Digital marketing is a widely-used term that encompasses various types of online marketing strategies, with new channels and capabilities emerging continually. Despite this, performance marketing is a digital marketing approach that is often overlooked. This approach involves advertisers only paying when certain actions occur, such as a viewer clicking through to their page or making a purchase.
In this article, we will delve into performance marketing in detail, covering how it works, its benefits, and the channels that provide the best value for money.
How Performance Marketing Works
In performance marketing, advertisers choose a particular channel to display their ads (you can read about the top performance marketing channels below) and pay according to how their ads perform. There are different payment models used in performance marketing, which are as follows:
Cost Per Click (CPC): Advertisers pay based on the number of times their ad is clicked on, making it an effective way to drive traffic to your website.
Cost Per Impression (CPM): Impressions refer to the number of times your ad is viewed. With CPM, you pay for every thousand views of your ad.
Cost Per Sale (CPS): This model only requires payment when an ad results in a sale, which makes it a popular choice for affiliate marketing.
Cost Per Lead (CPL): Similar to CPS, advertisers only pay for leads generated through their ads, such as newsletter sign-ups or webinar registrations. This helps generate leads, allowing businesses to follow up with potential customers and drive sales.
Cost Per Acquisition (CPA): This model is broader and encompasses different actions, such as making a sale, sharing contact information, or visiting a blog. Advertisers pay when consumers complete the specific activities outlined in the CPA agreement.
Top Performance Marketing Channels
There are five types of performance marketing channels that advertisers and agencies use to drive traffic:
Social Media: Social media platforms, such as Facebook, LinkedIn, Instagram, and Twitter, provide a haven for performance marketers to reach users and drive them to their websites. With the opportunity for sponsored content to be shared organically, social media can extend a brand’s reach far beyond the original post.
Search Engine Marketing (SEM): With most online research done via search engines, having a site that is optimized for SEM is essential. For performance marketers, the focus is primarily on cost-per-click (CPC), especially for paid advertising. Organic SEM relies heavily on content marketing and SEO-optimized landing pages.
Banner (Display) Ads: These ads are commonly found on the side of your Facebook newsfeed, or at the top or bottom of a web page. While display ads are losing their effectiveness due to ad blockers and banner blindness, companies can still achieve success with interactive content, videos, and engaging graphics.
Content Marketing: This channel focuses on providing valuable information to users, while also putting your brand in context. Content marketing can include blog posts, case studies, e-books, and more. It generates three times as many leads as outbound marketing and costs 62% less.
Native Advertising: Native advertising promotes sponsored content that blends in with a website’s natural appearance. This type of advertising allows your sponsored content to live seamlessly alongside other kinds of organic content, providing a more natural way to promote your brand.
Benefits of Performance Marketing
As advertising techniques have evolved, so have performance-tracking methods. Digital marketing channels, such as display ads, email campaigns, and social media, have made it simpler for marketers to monitor and optimize their campaigns for desired results. Here are five key advantages of performance marketing:
Better Planning: Performance marketing campaigns are easy to budget for, as marketers establish goals and a desired cost per action at the beginning of the planning stage. This makes it easy to determine the appropriate campaign budget. Campaign goals are prioritized throughout the campaign, so ads are optimized accordingly, whether it’s for viewable impressions, clicks, leads, or other metrics.
Pay for Results: The most significant benefit of performance marketing campaigns is that you only pay for the desired results without undefined overheads. This is particularly important for lower-funnel campaigns that are driven by specific conversion metrics. It’s essential that marketers set a goal and stick with it, optimizing the campaign for their desired conversion metrics.
Track Performance: Because performance marketing is primarily digital, marketers benefit from near-instant results and insights into their campaigns’ performance, including spend, impressions, clicks, and conversions. With these metrics, marketers can track performance and determine the return on investment throughout a campaign. If a campaign isn’t performing as expected, they can pause it and redirect the budget elsewhere.
Pivot in Real-Time: Most platforms break down performance by individual advertisements, allowing marketers to adapt and react to feedback throughout the campaign. By tracking each creative’s performance with a target audience, marketers can optimize their campaigns for better results within the original campaign budget.
Discover New Formats: Performance marketing can be done through single placement channels, but marketers can also partner with performance marketing networks to expand their reach. These networks offer unique ad opportunities, providing new insights into valuable placements based on audiences. Performance marketing networks are particularly useful for marketers targeting hard-to-reach audiences, such as developers, who avoid display ads and are difficult to locate on social media.
This specific marketing approach is causing a shift in the world of hiring as companies are looking to recruit performance marketing separately from main marketing roles. The major disruption here may be how companies might start to think about their sales and promotion efforts if they opt to view marketing purely through a numerical lens. That said, brand marketing absolutely still has its place as the preeminent long-term play, for the time being, that is, and we’re eager to see if that will change.”
– James Weiss, Big Drop’s Vice President
In Conclusion
With the increasing investment in digital marketing, performance marketing presents a promising opportunity for business owners seeking to reach and convert new customers on a larger scale and at a lower cost. Collaborating with publishers and affiliate networks expands your reach beyond what traditional marketing approaches can achieve.
Regardless of where you currently stand in the performance marketing realm, there is always room for improvement and growth. Determine which approaches are most effective for your brand and your affiliate partners, establish your specific goals, and begin building those connections. And if you need assistance, Big Drop is always here to help.