In 2021, the amount spent globally on digital advertising reached a massive sum of $455.3 billion. According to Statista, this is expected to reach $646 Billion by 2024. As a result, new forms of online marketing are coming into existence with every passing day. Among these, some notable ones are social media advertising, affiliate marketing, email marketing, and performance marketing.
In this blog, we will be taking a closer look at performance marketing, its core concepts, how it works, and why you should use it.
What is Performance Marketing?
Performance marketing is a digital marketing approach that focuses on measurable outcomes such as clicks, conversions, or sales rather than just brand awareness. It is data-driven and makes use of Key Performance Indicators (KPIs) for evaluating success. It involves tracking and analyzing various metrics such as conversion rates, click-through rates, and return on investment(ROI).
Performance marketing is driven by ROI since all actions can be tracked and measured against key performance indicators (KPIs). Be it the number of clicks, page views, or sales, these key metrics are important in measuring and improving performance.
Below are some of the most commonly used metrics and KPIs for you to get a better understanding of performance marketing pricing.
This is the amount retailers or merchants pay when consumers complete a desired action, such as a sale, a click, or completing a form.
In e-commerce, this is a very common payment model for merchants to set up.
A “lead” can either be a completed form registration or signup involving customer information — such as a customer’s name, email address, or phone number — which can then be used by the merchant to follow up with the customer and drive sales.
This is the price paid by a retailer to an affiliate for any ad clicks they refer to a desired landing page.
In this payment model, the “X” can be anything that the merchant defines as the desired action outside of a lead, click, or sale.
Downloads, upsells within apps, and rewards program sign-ups are some examples of these.
The purpose of this metric is to estimate the "lifetime value" of a customer throughout their relationship with the retailer. Based on a customer's behavior and actions with the brand, LTV calculates how much the customer will spend.
Well-defined Goals and Objectives
Identifying the Target Audience
Choosing the Right Channels
Analysis of Performance
Budgeting and ROI Analysis
Performance marketing includes several different types of marketing. The following is a small overview of different types of performance marketing and how each can benefit your e-commerce business.
Any digital marketing strategy that is connected to the advertiser and pays out when the desired action is completed is known as affiliate marketing. This may include collaborating with discount, loyalty, review, and incentive websites, or working with an influencer, YouTuber, or blogger.
Unlike display ads or banner ads, this type of paid media does not appear to be an advertisement.
Native ads tend to fit “natively” on the page/site they’re placed on — such as news or social sites and can be fed dynamically based on each user viewing the content.
The most common payment models for native advertising are CPM (pay per impression) and CPC (cost per click).
Sponsored content is a type of native advertising and content marketing in which a dedicated article or video is included on a website that distributes similar content. This way, the sponsored content blends in with the rest of the content while yet displaying some indicator that it is sponsored.
Compensation can take the form of a free product or experience, as well as a CPA-, CPM-, or CPC-based payout.
This type of performance marketing utilizes social media networks to increase traffic and brand recognition, such as digital content displayed on Facebook, LinkedIn, or Instagram.
Merchants can reach potential customers by using a variety of ad types and targeting options while evaluating KPIs like engagement, clickthrough rate (CTR), CCP, and ROI.
Paid search marketing involves an advertiser paying for clicks to sponsored ads on search engines such as Google Ads, Bing, and Yahoo. Or, less commonly, an advertiser may pay each time their ad is displayed (CPM).
Search Engine Optimization (SEO)
The opposite of paid search marketing, organic search uses unpaid methods such as search engine optimization (SEO) and relies on the search engine’s algorithm to rank at the top.
What are Some Performance Marketing Tips to be Successful?
Having covered the basics, let's jump into our top tips for performance marketing success.
1. Focus on a good landing page and offer
In performance marketing, having a good landing page is crucial. If your landing page quality is low, it can deter visitors from converting, and a bad offer can prevent them from clicking through.
As an advertiser, make sure you have an appealing offer for your affiliates, and keep testing your site for any potential problems a visitor might run into.
Evaluate the complete user experience, from the landing page to the shopping cart. Test links and offers regularly, and change any underperforming content and landing pages.
2. A/B test and optimize for revenue-driving KPIs
Testing and measuring are two essential steps for ensuring that a digital marketing strategy is working.
In the case of performance marketing, try different techniques and strategies for optimization of click-through rates, conversion rates, AOVs, and traffic by doing A/B testing to get a clear picture of what’s working and what’s not.
3. Choose your traffic sources carefully
Quality matters more than quantity. Therefore focus on making sure your traffic is coming from reputable sources. When untrustworthy sources are advertising you, consumers may think twice about trusting you as a brand.
So instead of generating lots of low-quality traffic, partner with affiliates that will drive meaningful traffic to your site.
4. Track and monitor as much as you can
Attribution, mobile vs. desktop, bounce rates, etc. are some factors that provide important campaign data points for you to get better insights into what’s working and what’s not.
Tracking and monitoring your gains and losses is crucial in getting the most out of your performance marketing campaign.
Performance marketing holds great potential for business owners seeking to engage and convert new customers at a large scale and a reduced cost. There's always room to grow and improve, no matter where you and your brand are in the performance marketing space.
Learn which strategies are effective for you and how to satisfy the demands of your affiliates as well as your brand. As soon as you have determined your precise objectives, get started with building those connections.
