Today, entrepreneurs invest a lot of capital to reach new audiences and get new customers. In 2021, digital ad spending from around the world reached $521.02 billion. The numbers show how much marketers spend to boost their promotion campaigns.
One popular advertising method among digital marketing promoters today is performance marketing. If this marketing strategy is something you want to try in your business, this article can help you get started.
One popular advertising method among digital marketing promoters today is performance marketing. If this marketing strategy is something you want to try in your business, this article can help you get started.
Key Takeaways
- Performance marketing is where advertisers give payments after affiliates or publishers complete certain tasks.
- Today, there are two types of performance marketing: result-based and channel-based digital advertising.
- This type of marketing allows marketers to plan better and track the performance of their ad campaigns.
What is performance marketing?
Performance marketing is a results-oriented digital marketing strategy where people make payments based on user interaction with the advertising piece. It is a cost-effective strategy for brands looking to boost their online presence and reach a large audience.
Advertisers and marketers work with agencies or publishers to put ads on various performance marketing channels. They pay based on the performance of the campaign, such as the number of clicks, impressions, shares, downloads, or sales it generates.
This type of advertising combines paid ads and brand marketing and operates on a pay-for-performance model. In this model, affiliates and marketing companies only get their payment when customers complete a desired action.
This mutually beneficial approach allows the retailer or merchant and the affiliate to maximize their return on investment (ROI) by strategically targeting their campaigns. Additionally, merchants get additional benefits through brand exposure and targeted clicks.
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How payments for performance marketing work
In performance marketing, the ROI is the key factor in measuring success, as merchants can evaluate every action using key performance indicators (KPIs). KPIs are metrics that can tell marketers how many clicks, page views, or sales their ads are getting.
These metrics are essential in determining the performance of a campaign. Understanding the KPIs is crucial to making informed decisions and maximizing the pricing of performance marketing efforts.
There are many payment models used in performance marketing. The following examples below are only the most common methods marketers use today:
- Pay Per Lead (PPL) - A merchant pays their ad publishers every time a customer fills out a registration or sign-up form. The document provides customer information such as name, email address, or phone number, allowing the merchant to follow up with the customer.
- Pay Per Sale (PPS) or Cost Per Acquisition (CPA): A company pays its ad publisher when a customer makes a purchase. This is a popular payment model among e-commerce shops.
- Pay Per Click (PPC): A merchant pays their marketer for any ad clicks that redirect a potential customer to a desired landing page.
- Pay Per X (PPX): In this payment model, the X represents a particular action that a merchant defines outside of a lead, click, or sale. For example, they will pay their advertisers every time a potential buyer downloads a particular app.
- Lifetime Value (LTV): This metric predicts a customer’s lifetime value based on their activity on the merchant website. Using predictive analytics, the LTV estimates how much a customer will spend throughout their relationship with the retailer.
Two Types of Performance Marketing
If you are trying a performance-based approach to marketing, you need to learn the different techniques of this strategy. Marketers categorize performance marketing into several types based on the expected results and channels used.
Result-based marketing
Results-based advertising can be broadly grouped into goal-based and action-based marketing campaigns.
Advertisers set specific objectives in goal-based campaigns. For example, they might set a certain number of leads or sales a campaign should generate.
Meanwhile, action-based campaigns are based on a specific action that customers complete. These actions include clicks, purchases, or sign-ups.
These two types of campaigns can be further categorized based on the kind of marketing activity being rewarded.
- Acquisition campaigns focus on attracting new customers through paid search, banner ads, or social media advertising.
- Engagement campaigns aim to encourage interaction with the brand among existing customers. Marketers usually use email marketing, social media advertising, and other methods to boost engagement.
- Conversion campaigns aim to convert existing leads into sales through affiliate marketing or retargeting.
Channel-based marketing
Advertisers can also categorize performance marketing into five types based on the channels used by the brand.
- Native marketing
Native advertising is a form of paid promotional media designed to blend in with the natural look and feel of a website or platform. Unlike traditional advertisements, these ads do not appear as prominent marketing tools.
Instead, they fit seamlessly into the content of the site, appearing to be a natural part of the website. This advantage allows marketers to present content in a way that feels more organic and less intrusive to the viewer.
Standard payment models for native advertising include cost per thousand impressions (CPM) and cost per click (CPC).
In the CPM model, the advertiser pays for every thousand times the ad is displayed, regardless of whether someone clicks on it. Meanwhile, in the CPC model, the advertiser pays only when a site visitor clicks on the ad. This advantage allows the advertiser to pay only for actual engagement with their content.
Native advertising is popular on various platforms, including news websites, social media sites, and e-commerce platforms. For example, on YouTube, sponsored videos might appear in the “Watch Next” section of a video page. Meanwhile, on Facebook Marketplace, native ads may appear alongside other products for sale.
One reason native advertising works so well is that it takes advantage of the natural appearance of a website or marketing platform to promote sponsored content. Users often do not differentiate between native ads and regular content. This process allows advertisers to promote their brand in a way that feels natural and unforced.
This benefit can result in a more positive experience for the user and a higher level of engagement for the advertiser.
- Content marketing
Content marketing is a valuable strategy for companies looking to educate their audience and establish their brand as an authority in their industry. Traditional outbound marketing techniques rely on interrupting consumers with ads. However, content marketing is about providing users with useful and relevant information.
The main focus of content advertising is to create and share valuable content with the target audience. This effort can take many forms, including blog posts, e-books, case studies, or videos.
The specific goal is to engage users and build a relationship with them rather than simply trying to sell them a product or service. For example, a makeup company could create a series of informative blog posts about the benefits of a certain ingredient and then include a link to the products they sell. This way, they are providing helpful information while also promoting their brand.
There are three crucial steps involved in content performance marketing:
- Target demand: First, advertisers determine where their target audience is most likely to be looking for their product or service and what types of content they like to consume. They use this information to create relevant content that meets those parameters.
- Optimize content: Advertisers also optimize their content so their target audience can find it faster online. Search engine optimization (SEO) is crucial for this step so search engines can recommend their content to potential customers.
- Measure results: Marketers need to measure the success of past content performance campaigns to inform future advertising efforts. They must closely monitor metrics to make informed decisions and eliminate guesswork.
One popular form of content marketing is sponsored content. This piece of advertising involves publishing a dedicated post or video on a website that publishes similar content.
The key is to make the sponsored content blend in and make it obvious that it is an ad. Brands use this content to reach a wider audience and increase brand awareness. Sometimes, the compensation for this type of marketing may be a free product or experience. Meanwhile, in other cases, it may be a CPA-, CPM-, or CPC-based payout.
- Social media marketing
Social media has become a crucial aspect for performance marketers. It provides numerous opportunities for advertisers to reach a vast audience and drive website traffic.
Social media does not only allow marketers to reach potential customers. It also allows users to share their sponsored content organically, which can increase their reach.
Although Facebook provides the most extensive list of services for performance marketers, platforms like LinkedIn, Instagram, and Twitter also offer valuable marketing opportunities.
Moreover, social media platforms provide clear metrics that allow performance marketers to measure KPIs such as click-through rate (CTR), CPC, and overall ROI. The platforms also enable easy traffic, engagement, lead generation, and sales monitoring.
To know the best social platforms to advertise on, performance marketers should consider the following factors
- How the demographics of the network align with their brand
- Their organic reach on each site
- How their competition approaches the various social channels
- The ad formats that they can use on the site
Marketers should also learn the following practices:
- Use information from the performance monitoring process to target the right audience
- Create ads that blend well with the organic content found on each network
- Take the time to understand the pros and cons of the various ad formats on social media
- Experiment with strategies and optimize them over time to increase ROI
- Update ads and landing pages often
- Search engine marketing (SEM)
Today, people almost always use search engines for online searches, which is why optimizing a website for search engine marketing (SEM) is of utmost importance.
Performance marketing mainly focuses on CPC for paid advertising campaigns. People focus on content marketing and optimized landing pages for organic SEM to boost visibility and attract clicks. The process involves organic and paid advertising efforts to increase online visibility and get more clicks.
Paid SEM is one of the most popular performance marketing channels available today. The popularity of paid SEM can be attributed to the Google AdWords program, which has been the go-to platform for advertisers for many years.
One of the key benefits of paid SEM is that it allows advertisers to show their ads to a relevant audience. This advantage makes it a highly effective tool for reaching customers who are ready to make a purchase.
Keywords play a vital role in SEM, and choosing them wisely is critical for success. Comprehensive keyword research should be a crucial part of your SEM strategy. This process helps advertisers identify keywords relevant to your brand and the words that prospective customers use when searching online.
It is worth noting that keywords with high commercial intent, such as "buy," "discount," "deal," "coupon," and "free shipping," are more competitive and more expensive. Remember that these keywords are in high demand, and most marketers are willing to pay more.
Benefits of Performance Marketing
Today, some marketers prefer the performance-based marketing approach to traditional advertising. This section outlines the benefits of performance marketing that advertisers can enjoy.
Better planning
Performance marketing allows marketers to plan their campaigns more effectively because they only pay for the results they actually receive. This means they can plan their campaigns more accurately and budget their resources more effectively.
This advantage reduces the risk of wasting money on ineffective campaigns. Advertisers can invest the money they save in other areas of business.
Payment based on results
The main advantage of performance marketing is that the advertiser only pays for the results they receive. This advantage protects them from the risk of paying for ineffective campaigns, as the advertiser only pays for the leads, clicks, or sales that the campaign generated. It also helps reduce overall advertising costs.
Easy performance tracking
Performance marketing makes it easy to track the success of a campaign, as every action can be tracked and measured against KPIs.
This benefit allows advertisers to easily measure the success of their campaigns. It also allows them to refine their performance marketing strategy over time to achieve the best possible results.
Real-time adjustments
Performance marketing allows for real-time campaign adjustments. Since advertisers can change their campaigns in response to the data they receive, they can quickly respond to changes in consumer behavior.
This benefit allows advertisers to optimize their campaigns to achieve better results, improving the ROI of their advertising efforts over time.
Effective Performance Marketing Tips
A performance marketing approach to advertising can be challenging for those unfamiliar with the strategy. This section highlights practical pointers to help those who want to get started.
Create a good landing page
Regularly updating content and landing pages is important to ensure your site remains engaging and relevant. Consider testing different offers and making changes to your landing page design and see what works best.
To ensure your landing page is effective, you must have an enticing offer that will attract site visitors and partners. Take some time to consider what would appeal to your target audience and what might motivate them to take action.
Select your traffic sources wisely
Choosing the right traffic sources is crucial in performance marketing. Partnering with reputable affiliates that can drive meaningful traffic to your site will help you establish your brand and build trust with your audience.
Optimize for revenue-driving metrics
You should test and measure various metrics to get the most out of your performance marketing campaign. Determine the metrics that impact your revenue and monitor them closely. You can try using A/B testing to get a clearer picture of what works and doesn't.
Go for influencer marketing
Influencer marketing has become a crucial part of modern social media campaigns. However, it has a mixed reputation among social media advertisers.
On one hand, it’s a cost-effective way to reach your target audience on social media sites through personalities they already know and like. This advantage provides a more relatable form of advertising than traditional sales pitches.
On the other hand, it can be tough to measure the impact of influencer marketing. As a result, many marketers question its effectiveness.
However, influencer advertising is constantly evolving and is now being seen as a performance-based online marketing strategy. Social networks are working to improve the transparency and reliability of the process by introducing new measures to boost its effectiveness.
For example, Instagram is testing the removal of “likes” and shifting its focus from reach to engagement. Meanwhile, Facebook has introduced the Brands Collabs Manager, which allows advertisers to easily find and work with influencers within the platform.
Track and monitor
Monitoring and tracking important campaign data points such as attribution and bounce rates can provide valuable insights into your campaign. The process can tell you what's working and what needs improvement. It will help you make informed decisions and optimize your campaign for better results.
Pro-Tip: Constantly monitoring data to optimize your campaigns is crucial to succeeding in performance marketing. Make sure to regularly monitor key performance indicators to identify areas for improvement.
Learn More About Performance Marketing With Archive
Performance marketing and its measurable results bring crucial advantages to modern marketers. Now that campaign metrics are easily trackable, advertisers should consider this approach if they want to supplement a cost-effective strategy to their promotional campaigns.
If you want more information about performance marketing, visit Archive today. Our blogs are full of valuable insights that can help modern advertisers improve their digital marketing campaigns.
Unlock the full potential of your ad campaigns through performance marketing. Visit Archive.com to learn more about how this approach can drive growth for your business.
FAQs on Performance Marketing
Why is performance marketing relevant today?
Performance marketing is relevant today because it allows advertisers to run efficient campaigns even with limited budgets. It lets them keep track of their marketing spend, which helps ensure that every penny counts.
How do you evaluate a marketing channel’s performance?
To evaluate marketing channel performance, you must set business goals and KPIs for each channel, monitor leads and conversions, and identify the channels that generate the most conversions.
What metrics should you look out for when monitoring marketing performance?
The following key metrics are crucial when monitoring marketing performance:
- Sales revenue and growth
- The lifetime value of a customer
- Cost per lead
- Conversion rate return on marketing spend
