Digital Marketing

Understanding Performance Marketing in Simpler Terms

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Performance Marketing is one of the most crucial modules of Digital Marketing where the brands or companies pay only for the better-performing campaigns.

Performance marketing is a form of digital marketing where the elements and factors completely depend upon the sales performance of the respective brand or company. If we go by the traditional methods, marketing was done to get marketing done. But, in performance marketing, based on the performance, the brand or the company can focus on specific customer needs.

Performance marketing is a benchmark for helping companies or brands track their marketing performance.

The Importance of Performance Marketing

Performance Marketing is one of the most effective and working modules of Digital Marketing. Reasons, why performance marketing is one of the best and most effective parts of Digital Marketing, are:-

  • Performance marketing is one of the effective and crucial marketing strategies that can help a brand increase its reach and grow faster, thus increasing its respective customer base.
  • Performance marketing is one of those ways that can help a brand or a company reach its customers and then gather information about what the customers need or are looking for.
  • For the performance marketing base to grow and expand, one needs to understand its customer base or group. Therefore, the brand and company can create relevant content and develop different marketing strategies that cater to the customer’s liking.
  • With such a comprehensive list of public data available online, it becomes easier for a brand or company to reach out to their customer base for performance marketing requirements.
  • The entire performance marketing is highly scalable and can be adjusted accordingly. The intensity and performance of the entire performance marketing campaign can be easily increased or decreased concerning the needs and requirements of the brand.

Performance Marketing vs. Digital Marketing

  • Performance marketing is a strategic part of the overall Digital Marketing network involving all the online channels.
  • Digital Marketing is a wider term consisting of all the channels and strategies. At the same time, performance marketing involves using these available channels and strategies to reach a wider audience catering to their specific taste and demand.
  • Compared to Digital Marketing, performance marketing primarily focuses on short-laid targets and providing quick and faster results. It mostly includes easy-to-operate and understands benchmarks such as measuring the lead generation or clicks from the people.

Performance Marketing & Its Uses!

As we all know, performance marketing is a digital marketing module, but the entire performance marketing can be used quite differently if we think of it.

These are some of the channels in digital marketing where performance marketing can be of great use:-

  • Affiliate Marketing – Affiliate marketing is one of the crucial methods used by companies to reduce their expenditure to an extent in their allotted marketing budget.

Affiliate marketing consists of the process where the affiliate is paid a commission or fee for every conversion they create or help the company create. In short, if we increase the overall marketing scale, performance marketing somewhat works and behaves like affiliate marketing.

  • Native Ads – Native ads are a form of paid advertising channel where the ads on a website match the website’s appearance, form, and its functionality concerning the media that appears on the website.

Some of the most used and common payment models for native ads are PPC or Pay per click and PPI or Pay per Impression.

  • Search Engine Marketing – Search engine marketing is one of the very effective channels of Digital Marketing. The entire search engine marketing aims at increasing the overall visibility of our website in the top search engine results by using a mixed approach of paid and unpaid methods.

For all the paid options available, the advertiser running the ads pays for all the clicks that he can get on his ads on the respective search engine wherever he chooses to run his ads – yahoo, google, Bing.

The other method is the organic method. This is the most rewarding method if done right. The organic method completely relies on the respective search engine algorithms on which the ads are being run to boost that page’s rank.

  • Sponsored Content – Yet another type of performance marketing is sponsored content. It is a type of performance marketing strategy mostly used by content marketers. Sponsored Content marketing occurs when influencers or promoters are asked to promote a product or service in return, they ask for easy compensation such as free products or services, etc.

The sponsored content can be successful as the influencers or promoters have their list of followers. These followers have a sense of deep faith and trust vested in the influencers. Due to this trust factor of their followers, even if the content is related to advertising, it will still be seen and felt as organic.

With proper execution, sponsored content online can be a good outcome for the company or anyone running the advertisements.

  • Social Media Marketing – Social media marketing refers to a marketing method that involves properly incorporating all the social media tools available to us, such as Facebook and Instagram, to promote products and services or increase brand awareness amongst the people they are trying to reach out to.

Advantages of Performance Marketing

The benefits that performance marketing holds are immense. Running campaigns through the performance marketing strategy can prove to be beneficial for the brand or company.

  • Performance Marketing consists of all the parameters measuring how well your marketing campaign performs.
  • It measures the overall performance of your campaign by constantly checking the conversion rates and how they are affected.
  • Performance Marketing helps the brand or company grow its brand awareness and increase customer loyalty, which in turn helps in the overall growth of the brand or company.
  • It is one marketing strategy that delivers accurate, measurable, and tangible results.
  • It is a marketing strategy that can help marketers understand and identify the websites with the best performance, high conversion rates, and the most profit generations.

Disadvantages of Performance Marketing

Performance marketing comes with its demerits and risks if the right strategies are not being used properly or your entire campaign isn’t in the right hands of management.

  • Some of the visible metrics that aren’t valuable enough for the brand’s improvement or the company’s growth, known as vanity metrics, don’t add up to the overall growth. For example - a Twitter account might be experiencing an increase in followers, but that doesn’t affect the overall sales or revenue.
  • In digital marketing, the monthly costs remain the same as what amount is expected every month to be invested for the marketing and advertising campaign. But, a performance marketing campaign doesn’t have a fixed constant amount as it keeps varying and is never the same.At one time, the cost can immediately rise, causing budgeting issues as the campaign being run doesn’t respond with increased revenue.
  • If reputable or trusted agencies or companies are not running your campaigns, there is a high risk of fraud. For any unreliable company, it is an easy way to commit fraud since these agencies rely completely on results to perform.

Planning and formulating a Performance Marketing Strategy

One of the first steps of the performance marketing strategy involves proper planning and coordination of how the entire campaign is supposed to be running. The next step is setting up an achievable and realistic goal.

Performance Marketing always works on the “SMART” strategy of working. This strategy can be broken down into all the different goals, such as –

  • Specific – a goal that is specific enough
  • Measurable – a goal that can be measured and tracked
  • Achievable – a goal that is realistic enough and is achievable
  • Relevant – a goal that is relevant enough to the resources and all the inputs
  • Time Bound – a goal bounded by limited timing or a deadline for timely execution.

If we break these down further, we get these observations:-

  • An ample number of clicks are received on the respective ads running every month.
  • Through these clicks, the number of sales and revenue generated is calculated each consecutive month.
  • Receiving a high conversion rate and then tracking all of those numbers further
  • Tracking of all the leads that are being generated in the next 60 days

Certain industry-specific metrics help us in measuring the above-mentioned set of goals, and they are:-

  • LTV – Lifetime value measures a customer’s relationship with the company as long as one decides to be associated.
  • CPA – Cost per acquisition measures the specific cost incurred in purchasing or signing up for a service.
  • CPC – Cost per click measures the amount of cost incurred on every single click on an ad.
  • CPM – Cost per Mille measures the cost incurred in generating 1000 impressions.

Once the above steps have been touched upon and looked into properly, it’s time to select the proper channels and media to reach out to all potential customers.

Selection of the Channel

Some of the best performance marketing channels are display marketing, search marketing, social media marketing, email marketing, affiliate marketing, and mobile marketing.

Let’s go through these channels briefly and see how they affect the overall process.

  • Display Advertising – It involves all the display formats associated with display advertising, such as banner ads, pop-ups, square ads, skyscrapers, etc. The entire display advertising can be run using CPM (cost per 1000 impressions) or CPC (Cost per Click) as benchmarks.
  • Search Advertising – Search advertising consists of directly targeting those people who are already looking for that specific product that the website sells. The ads being run in search advertising can be simple text ads or sponsored links that will be visible in the final search results. Search advertising works on a CPC basis, i.e., cost incurred on every click received on the ads.
  • Social Media Advertising – Social media advertising targets all the people who use and remain active on social media networks like Facebook, Twitter, and LinkedIn. This type of advertising works on both CPC and CPM basis.
  • Email Advertising – Email marketing targets people already enrolled in the brand or company’s email list. The emails sent out to the people in the mail list will contain ads in text-based or HTML-based format. Email advertising can be procured on Cost per click basis and even Cost per Miles basis.
  • Mobile Advertising – Mobile advertising refers to the process of using all the available channels and specifically targeting those people who mostly use the internet or access it through their mobile phones. It is a subset of Mobile Marketing and is usually done via text ads in the form of text messages or banner advertisements embedded in a particular website. Mobile advertising can be bought through cost per clicks basis.

Once all the channels have been finalized, and the right one has been opted for, it’s time to determine the people you will be working with. It refers to the selection of appropriate partners who will be the ones facing the target audience. They will be acting as publishers, and finding the right publishers with the right audience for brand promotion, etc., is crucial.

The final step would be to bring the entire performance marketing campaign to life, followed by keeping an eye out on the results and the necessary stuff. The necessary stuff will include:-

  • Making all the ad creatives.
  • Tracking the conversions.
  •  Defining and setting up the conversion goals.

The performance marketing campaign can be tracked using Google Analytics or Ads Manager. The entire campaign needs to be tracked constantly to ensure it coincides with the pre-set goals or objectives. A dedicated team will do all the tracking work and keep an eye out for the entire campaign.

Wrapping things up.

Technological advancement is real, and it’s constantly on the rise in 2022. Suppose technology continues to bloom like it's happening. In that case, performance marketing will always be present in the scene, helping and creating new opportunities for businesses to improve further and do well for themselves.

Performance marketing is one of the most crucial modules of digital marketing. It is one of the best ways to target a wider audience for one’s business, create more brand awareness and ultimately achieve all the desired targets.

Since performance marketing helps rapidly boost sales, increase clicks received on the ads or campaigns, and maximize lead generation, businesses or companies can use this method to upgrade their marketing and advertising.

Blog Post written by:
Digital Marketing Institute