What is Performance Marketing? Everything You Need to Know
Performance marketing focuses on maximizing ROI on your marketing spend. It is all about the KPIs that generate real results – leads, conversions, and sales.
Performance marketing helps you monitor all your campaign metrics and make any necessary adjustments based on the data collected.
According to the Performance Marketing Association, “Performance marketing is a comprehensive term that refers to online marketing and advertising programs in which advertisers and marketing companies are paid when a specific action is completed; such as a sale, lead, or click.”
How is it different from traditional marketing?
With performance marketing, you only pay for ads after you see the outcome of your campaign. Rather than a larger flat fee, you often pay a smaller fee for each conversion.
In traditional marketing campaigns, an advertiser pays an upfront fee for ad space, apart from the performance or outcome of the campaign. This includes paying even without seeing the results, which can lead to a waste of money.
How does performance marketing work?
You need three players in order to develop a strategy:
- A publisher or an affiliate partner
- A conversion goal
- A commission rate
You collaborate with an affiliate partner, which can be an influencer or publisher. Later, you determine conversion goals. Let’s say your marketing objective for the quarter is to gain 20,000 leads. You can tell your partner to direct traffic to your landing page and they will earn a commission once a user fills out the form.
How can you know which users come from which affiliate? As an advertiser, you give each partner a specific link or code to track who is responsible for that conversion goal.
Sometimes people use “performance marketing” and “affiliate marketing” interchangeably as both of them pay a third party for each conversion rather than a flat fee.
However, affiliate marketing is a type of performance marketing, as a subset of the larger picture.
Any tactic that requires paying for marketing based on results, counts as performance marketing.
You need to establish your objectives before creating campaigns. Do you want to create brand awareness, acquire more leads, generating sales for your new product line? Once you define your goals, you can create your ad strategy and decide which metrics to track.
Pay per sale
In this case, advertisers only pay the affiliate when a sale is generated from the affiliate’s referral traffic, often as a percentage of each sale.
Pay per lead
A pay-per-lead method helps the affiliate earn a commission when the visitors perform lead actions such as completing a survey form, signing up for a free trial or subscribing to a newsletter. Payments aren’t made for visitors who don’t sign up.
Pay per click
Payment depends on a qualified click-through from the affiliate’s website to a landing page on the advertiser’s website.
Types of performance marketing
Social media marketing
This method requires the usage of social media platforms to gain traffic and engagement through likes, shares and clicks.
Affiliate marketing is where a retailer pays a commission to the affiliate when the affiliate’s referral traffic leads to a conversion. Since affiliate marketing pays the affiliate for each conversion they get, performance marketing is affiliate marketing at scale.
Native ads are designed to match the color, layout, and theme of the media format in which they appear. The ad is located in regular content to generate a higher conversion rate.
Sponsored content takes place when influencers or brand ambassadors promote a product, service or brand in exchange for some compensation. Even though this content is advertising, it feels organic because influencers’ followers trust what they have to say.
Search engine marketing
Search engine marketing (SEM), is the act of using paid strategies to increase the search visibility of a website in search engine results pages (SERPs).
On the other hand, Search Engine Optimization (SEO) is the unpaid version of search marketing. It involves using keywords often searched by the target audience on the brand’s website.
Performance marketing campaigns can help you expand your customer base, maximize your ROI, and get real business results. If you collaborate with the right partners and set up a robust program to reach your business goals, you can have success with performance marketing.
At Response DGA, we create a digital growth marketing strategy that is not only innovative and market-leading but, most importantly, delivers commercial success. Would you like to discuss a full-funnel digital growth campaign?