BusinessMarketing

What is Performance Marketing and How does it Work?

Each time you pay for the advertisement of your product or service, you expect an outcome. However, it is almost impossible to guess whether the promotions are working or not with traditional marketing plans.

Do you have a limited budget for promotions and expect a productive outcome from your online marketing performance? If yes, then it’s time for switching to Performance-Based Marketing.

We have rounded up all the vital topics that you must know to develop your performance marketing strategy. Moreover, it will make you feel confident in your next negotiation with a Performance-Based Marketing company.

What is Performance Marketing?

The term describes itself. It is a marketing strategy based on performance.

The performances are diverse. They include a wide range of executed and anticipated results. Sale, booking, download, or lead are a part of the results.

Performance-based marketing is an umbrella term that covers a wide variety of online marketing and promotional programs. A balanced marketing performance management depends on the delicate balance between Advertiser (merchants, or retailers) and Marketing Companies (affiliates, or publishers).

In a performance marketing campaign, the Advertiser pays the Marketing Company when a particular performance such as leads, sale, or even a click is achieved.

This digital marketing strategy is a win-win situation for both parties. Here, the Advertiser feel confident while they pay for the performance as the target audience has already been converted to a customer.

Marketing Companies, on the other hand, are getting paid for their marketing efforts. The more they perform, the more they will get paid.

The Benefits of Performance Marketing

Around 74% of the US shoppers visit at least three non-retailers sites before they make a purchase. This one number signifies the importance of an effective marketing strategy.

Spending on Performance-based marketing will rise to $6.82 billion by 2020. It has been projected only for affiliate performance marketing.

Think about how significant the amount will be if all the sectors are summed up. People are turning into these performance-based marketing plans because of some unique benefits.

Return of Investment (ROI) Focused

The marketing plan is focused on ROI. If Marchent found a higher ROI market, they will try to invest in it. In the same way, marketing companies will develop their campaign to achieve the highest ROI.

The campaign performance can be measure easily with the ROI. Higher the number, the higher the success rate.

Low-Risk Strategy

You are paying after your desired result has been achieved. What other marketing strategies can be such low-risk like this.

You are spending every single buck with the confidence that your target audience has been reached. Moreover, some of the audience may already be turned into your loyal customer.

Develop Brands

If you are a merchant and want to build your brand, performance marketing is the best option.

A performance-based marketing agency will help to build your brand. The best thing is you have to pay each time your brand has been reached to a larger target audience.

The affiliates or publishers use their budget and audiences to expand your brand value. In the end, as a merchant, you get an increased audience, higher targeted traffic, and more share in the market. How great is that?

Measurable

You can measure the progress of your marketing campaign. Yes, its easy and effortless. There are many technologies and tools to do the campaign performance analysis.

The technologies are trustworthy and typically come with authentic results. You can measure the engagements, reach, and even conversion rate with the help of tools like Google Analytics and other social media marketing performance analysis tools.

How does Performance-Based Marketing work?

Performance Marketing works as a team of four groups. The groups are

  • Retailers or Merchants
  • Publishers or Affiliates
  • Networks of Affiliates and Third-party tracking platforms
  • Outsourced Program Management Companies (OPMs’)

Retailers or Merchants

This group is the primary source of business. Retailers try to promote their products or services through Publishers or Affiliates. Thus, they advertise their products to the audience of the affiliates.

Retailers of food, beauty, fashion, and sporting goods are successfully using performance-based marketing for promotions. They are using shoppers or influencers campaigns to establish brands among people.

The influencer marketing performance is high among the already established brands. As these retailers already have an engaged audience, so the approach is working great for them.

Publishers or Affiliates

This group is the marketing partner of the established retailers. The affiliates use their budget and audience to promote the merchant’s goods and generate ROI.

There can be a diverse range of affiliates like websites, blogs, reviews, magazines, and many more. However, the recent trend is social performance marketing that uses social media platforms for affiliate marketing.

Moreover, any performance agency will look forward to using mobile apps, content sites, AI, remarketing advertising managers, and personalized applications for an all-around model of performance marketing.

Networks of Affiliates and Third-party tracking platforms

This group work as a connection between the merchant and affiliates. If you need any information and tools for the marketing campaign, this group will be your one-stop source.

These third-party platforms track measurable performances like clicks, leads, and sales. They also pay for performance marketing to the affiliates.

There are many third-party tracking platforms in the industry. They have different merchant vertical expertise, cost structures, strengths, and weaknesses. Thus, do in-depth research on them before you decide to work with them.

Outsourced Program Management Companies (OPMs’)

The OPMs’ also connect the merchants and affiliates but in a different way. These groups are the main drive that keeps Marketing Performance Management (MPM) on the run.

The OPMs work as performance marketing consultants for retailers and affiliates. Your marketing campaign performance will improve with the technical and strategic expertise as well as the partner database of the OPMs’.

As a digital marketing consultant, the OPMs support the management of the campaign, strategic growth, recruitment of partners, and content creation. Due to the limitation in resources, some retailers give the entire campaign management to an OPM.

Types of Performance Marketing channels

Performance-based marketing is a diverse strategic approach. There are many channels to fulfill the procedures and achieve the desired performance. Each channel measures a specific aspect to acquire performance marketing goals.

Affiliate Marketing

This is a form of performance marketing where publishers become affiliates and generate sales and traffic for the merchant. It is a relationship-based model between retailers and publishers, where both benefited equally.

Affiliates, in this model, redirect traffic towards the retailers. For each completed performance such as clicks, sales, or shares, the affiliates receive a commission from the retailers. The affiliates work as an extension of the brand into a diverse audience.

Typically, the affiliates can be a website that reviews a specific type of product of retailers. In the North American market, it also includes a loyalty program, coupon, and reviews.

Search Engine Marketing(SEM)

This type of performance marketing relies on search engine results to measure performance. There are two ways to conduct this marketing strategy. One is paid; another is organic.

For the paid option, you pay the major search engines like Goggle, Bing, and Yahoo for click to ads. For small companies or startups, this option may seem expensive. Thus, they move to the organic option.

The organic option uses unpaid methods like Search Engine Optimization (SEO) to divert organic traffic. This option is considered more authentic in the industry as it reflects the real search intention of the target audience.

Keywords are the heart of this marketing strategy. You have to do intensive keyword research to get organic traffic and a higher conversion rate eventually.

Social Media Advertising

This is a relatively newer trend in performance marketing in social media. However, designing any marketing campaign on social media is getting more robust due to heavy competition.

It is effortless to measure your B2B performance marketing on social platforms. You can see and analyze the metrics like cost per click (CPC), Clickthrough Rate (CTR), and overall ROI.

Social medias are an excellent platform for influencer marketing campaigns. You can easily influence the audience with influencer’s contents like posts, stories, videos, and animations.

A successful performance agency will target to enhance the following through social performance marketing.

  • Sales
  • Engagement
  • Lead Generation
  • Traffic

Native Advertising

This is more dynamic than any paid advertisement strategy. It does not look like any regular ads or banners. Instead, these advertisements are more personalized.

Typically, the native advertisements are placed on a site as news or social site links. These ads are posted dynamically based on the user’s preferences. Thus, it is crucial to realize the reader’s perspective and develop the content.

This type of advertisement generates revenue through CPM (Pay Per Impression) and CPC (Pay Per Click).

Sponsored Content

These contents are a part of influencer marketing campaigns. The influencers develop dedicated posts or articles that promote a particular brand or product.

Influencer marketing performance is easily measurable. They generate revenue through an increase in sales, engagement, and overall traffic.

Steps of Performance Marketing Strategy

Developing performance marketing strategies depend on the target of measurable outcomes. You can easily calculate the effectiveness of marketing performance management through the following revenue generation model.

Pay Per Click

It is a simple model. The more clicks an affiliate can generate, the more they will be paid from the retailer. Thus, any click is vital for online marketing performance.

This model is not that popular in the performance marketing strategy. However, it will be essential during Nexus Tax legislation.

Cost Per Acquisition (CPA)/ Pay Per Sale

This is the most popular model in affiliate marketing and eCommerce. To get payment from the merchant, the affiliate has to generate sales. The affiliate will get the amount after the transaction is completed.

Most of the affiliate programs rely on this model through a third-party tracking platform.

Pay Per Lead

The “Lead” in marketing is the status of consumers when he/she provide information like name, address, cell number, email address, job types, income, and personality traits.

In this model, the marketing agency receives the payment for each lead they generate. Sign-up forms on websites are one of the most efficient ways to generate leads.

Pay Per “X”

That “X” stands for anything beyond sales, clicks, and leads. Typically, the merchant fixes what the X will be.

While measuring online marketing performance, the X can be the upsell within the mobile app, the number of downloads, sign-ups, or reward points.

Performance Marketing vs. Brand Marketing

Brand marketing is a long-term revenue generation model. It based on a relationship with the unincentivized conversion. The model relies more on traffic quality and value creation.

Performance marketing, on the contrary, is a model for short-term revenue generation. It based more on lead generation with the incentivized conversion. It relies more on traffic volume than quality.

Performance Marketing vs. Growth Marketing

Growth Marketing is more dynamic than its Performance counterparts. In fact, it is the new generation of data-driven marketing strategies.

The approach is more dynamic than performance marketing. It adds A/B testing, creative copy, SEO optimization, and data-driven email marketing with the traditional methods. The outcome is more sustainable and robust.

Tips for Success in the Performance Marketing Industry

  • The Offer and Landing Page is vital. Focus on it
  • Check and choose the proper traffic sources
  • Conduct A/B test regularly to measure and optimize the revenue-generating KPIs.’
  • Continuously monitor the measurable variables of the performance marketing campaign
  • Stay aligned with your marketing partners.

Conquer over your Marketing Performance

Performance-based marketing is a technology-oriented approach. Thus, it will thrive and create new business opportunities as long as the technology will flourish.

With the sheer advancement of science, there is no sign of technological progress soon, Therefore, performance marketing will boom in new platforms to promote new business.

Now you know the basics of marketing strategies. Lets, dig in to learn more and earn more.

 

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