What is Performance marketing?
Performance marketing is a digital marketing strategy that focuses on driving specific actions or measurable outcomes, such as clicks, conversions, leads, sales, or other desired user interactions. Unlike traditional marketing, which may focus on brand awareness or general visibility, performance marketing is centered around achieving tangible and trackable results.
Performance marketing is a way for companies to put their ads on places like social media, search engines, and videos. They work with agencies or publishers to do this. Instead of paying a fixed amount for the ad, they pay depending on how many people click on the ad, see it, share it, or buy something because of it.
How Performance marketing works:
1) Connecting with Partners:
Businesses collaborate with agencies or publishers who have access to various online platforms like social media, search engines, and websites.
2) Designing Ads:
The businesses create attractive and engaging advertisements that they want to show to potential customers.
3) Placing Ads:
These ads are placed on different performance marketing channels such as social media platforms, search engine results pages, websites, videos, and more.
4) Performance Tracking:
Advanced tracking technologies are used to monitor how the ads are performing. Metrics like clicks, impressions (how many times the ad is seen), shares, and sales are tracked.
5) Payment Based on Performance:
Instead of paying a fixed fee upfront, businesses only pay when certain actions are taken by users. For example, they might pay a small amount each time someone clicks on their ad or when a sale is made directly from the ad.
6) Optimising Campaigns:
Advertisers continuously analyse the data to see which ads and channels are delivering the best results. They can adjust their strategies accordingly, focusing more on what's working well and making improvements where needed.
7) Flexible Budgets:
Businesses can set budgets that suit their goals and financial capacity. Since payment is tied to performance, they can scale their efforts up or down based on the outcomes they're getting.
In simpler words, performance marketing is like a pay-for-results approach. Businesses put their ads online, and they only pay when people interact with the ads in certain ways that they care about. This makes it a more efficient and targeted way to reach potential customers and get the best value for their advertising budget.
Different ways to pay in performance marketing:
In performance marketing, there are several ways businesses can pay based on the actions users take in response to their ads. These payment models are designed to align with specific goals and outcomes. Here are the main payment methods used in performance marketing:
1) Cost Per Click (CPC):
With CPC, advertisers pay a set amount each time someone clicks on their ad. It's often used for driving traffic to a website or landing page.
2) Cost Per Mille (CPM):
CPM is based on impressions, which is the number of times an ad is displayed to users. Advertisers pay a fixed amount for every thousand impressions, regardless of whether users click on the ad or not.
3) Cost Per Action (CPA):
Also known as Cost Per Conversion, CPA requires advertisers to pay only when a specific action is completed, such as a purchase, sign-up, or download. This is a performance-based approach, as payment is tied to a desired outcome.
4) Cost Per Lead (CPL):
Advertisers pay for each qualified lead generated through their ad. A lead typically involves user information like email addresses, phone numbers, or other contact details.
5) Cost Per View (CPV):
CPV is commonly used for video ads. Advertisers pay when their video ad is viewed by users, usually when a certain percentage of the video has been watched.
6) Revenue Share:
This model involves sharing a percentage of the actual revenue generated from sales or conversions with the advertising partner. It's often used in affiliate marketing where partners promote products and earn a portion of the sales they help generate.
7) Flat Fee + Performance Bonus:
Advertisers pay a fixed fee upfront and then offer a bonus based on specific performance metrics. This approach encourages the advertising partner to work harder to achieve better results.
8) Hybrid Models:
Businesses can combine different payment methods to suit their goals. For instance, they might use a combination of CPC and CPA to balance between generating traffic and driving conversions.
These payment methods allow businesses to customize their advertising strategies based on their objectives and budget. It also shifts the risk from the advertiser to the advertising partner, as payment is directly linked to the desired outcomes.
Performance marketing channels:
Performance marketing utilises various online channels to promote products or services and measure their effectiveness based on user interactions. Here are some common performance marketing channels:
1) Search Engine Advertising (SEM):
This includes pay-per-click (PPC) ads that appear at the top of search engine results pages. Advertisers bid on keywords relevant to their business, and they pay when users click on their ads.
2) Social Media Advertising:
Platforms like Facebook, Instagram, Twitter, and LinkedIn offer targeted advertising options. Advertisers can pay based on clicks, impressions, or specific actions like post engagement or app installations.
3) Display Advertising:
Banner ads, text ads, and interactive media can be placed on various websites and are often paid for based on impressions (CPM) or clicks (CPC).
4) Video Advertising:
Ads can be placed on platforms like YouTube, where payment can be based on views (CPV) or clicks (CPC).
5) Affiliate Marketing:
Businesses partner with affiliates who promote their products or services on their own platforms. Affiliates earn a commission for each sale or action generated through their unique affiliate links.
6) Email Marketing:
While not strictly a pay-per-performance channel, email marketing can be used effectively to target specific audiences and measure responses such as open rates, click-through rates, and conversions.
7) Content Marketing:
Creating valuable content can attract and engage potential customers. Performance can be measured based on engagement metrics like time spent on page, shares, and conversions.
8) Native Advertising:
These ads blend in with the content of the platform they're on, providing a non-disruptive way to engage users. Payments can be based on clicks or views.
9) Influencer Marketing:
Collaborating with social media influencers to promote products or services to their followers. Payments can vary based on the influencer's reach and engagement.
10) Retargeting/Remarketing:
These ads target users who have already visited a website but didn't complete a desired action. Payments are often based on clicks or actions.
11) Mobile Advertising:
Ads designed specifically for mobile devices, often utilising in-app advertising or mobile websites.
12) Programmatic Advertising:
Automated buying and selling of ad space, often using real-time bidding to optimise ad placement and pricing.
13) Comparison Shopping Engines:
Platforms like Google Shopping and Amazon allow businesses to list products with relevant information, often paid for on a CPC basis.
14) Performance-based Content Partnerships:
Collaborating with publishers to create content that aligns with the advertiser's goals, often paid for based on performance metrics.
Each of these channels has its own strengths and is suited to different types of businesses and goals. Performance marketing allows businesses to diversify their efforts and optimise their strategies based on the channels that yield the best results.
Performance marketing example:
Here's a concise example of performance marketing:
Example: A shoe company wants to boost online sales for their new running shoes.
Performance Marketing Approach:
1) Search Engine Advertising (SEM):
They run Google ads for keywords like "best running shoes" and pay when people click on their ad and visit their online store.
2) Social Media Advertising:
They create engaging Instagram ads featuring the running shoes and pay when users click the ad or engage with it.
3) Affiliate Marketing:
They partner with fitness bloggers who promote their shoes with unique links, earning a commission for each sale driven by these links.
4) Retargeting:
Users who visit their website but don't purchase see ads for the running shoes on other sites, encouraging them to return and buy.
5) Email Campaign:
They send out emails to their subscriber list showcasing the new shoes, tracking click-through rates and purchases.
Measurement and Adjustment:
--> If the SEM campaign isn't driving sales, they might adjust their ad copy and keywords to better target potential buyers.
--> If certain influencers in the affiliate program generate more sales, they could prioritise collaborations with them.
--> If the retargeting ads are effective, they might increase the budget for that channel.
--> If the email campaign has a low click-through rate, they may experiment with different subject lines or content.
Throughout, the company monitors metrics to optimise their strategy and get the best results for their marketing budget.
Benefits of Performance marketing:
In the coming years, digital marketing will keep getting better. Using performance marketing channels is like a smart move. It helps you grow your advertising without spending too much money.
Performance marketing is a cool way to show your stuff to different people and learn useful information. And there's more to gain. When you use all the cool parts of performance marketing, like ads that look like they belong and teaming up with others on social media, you'll see that growing your business becomes really easy.