What Is Performance Marketing and Why Does It Matter?

With the spend on digital marketing worldwide crossing USD 325 billion, innovation in the space is at an all-time high. One of these approaches is performance marketing, which has the advertiser, publisher and agency trifecta equally excited.

Let’s first understand the concept of Performance Marketing, a technique of digital marketing which is almost entirely focused on the performance, outcome, or results of online marketing campaigns, and has been redefining the way advertisers sell their products.

Simply put, performance marketing allows the advertiser to get their brand out there across digital channels and pay only when the completed desired action takes place. The key driver of performance marketing was the growing need to reduce cost per acquisition and increase the return on ad spend. It allows advertisers to measure everything from online brand impact to conversion rate, drilled down to a single ad.

How it works

Performance marketing allows advertisers to pay when a specific action takes place rather than upfront for their entire campaign. Some of these objectives are:

Lead generation
Outsourcing the promotion of the business to a targeted set of prospective customers in order to generate actionable leads.

Product/ service purchases
Generating online sales with highly targeted campaigns and in some cases even offline sales driven by online campaigns.

Application downloads
For certain types of brands, users downloading their app is the first important step to more sales.

Performance Marketing channels

Performance marketing requires advertisers to employ a variety of digital marketing channels such as:

Display ads
Display ads, banner ads and other visual ads that show up on targeted websites, i.e., those sites visited by the target audience.

Sponsored content
Sponsored content sits at the intersection of online advertising and content marketing. Branded content like videos, blogs, white papers and such, is created and posted on relevant paid/ unpaid channels.

Ads on social media
Brands can advertise on social media in different ad formats, with multiple options for payment models and targeting.

Search engine advertising
These ads are seen at the top of the search results for matching keywords and are great for expanding online visibility.

Affiliate marketing
Affiliate marketing is a type of online marketing in which a marketing agency receives payment for sending new leads or customers to a business’s website.

Why does Performance Marketing matter so much today?

Real-time ROI tracking
By its very nature, it is easy to measure and track results and returns on spending, as compared to other forms of digital marketing. Whether a user is clicking on your ad, signing up for an email subscription list, downloads your app or an eBook, you know you’ve reached your goal. This way you can track and prove your ROI easily and report to the powers that be.

Optimize KPIs
Marketing KPIs play a vital role in the success of any branding activity and related goals. No matter what is your KPI, performance marketing makes it easier to achieve them.

Pay only for what you get
Your performance marketing agency will only charge you when the desired action is achieved, instead of charging you project cost upfront. This eliminates the room for any undefined overhead and lets marketers pay only for outcomes aligned with predefined goals.

Simpler planning
Performance marketing campaigns are easier to budget because you can begin by identifying the desired outcomes you want to achieve and then work backward to see how you can get there. This way you can develop a clear budget and plan a clear campaign spend.

Monitor outcomes and optimize in real-time
Since performance marketing is all online, marketers can track how their campaign is running in real-time and optimize as and when required. This could mean reducing, or even increasing, the ad spend to improve the number of impressions, clicks and conversions. Campaigns can be pivoted entirely if marketers feel something is not working well and budgets can be reassigned to different channels or marketing methods.

But all is not perfect

Performance marketing also comes with several disadvantages especially if marketers don’t do it right.

Fake metrics
Some marketers try to present fake, irrelevant metrics that look beneficial to the advertiser’s business goals but are actually not really impactful in increasing revenue or brand visibility. Some agencies even use black hat tactics to bring in a lot of traffic to your site.

High costs
When you partner with a good online marketing agency, your costs are consistent and predictable and you will also stay within budget. But in the case of a performance marketing campaign, your monthly costs will vary widely. In one month the leads and ad clicks will be high, but the following month may not see much traction.

Performance Marketing payment models

Pay Per Sale / Cost Per Acquisition: The advertiser pays a publisher or affiliate for the sales generated once the transaction is complete.

Pay Per Click: Advertiser pays for a click that leads the target audience to the website or landing page.

Pay Per Lead: In the context of performance marketing, a lead is a customer who has completed a specific action like a download or filling up a subscription form.

Creating a Performance Marketing Campaign

Creating a performance marketing campaign is pretty much like other marketing campaigns.

Start with measurables goals, such as drive 5000 visitors to a new/ revamped website, or complete 50,000 app downloads.

Pick the right channels, which means channels that will best help you achieve your goals in the shortest possible time.

Prepare for launch, by creating content that will appeal to your target audience.

Monitor and optimize the performance of your campaign, by identifying the right metrics and making adjustments where necessary. You should alter and pivot your campaign to find newer, better ways to achieve your goals.

To really get the desired outcomes of your digital marketing campaign, it is important that your campaigns be designed strategically. Pick the right channels, choose the most effective ad formats, optimize goals, target the right audience and create content that will resonate with that target audience. If you want to hire a digital marketing agency that cares about you and your goals with complete ownership and detailed insights, Wizrdom is here for you. Reach out at [email protected] to know more.