show that native ads brought in an 18% greater lift in purchase intent and 9% for brand affinity responses compared to banner ads.
Performance marketers use this mostly for retargeting opportunities. They can provide potential customers with useful and valuable information to pique their interest and drive them to perform a specific action. The common metric used for native ads are pay per impression or pay per click.
This type of performance marketing channel involves working with influencers, prominent figures, and content curation sites. They publish a post or article dedicated to advertising a brand or goods and services in exchange for payment. The payout can be in the form of free products, services, experiences, cost-per-click (CPC), cost-per-mile (CPM), or cost-per-action (CPA)-based compensation.
Some people think that performance marketing and affiliate marketing are one and the same, but the truth is that affiliate marketing is a form of performance marketing.
The most common example of affiliate marketing is when advertisers place banner ads on other websites that might be related to their product or service (i.e. Google Adsense). This means their brand gains exposure to an entirely new audience and a chance to bring them to their website.
Other common examples involve companies partnering with an influencer to promote their brands and products or services, such as through a contest that helps generate registrations. The brand can then see the number of registrations and compensate the influencer according to the results.
Search engine marketing (SEM)
This type of digital marketing is also known as pay-per-click (PPC) or paid search advertising, and it uses native ads through sponsored search results to combine it with other types of marketing. SEM or paid search marketing pertains to when an advertiser bids on keywords and pays for the clicks they get on ads posted on search engines like Google, Yahoo, and Bing.
Keywords are the bread and butter of SEM, and choosing them takes thorough research. You can analyze both your campaign’s organic and paid search keywords to understand how they are complementary.
Benefits of Performance Marketing for Your Business
Easy analytics and data tracking
Since performance marketing concentrates on boosting performance levels for your specific business goals, such as clicks, impressions, leads, and sales, you get to target and measure those metrics directly. Modern tools and technologies make it easier to track your ad performance and monitor and adjust your campaigns based on the insights gathered.
Each time a user subscribes to your mailing list, clicks on your ad, or interacts with any action that meets your goals, marketers can easily see if you’ve fulfilled your goals since they know which data to track and analyze.
Performance marketing focuses on bringing in a good return on investment. It doesn’t have the same risk as other marketing strategies like traditional advertising. Moreover, you can watch results in real-time, adjust or reallocate your budget as you see fit, and even put a full stop on campaigns to avoid overpaying for underperforming campaigns.
It ensures positive results for the goals or performance-related actions you set out to achieve.
Diversification of revenue streams
Performance marketing is a versatile marketing approach. When one channel doesn’t work, you can quickly pivot to another one that can bring better results. That means you don’t have to continue spending your ad budget on ineffective tactics, since you have a sure-fire way to generate revenue. This can be helpful when your other marketing channels aren’t generating the sales volume that you need.
Tap new and hard-to-reach audiences
An effective performance marketing plan can help you acquire an increased and more diversified audience that wouldn’t otherwise be possible with traditional advertising. This is especially true if you’re using affiliate marketing, where the outcome can bring in a larger audience, tap highly targeted traffic, and generate more sales.
Additionally, since performance marketing can come in different formats, it opens your brand to new markets as your ads find placements across various channels and content outlets.
Pay only for results
Instead of paying a fixed amount upfront, performance marketing agencies and marketers will charge you only when your desired action or goal is met. Typically, the payout is on a cost-per-impression basis to allow businesses to easily track their spending, ensuring their money doesn’t go to waste.
Whether you’re looking to build your mailing list, drive traffic to your website, increase the downloads for your app, or generate sales, this approach means that you only pay when these metrics are hit.
Tips for Performance Marketing Success
Experiment and optimize?
Good marketers know the importance of continuous testing and measuring when refining marketing strategies. With performance marketing, explore a range of different tactics for optimizing revenue-driving metrics to see what’s working and what’s not.
Experimenting will help you understand what’s lacking in your campaigns and how you can make adjustments to reach the goals you want to achieve. As you learn more from your growing experiments, you’ll build important knowledge about what tends to work specifically for your brand.
Choose a credible agency to avoid fraudulent results
The “pay for the results you want” arrangement is appealing for businesses indeed, especially those with a restricted budget. Likewise, it’s an attractive opportunity for some marketing firms to take advantage of their clients’ budgets by pushing fraudulent, low-value results focused on vanity metrics or obtained using black-hat tactics.
With this in mind, you must do thorough research when selecting an agency you want to entrust your business goals with. Ensure that the agency you’ll be working with is proactive and works for you, not for themselves.
The goal of performance marketing is generally to help brands tap into a broader audience, and engage and convert them into customers to boost your sales and brand recognition.
The Federal Trade Commission (FTC) has rules and regulations in place that brands and publishers need to follow to do this successfully and properly, and to avoid deceptive or unfair messaging in the campaigns. Brands and publishers must refer to the guidelines to ensure that their campaigns align and comply with the rules.
Are You Ready for a Pay-As-You-Go Marketing Approach?
These days, it’s not enough that businesses establish good branding. The new age of data-backed marketing ensures you only pay for the results you want, so your ad spend is worth every penny. Performance marketing is an excellent method to build your brand, improve product awareness, and interact with your audience without worrying too much about budget constraints.?
If you’re looking for a performance marketing agency that can help you plan the best strategy to drive results for your business, Spiralytics will take care of your business as if it’s our own.
Contact us today to get a quote!