What is Performance Marketing?
Performance marketing, digital performance marketing, or performance media marketing, is a digital advertising strategy you can use to optimize your advertising spend and drive more measurable results.
This strategy saves you money by ensuring you only pay performance service providers like influencers and affiliates when they deliver specific performance metrics, such as clicks and conversions.
A performance marketing campaign is ideal when you’re targeting clear-cut audiences and have pre-defined results you’re after. It lets you streamline your marketing strategies, refine your targeting techniques, and optimize your marketing budget.
Below, we expand on performance marketing, its various channels, how it works, its benefits, and any challenges you may encounter when you employ this marketing technique. Let’s dive in.
Defining performance marketing
Performance marketing refers to a digital marketing strategy focused on results. How? With performance marketing, businesses hire advertisers such as influencers and affiliates to drive specific results. These advertisers are only paid once pre-defined goals are met.
It differs from traditional marketing, where advertisers are paid upfront or by milestones. With performance marketing, advertisers must prove their worth by delivering results and detailed reports before they can receive their cheques.
To boost the success of your performance marketing efforts, you must determine the most meaningful metrics for your businesses and communicate these to the advertisers. The advertisers then start promoting your products or services to meet these goals, which may include:
- Increasing leads
- Growing sales
- Maximizing application downloads
- Driving more website traffic
- Boosting engagement
Types of performance marketing
Performance-based marketing can take various forms. The best channel depends on the results you want to drive for your business.
Here are the top channels for performance marketing:
1. Affiliate marketing
It involves forming a partnership between a business and an advertiser. The independent advertiser promotes your products or services on their platforms, and they include links to these.
They then receive a commission for every conversion, whether through a click, lead, or sale generated from the links they’ve shared.
2. Influencer marketing
You can collaborate with influencers who create authentic ads for your products and services and promote these to their huge number of followers. The influencer is paid based on the clicks, engagement, and sales they drive.
3. Social media marketing
Marketers use different ad formats, targeting options, and payment models to run ads on social media platforms like Facebook, Instagram, and LinkedIn. You can then track performance by the engagement, conversion rates, impressions, and clicks you get.
4. Search engine marketing
It involves running targeted ads on search engines like Bing and Google for specific keywords. You only pay when somebody clicks the ad, converts, or takes another desired action like signing up for your newsletter.
Performance marketing pricing
Because of the unique nature of performance marketing, there are specific ways the performance of each campaign is measured and the payments made.
Below are the top pricing structures for performance marketing:
- Pay Per Click (PPC): This pricing model requires you to pay an affiliate or influencer for every ad click to a specific landing page they drive. Tracking URLs helps determine how many clicks you’ll pay for.
- Cost Per Impression (CPM): Your performance marketing spend is determined by the number of impressions an ad gathers. It’s typically measured and paid out for every 1000 impressions.
- Cost Per Acquisition (CPA): With CPA, advertisers are only paid when consumers complete sales that can be directly traced back to them.
- Cost Per Lead (CPL): Advertisers receive an amount every time a lead they’ve generated shares their contact information by filling out a registration or signup form.
The benefits of performance-based marketing
Performance marketing can help you scale your advertising efforts while ensuring your budget is utilized efficiently. It boasts numerous benefits, including:
- Driving a high marketing return on investment (ROI): Performance marketing ensures you get value for your money because you only pay for delivered results that align with your goals.
- Delivering measurable and transparent results: Performance marketing helps measure your campaign performance by tracking and analyzing key metrics.
- Increasing brand awareness: Influencers and affiliates can help you reach new audiences that are outside your normal circle. These make more people aware of your brand’s existence and its offerings.
The challenges of performance marketing
While performance-based marketing sounds like an all-win strategy, there are several challenges you may encounter as you try to optimize its use for your business.
Some of these challenges or disadvantages of performance marketing include:
- It requires continual monitoring: Keeping track of all the results is a time-consuming process that eats into the time you can use to grow other areas of your business.
- The costs are inconsistent: It may be challenging to predict the exact budget for your performance marketing efforts month after month. This could lead to overspending or underspending, both of which affect your campaign success.
- It’s difficult to accurately measure ROI: Determining ROI may be difficult, especially when campaigns have multiple touchpoints and long sales cycles.
Invest in revenue-driven performance marketing from Inbound Marketing Inc.
It’s possible to set up and track the results of your performance marketing campaign independently. However, it may strain your resources and overburden your in-house team by requiring them to constantly track results from the various channels you use.
When you partner with us, our team will customize a performance marketing strategy that aligns with your business goals and objectives to drive more revenue. To learn more about our dozens of performance marketing services contact us today or call us at 888-675-9886!