Amid rapid digitization and tech advancements, performance marketing has gained immense popularity in the global digital marketing landscape.
In other words, you need to have an effective performance-based mindset to outmatch your competition and achieve business growth on digital platforms.
Moreover, with incumbent firms planning for expansion and new firms entering the market consistently, it is crucial for you to outline effective marketing strategies.
According to a recent report, the projected amount spent for US performance-based affiliate marketing alone counts as $6.82 billion in 2020.
Nowadays, whether you want to reach the target audience or build a strong brand image online, you need to embrace advanced promotional tools.
Moreover, the term ‘performance marketing’ has gained a lot of traction lately as it primarily aims at realizing objectives.
And if you’re wondering how performance marketing forms a vital part of digital advertising strategies, a ‘performance-based approach’ is the answer to this.
It basically drives the target audience’s interests by focusing on attaining better engagement, more conversions, and higher customer acquisition.
But if you still don’t understand it fully, then it’s best we dive into what performance marketing really means.
What is Performance Marketing?
As the word says it all, it means marketing based on performance.
It refers to the online marketing strategy and advertising program where advertisers are entitled to pay marketing companies when a specific goal is achieved.
It begins with chalking out an objective, followed by tracking the process and paying digital advertising service providers once the action is completed. The action could be flourishing sales figures, getting more leads, or achieving higher clicks from the target audience.
In simple words, performance marketing follows the result-based approach and is driven by end results.
This is, in fact, a perfect approach for companies seeking to reach a greater audience as the payments depend on ads performance and user interaction.
Moreover, this cost-effective nature makes advertisers a bit more confident about their budget as they need to spend depending on the success rate of campaigns.
The companies connect with advertising agencies or platforms to put their ads on different marketing channels. These companies depend on paid advertising channels such as affiliate marketing, social media means, sponsored ads, search engine advertising, and more.
Back when print ads were the widely preferred advertising means, users had to pay for each advert printed, regardless of its performance.
But, unlike traditional advertising, advertisers now don’t need to pay per ad. Instead, they need to only pay based on how well their digital ad performs. And the ad amount varies with visitors, clicks, impressions, or sales.
For instance, if your product/service’s ad is displayed to people on social media/search engines, you’ll have to pay every time a visitor clicks your ad or whenever the visitor gets converted to a buyer.
In simple terms, advertisers are required to pay only if the ads run well.
What else could be better than this win-win situation both for marketers and publishers? Both parties mutually work for a common goal and hence, end up maximizing conversions and ROI.
How Does Performance Marketing Work?
Performance marketing mainly consists of four parties namely:
- Retailers or Merchants
- Publishers or Affiliates
- Networks & Third-Party Platforms
- Affiliate Managers or Outsourced Program Management Agencies
Each group plays an important role in executing performance marketing and helps to drive business results successfully.
1 – Retailers or Merchants
These are the brands and companies that want to promote their products and services through affiliate partners or publishers.
As you already know, consumers nowadays regularly stream content on TVs and visit websites as well as social media platforms. And performance marketing opens doors for marketers to reach and engage their target audience through a digital media campaign.
Put another way, if the goal of your company is engaging more consumers, generating leads, and increasing sales by greater conversions, performance marketing is probably the medium for you right now.
Consumers pass through the research and knowledge-building phase before buying a product/service. They depend on product reviews and ratings by the influencers or other shoppers while reaching a final decision. Retailers/Merchants engage more audiences resulting in a proven conversion rate and ROI.
2 – Publishers or Affiliates
Publishers refer to any company that owns and operates a platform (website/app) that sells digital advertising by publishing on it.
Advertisers bid on the ad space present on the website for reaching their target audience. When the audience visits the website, the ads appear in front of them.
Affiliates or publishing platforms include coupon websites, product review sites, blogs, loyalty and cashback websites, mobile apps, social influencers, and so on.
Before selecting the publisher, you must analyze the website content to check if the web traffic or audience matches your target market.
For instance, influencers are publishers that mainly promote a particular category of products through their social channels, groups, social media accounts, or blogs. They aim at giving guidance to the customers related to a product by adding their personal reviews and experiences.
This builds loyalty both for customers as well as publishers.
3 – Networks & Third-Party Platforms
Also known as affiliate networks are the middlemen who connect retailers and publishers offering affiliate marketing solutions for their goods/services.
Through a single portal, it gives publishers access to multiple channels such as banners, text links, promotions, and more.
Third-party platforms are essential to both merchants and publishers. Affiliate networks help companies to keep a track of ad leads, clicks, and conversions.
A few leading affiliate networks are ShareASale, Amazon associates, FlexOffers, Pepperjam, ClickBank, and many more. They all differ from each other based on several factors like features, cost structures, usage, security, payment schedule, etc.
4 – Affiliate Managers or Outsourced Program Management Agencies
Affiliate managers or OPMs are the key links between merchant and affiliate networks.
Affiliate companies can either be in-house or outsourced teams, depending on the needs of a brand. It can also be the case that the entire project is managed by the outsourced team or it is appointed just to support the in-house team.
Working with a well-experienced affiliate management company can facilitate the brand with flexibility, scalability, high ROI, and effective working. With abundant expertise, affiliate managers ensure meeting every need of both merchants as well as a partner.
Deciding over anyone whether in-house or an affiliate company depends on factors like in-house team size, expertise level, skills, budget, goals, project timeframe, and more.
Different Ways to Leverage Performance Marketing
Now as we’ve shed light on groups of performance marketing, let’s move towards ways to practice performance marketing.
Cost Per Click (CPC)
In this revenue model, advertisers make payments based on the number of times the ad is clicked. In the case of CPC, you can set a maximum CPC or max CPC amount – the highest amount you’re willing to pay per click on your ad.
Cost Per Impression (CPM)
impressions usually refer to views of your ad. With CPM, you’ve to pay for every 1,000 views. For instance, if a website publisher charges $3.00 CPM, that means an advertiser has to pay $3.0 for every 1,000 impressions on its ad.
Cost Per Sales (CPS)
Also known as pay per sale is an affiliate payment model in which advertisers have to pay according to the sales generated by publishers via ads placed in publisher’s platforms.
It can be calculated by dividing the total ad campaign cost by the sum of all sales made.
Cost Per Leads (CPL)
CPL is an advertising pricing model where the advertiser has to pay upon lead generation. It could be sign-ups for an email newsletter, webinar, or any other offer. This mode generates leads and hence, allows you to follow up with customers and increase sales.
Cost Per Acquisition (CPA)
In the case of CPA, advertisers pay when a customer completes an action. The action could be anything from making a sale to visiting a blog or downloading materials. It measures the cumulative costs of customers’ actions that lead to account conversion.
What Are The Best Performance Marketing Channels?
Let’s take a rundown through different performance marketing channels.
Banner Ads
When you visit a website, whether it be a news site or social media page, you might have noticed the ads appearing on the sides or at the top and bottom.
These image-based ads with rectangular graphics of varied sizes are banner ads/display ads.
They are recognized as a popular advertising means. The primary purpose of the banner ads is to promote product/service on the host website, divert visitors to the advertiser’s website and convert them into customers. The banners are usually clickable that are directly linked to a landing page or home page of the advertiser’s website.
The companies opt for banner ads to claim numerous benefits such as cost-effectiveness, ease to create, targetable, measurable, creating brand awareness, and more. Having engaging images, they are also great lead generators.
Native Ads
“Recommended for you,” “suggested post” or “sponsored,” such words could be hitting your web pages more often, and they are nothing but native ads.
Native advertising matches the look, theme, and functions of a web page or website to promote sponsored content. They’re often found as ‘recommended content’ on the website you recently visited or as an ad listing on the top of your Google search results. They don’t appear as a banner ad, rather, they seem to be a part of the content flow.
A report claims, The Click-through rate of native ads is 40 times higher than classic display ads. And by the end of 2022, Native advertising revenue will increase by 46%. This is the reason why top companies are opting for native ads for their marketing purpose.
Affiliate Marketing
Affiliate marketing is a marketing model in which a company pays compensation to third-party publishers who generate traffic or leads to the company’s product/services. The third-party publishers are known as affiliates.
In general terms, it is related to a marketing medium that’s affiliated with the advertiser and gets paid out only when the desired action takes place.
Content Marketing
Content marketing refers to creating and distributing valuable content to attract and retain a loyal customer base. It is used by several leading companies such as P&G, Microsoft, John Deere, and more.
The content could be in any form whether articles, videos, podcasts, and other media that attract and engage the audience effectively. It promotes brand awareness and unique content strategies can keep your business top of mind, ahead of your competitors.
According to a study, nearly 80% of B2B marketers report having a content marketing strategy, 60% of which includes the most successful companies.
Companies are increasingly using content marketing as their key marketing channel for reasons including increased sales, reduced costs, more loyal customers, and higher ROI.
Further, content marketing is also a part of every marketing technique you follow. The most common content marketing strategies used by businesses are curating engaging content for SEO, PR that addresses readers’ concerns, PPC ads, inbound marketing to drive traffic, and more.
Search Engine Marketing
SEM involves promoting a website to increase its visibility in search engine results pages mainly through paid advertising.
SEM can be performed through paid option, also known as PPC, and with an organic option. Paid marketing is when an advertiser pays for each click to ads on search engines like Google and Yahoo. While organic SEM is related to unpaid means such as SEO-optimized landing pages.
Social Media Marketing
As the name suggests, it refers to promoting products/services through social media and social networks.
It is a widely used marketing means as report evidence, 73% of marketers believe that their efforts through social media marketing have been “somewhat effective” or “very effective” for their business”.
SMM can be categorized into different types such as social news, microblogging, social bookmarking, media sharing, community blogs, and social networks.
The elements that are usually measured in social media-driven “performance marketing” include user engagement, likes, clicks, and sales.
Benefits of Performance Marketing
Following are the primary benefits of performance marketing that one must know about.
ROI-Driven Marketing
Performance marketing focuses on assured results, hence, facilitating advertisers with higher ROI. It doesn’t bear the same risk levels as traditional promotional techniques. Moreover, you can also track actions periodically and set the budget accordingly.
As you’ve to pay only when the action is completed, you can prevent spending huge bucks for poor-performing ad campaigns.
Easy Data Tracking & Analytics
As performance marketing is all about putting efforts into achieving business goals, be it clicks, leads, or conversions, you can measure them easily. Marketing channels such as social media marketing and affiliate marketing enable you to track your ad performance accurately.
You can also track ad performance on top management software such as ClickUp and Basecamp to get reliable insights. Marketers can get notified with each click, subscriber, and conversion in a seamless way.
Diversification of Revenue Streams
Performance marketing is built with numerous channels that ensure enhanced ad results. You can analyze your business needs, examine your budget and choose a marketing channel to tailor your needs. You don’t need to follow the same old technique that isn’t able to generate more revenues for your business.
Tap Hard-to-Reach Audiences
A well-outlined performance marketing strategy can help you to reach a more diversified audience without any geographical boundaries. This won’t be possible with traditional advertising such as paper-based classified ads.
With performance marketing at your end, you can maximize your customer base by attaining higher traffic and generating greater revenues.
Pay only for Results
You don’t need to worry about paying the excessive sum in lots. Performance marketing companies charge only when the pre-fixed target is achieved or the desired action is completed.
How to Win at Performance Marketing: 3 Highly-Effective Tips
Now that you’re aware of the awesome benefits of performance marketing, let’s quickly go through 3 highly-effective tips to keep in mind to maximize your results.
Experiment & Optimize
Ongoing testing and monitoring is the most functional tip given by leading marketing experts. Marketers need to continuously test and alter strategies to cope with the changing customer needs and expectations.
To frame a successful performance marketing strategy, you must explore different revenue generation tactics available and tap into the most productive one.
Be Compliant
The Federal Trade Commission (FTC) has several rules and regulations that brands have to follow to fulfill their objective successfully and prevent any unfair practices in the campaigns. They must ensure that their ad campaigns align with the FTC guidelines and are in compliance with its regulatory obligations.
Partner with a Credible Expert
Selecting a credible performance marketing partner is necessary to prevent low-value results obtained using black-hat methods. Perform proper research, analyze different alternatives available at your source, match the features offered by each, and enlist the most preferred ones to decide the best partner.
Summary
These days traditional marketing strategies aren’t enough for businesses to thrive in the competitive market scenario. Not just the money, but businesses can’t afford to waste time and other resources over faulty marketing means.
Your ad spend matters and is worth every penny you spend, which is why performance marketing is a necessity for every business, irrespective of their industry, to build brand image, improve account conversions and reach a larger share of the target audience without concerning much about the budget.
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