Marketing

What is performance marketing? 

Kshitija Desai
June 24, 2022

Digital marketing is effective,
result-oriented, and...expensive. 

Although by-the-book digital marketing channels contribute greatly to a company 's revenue and overall growth, performance marketing has emerged as a cost-effective alternative in the digital marketing space.

Performance marketing is a result-based marketing strategy wherein the advertising company pays only  for every successful transaction or interaction with their target audience. While this may seem like a no-brainer, utilizing performance-based methods can be an excellent way to ensure advertising efforts that translate to solid returns - increased customer engagement, reach on social media platforms, transactions on one's website, etc. 

This blog will serve as a handy guide for anyone looking to venture into performance-based marketing, its benefits, types, risks, figuring out whether it's a right fit for your brand and tools that can help with your performance marketing efforts in the future. 

What is Performance Marketing?

 

As opposed to traditional methods of advertising, such as putting up a billboard, or paying for ad space in a popular newspaper, performance marketing ensures that the advertiser pays only when a specific action is carried out by the target audience. 

For example, a brand may decide upon a featured ad on Instagram, paying a certain amount only when a user clicks on the post and is taken to the brand's official website. Not only does this model provide marketing efforts that are easy on the bank, but ensure easily measurable outcomes as well. 

A brand would find it much harder to track how many users viewed, engaged with, and responded to an ad in a newspaper. On the other hand, paying only when a user clicks on their ad helps form better, more actionable insights using various analytics tools and costs much, much less. 

Why is performance marketing preferred over other methods? 

As we've covered in earlier sections, one of the biggest advantages of performance marketing is its cost-effectiveness. Budgets for marketing can often be quite tight, and maximizing returns through advertising efforts is on the top of every marketer's list. 

Various types of performance marketing include Pay Per Click (PPC), Pay Per Impression, Pay Per Sale, and Pay Per Acquisition. The amount of flexibility these channels provide a brand, whether it's just starting or well-established, trumps other forms of marketing where cost may not necessarily set up your campaign for a higher ROI. 

Relatively Risk-Free 

When a brand invests before seeing results, there's always a factor of high risk and a low ROI. Questions like 

"What are the chances of this campaign running successfully?", "What if we do not receive our target CTR?" 

"Will we have to focus on other KPIs if our investment in this campaign is not returned well?"

are asked during all stages of campaign launches. However, utilizing channels that allow brands to pay only once a desired action is completed by the user eliminates a substantial amount of risk. 

Better, Clearer Insights 

Analytics tools track a wide range of customer insights, starting from their engagement with a brand touchpoint (such as a blog, social media ad, emails, etc).

Traditionally, marketing experts predict/expect a certain CTR, lead conversion, and, customer acquisition based on past campaigns and customer engagement. However, performance marketing takes the "guessing" out of campaign analytics, by showing clearer, more accurate insights of successful click-throughs, downloads, shares, sign-ups, and purchases. 

These insights are much more meaningful, as they provide actionable information on the brand's performance, based on the actions (such as signing up for a newsletter, downloading a product guide) the brand's needs and goals. 

How does performance marketing work? 

Now that we've covered the how's and why's, let's take a look at the various types of performance marketing, and how your brand can utilize these based on your campaign goals. 

PPC - Pay-Per-Click 

Perhaps the most popular type of performance marketing, PPC is a great way to ensure that your brand spends a certain amount only when your campaigns/ads receive a click from the user, taking them to your target landing page.

A great example of PPC is paid ads on search engines such as Google. Once you bid for your ad campaign to show up in search results every time your target audience searches for a relevant keyword, you end up paying only when they click on your ad - an extremely cost-effective method to ensure you only pay for genuine, promising leads. 

PPM - Pay-Per-Impression 

The number of impressions your ad has is the number of views it has gained on a platform, such as Instagram or Youtube. CPM involves a brand paying a certain base rate for, say, every 100 views. So, if your campaign received 500 views, you only pay an amount equal to your base rate x 5. 

PPL - Pay-Per-Lead, PPS - Pay-Per-Sale & PPA - Pay-Per-Acquisition 

In CPL, an advertiser pays only when an action that helps convert a viewer into a lead is undertaken, for example, paying every time a person signs up for a product demo, or a consultancy call with your brand.

Cost-Per-Sale is used most widely in affiliate marketing, when the advertiser pays only when a sale was carried out successfully, after converting a consumer into a lead. Often, influencers and affiliate marketers use referral codes to direct their audience to the company's website, receiving a certain percentage of profits gained through sales. 

 CPA, on the other hand, is more generalized in nature. The company pays when any desired action is carried out by the consumer, be it visiting the landing page, sharing their email ID, signing up for event reminders, etc. 

Where Can You Use Performance Marketing? 

Digital marketing is an extremely diverse space, with efforts being distributed across social media platforms, search engines, and emails. Performance marketing, too, can be utilized across a wide range of digital mediums to ensure your marketing campaign reaches your target audience quickly, effectively, and can translate into long-term gains for your growth. 

Here are a few niche spots you can target with the strategies mentioned above - 

Affiliate Marketing 

Got a product or service to sell? Bring in affiliates to help spread the word! Affiliate marketing is a fast-growing method that ensures better reach, boosted sales, as well as higher customer engagement due to local and personalized reach. Establishing a PPS framework with affiliates is the best way to move forward. 

Social Media 

With over 58.4% of the world's population on social media, these platforms are a goldmine for boosting brand reach. Designing solid social media strategies on popular platforms such as Instagram, Pinterest, Facebook and TikTok and directing interested users to a relevant campaign can do wonders for your brand. What's more, you only pay when a user completes an action you want them to carry out - visiting your website, downloading your newsletter, etc! 

Targeting Search Engine Results 

For search engine marketing, there's two ways your brand can gain more visibility - 

  • Organic efforts (SEO) and 
  • Paid ads and features 

Search Engine Optimization, or SEO, is a tool that you can use as part of your content strategy to boost organic growth over time. Targeting the right keywords for your brand, including them in your content, metadata, headings, and descriptions can help your website rank higher every time a user searches for a relevant keyword or phrase. 

 On the other hand, designing ad campaigns on search engines such as Google help drive greater traffic to your website due to its high visibility. To top that, ad campaigns are usually based on a PPC model, so that means you pay a certain amount only when a user clicks on your ad! 

Things to keep in mind 

While performance marketing may seem like the solution to all of your marketing issues, keep in mind that not all of your campaigns should be focused on performance-based models. Clearly defining your company's overall and campaign goals is essential before charting out a marketing strategy. 

Here are a few questions you should ask yourself before venturing into performance marketing - 

  • What are my goals for this campaign? 
  • Is it to drive more user traffic? 
  • Is it to rank higher on search engine results? 
  • Is it to boost sales of a certain product/service? 
  • How much risk am I willing to take with this campaign?
  • Who is my target audience? What are their needs? 
  • Is my campaign addressing their needs or simply promoting a product or service? 

In conclusion...

The world of digital marketing can be a tricky one to navigate, especially with the endless number of solutions that can be applied to a brand's ad efforts. However, performance marketing is emerging as a successful, popular, and easy-on-the-budget option for most business models and ad campaigns. 

Tools like Affise, AnyTrack, and ClickMeter are popular tools that can help you measure, inspect, and manage your performance-based efforts across various platforms. Alongside these tools, utilizing methods such as PPC, PPM, PPA, and PPS is the boost your brand needs this year! 

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