Performance Marketing

Today’s digital age has seen two major changes: how customers shop and buy products and how brands market and sell. With the advent of innovative technologies and tools, it has become easy to gather data from marketing campaigns and optimize them. With this data transparency, attribution has become super easy.

This is making performance marketing an integral part of brand marketing strategies. In fact, about 75% of marketers reveal that campaign reporting directly impacts their revenue.

So, what is performance marketing?

Let’s discuss the technical aspect first: performance marketing refers to a kind of marketing done through online campaigns. In this case, marketers or companies pay a certain amount to advertising platforms for desired results such as clicks or conversions.

In this case all marketing activities are tied to specific actions, including their tracking and measurement, and the ROI that’s derived from them.

While some brands spend a huge sum on branding, some spend their budget on specific ROAS-driving activities. It’s one of the best examples of getting the results you paid for.

what is performance marketing

What’s the difference between affiliate marketing and performance marketing?

Traditionally, affiliate marketing came before performance marketing. It covers a wider range of performance marketing activities. In fact, people who think affiliate marketing still refers to coupon and loyalty partnerships are far from the truth.

Presently, it has grown into an innovative strategy that helps in driving sales, customer acquisitions, segmentation, and ROI. Performance marketing has also grown from including the traditional aspects of affiliate marketing to include conversion rate optimization. Examples are intelligent product recommendations, personalized shopping experiences, and influencer marketing.

So, the terms might seem similar, but the approach each takes is different.

What is the performance marketing process?

There are 4 different kinds of stakeholders in performance marketing: Retailers, also known as Merchants, Affiliates, also called Publishers, Affiliate Networks or Third-Party Channels, and Affiliate Managers, also known as OPMs.

Individually, they perform different functions and together they help achieve the desired business goal.

Let’s take a detailed look at what each group does:

A) Retailers or Merchants

They are also known as Advertisers. These are the businesses or companies who take the help of the Affiliates or Publishers to promote their products.

Mostly, these retailers and eCommerce brands range across multiple industries such as fashion, lifestyle, hospitality, travel, sports, etc.

If you’re already a brand that’s established in your industry, own existing marketing channels, have an engaged audience, and see some conversion flowing in, then performance marketing can do wonders

for you. Affiliate campaigns are ideal for brands such as these. They also witness positive ROI from their marketing investments and traffic generation efforts.

B) Affiliates or Publishers

Also known as the Marketing Partners, there are various types of affiliates in performance marketing:

  • Coupon websites
  • Loyalty program websites
  • Product review websites
  • Online blogs
  • Online publications

Over time, more and more marketing partnership channels have arose such as social media influencers, content distribution sites, personalization tools, artificial intelligence, etc. The success of performance marketing has greatly been dependent on these partners as well.

Social media influencers have truly expanded as marketing partners in the last few years. These influencers will mostly promote brands through their blogs or social posts. They mostly cater to their followers with the aim to provide them with authentic recommendations and reviews. They also share product releases and offer exclusive deals and giveaways.

This kind of a collaboration is a win-win for both brands as well as the partners as it offers scope of brand awareness and better profits.

C) Affiliate Platforms

Also known as Third-party Tracking Platforms, these are essential for the smooth functioning of both retailers and affiliates.

They offer the spaces for promotion and advertising such as banners, text links, product feeds, and promotions.

These platforms also offer the retailers and affiliates with an opportunity to track metrics such as leads, clicks, and conversions.

Some of the common affiliate networks or platforms are:

  • Partnerize
  • Commission Junction
  • AWIN
  • Impact
  • PepperJam
  • Rakuten Marketing

D) Affiliate Managers

Also known as Outsourced Program Management Companies or OPMs, these are the bridge between the retailers and affiliates.

There are two types of scenarios that can work: companies can have in-house affiliate managers. They can also hire agencies who can again either manage the entire performance marketing process for them or train the inhouse team of the companies with their expertise.

You can also combine both i.e., work both with agencies as well as your in-house staff. You can also delegate 100% of the work to agencies.

Some of the advantages of working with agencies are:

  • More number of experts on the team
  • Proven processes to drive results
  • Solid partner databases
  • Technical industry expertise

There are different kinds of operations agencies can help with:

  • Recruiting suitable partners
  • Devising growth strategies
  • Strategizing long-term programs
  • Creating actionable content
  • Managing multiple campaigns

There are several things you need to consider before deciding to work with an agency:

  • The size of your in-house team
  • Your budget
  • Your business goals
  • Your timeline
  • How your brand fits with that of the agency

Benefits of Performance Marketing

With the advancement of performance marketing, tracking campaigns has also become more sophisticated. It has become easy for marketers to analyze and optimize campaigns.

Here are some of the benefits of performance marketing:

Helps you plan better

Performance marketing campaigns are great for your budget since they help you allocate your budget better. This is because you have to fix goals and an ideal cost per action before you start your campaigns.

This offers a lot of clarity to plan the budget. For example, if a marketer keeps a goal of getting 10,000 website visitors, then they’ll have to pay $0.50 per click by fixing a budget of $5000.

Another advantage is also that performance marketing campaigns help in aligning and prioritizing goals. For example, based on whatever your goal is – impressions, clicks, and leads - you can choose how to optimize your ads.

You pay only for the results

One of the best advantages of performance marketing is that you only pay for the results. There are no hidden costs or surplus overheads to worry about. This is ideal for low-funnel campaigns where particular metrics matter more.

A small consideration to make here is to stick to your business goals. For example, suppose if you had started an ad campaign with the goal of conversions, and then change the goal to clicks, there’s a high chance it may underperform in both cases.

In some cases, however, the charges that marketers fix as target cost can be more. This happens when suppose a marketer fixes $5 cost-per-conversion for an action such as an email subscribe. However, the audience for this is very narrow and the conversion rates are low. In this case, the charges will be more as the platform will raise the cost to meet the need of targeted impressions.

You can track your performance

The advantage of digital marketing is that it’s easy to get instant results. So, marketers can easily know how their campaigns are performing and insights into what’s working and what’s not working.

This can be done through metrics such as impressions, clicks, and conversions. These metrics help understand whether the marketer will get a return on investment or not.

In case, it’s not performing well, the campaign can be paused and the budget can be allocated elsewhere.

You can get real-time insights

The value of a performance marketing campaign lies in the data that reflects how each aspect of the campaign is performing. For example, the data as to how your target audience is reacting to your creative is a great asset. This can help you optimize your future campaigns better.

Again, if a headline in a certain ad brings a lot of clicks, then it makes sense for marketers to use that headline for other campaigns and analyze the performance.

This kind of an analysis helps in getting better ROI from the campaigns within the same budget.

You’re able to identify new channels

It can help you choose which channels to select for running your campaigns. You can rely on single placement channels such as Twitter. But you may also want to tie up with other performance marketing networks to get better exposure. These networks not only offer unique ad opportunities but also offer insights as to which placements work for which brands.

The networks come in handy especially when companies are trying to reach hard-to-reach audiences.

You get more flexibility at lesser risk

In the end, performance marketing offers a lot of versatility. You never have to be stuck spending on campaigns that don’t work. You can immediately understand from real-time data what’s working and what’s not.

In the worst-case scenario, you may get a few wrong clicks or bad conversions, but it’ll set you on the right path. You can customize your strategy as per your performance.

This also means that there’s low risk. Because you can see results in real-time, you can pause your campaigns without making any losses when it isn’t working.

Performance Marketing Challenges

There are several challenges that marketers and advertisers face when carrying out advertising campaigns. Here are some of the common ones.

Not doing Justice to the Budget

Your performance marketing campaigns are going to bear results when the allocated budget is spent wisely.

Once you ensure that your strategy produces considerable results, you’ll be able to allocate the budget your team requires as well as improve the efficiency per dollar.

Time and Resource Wastage for Fraud Detection

Ad frauds happen all the time in campaigns. It makes it difficult to realize whether the campaigns are performing well or whether the traffic coming in is accurate or not. Ad frauds have increased over the years.

However, there are several ad fraud detection tools as well that provide actionable and granular data to help optimize your marketing campaigns and boost your ROI.

These traffic detection tools constantly check the traffic to ensure it’s valid and also flags the suspicious ones bad. It also reduces the efforts of your marketing teams and ensures your budget is spent wisely.

Making Instant Changes to Long-Planned Campaigns

You’ve planned for weeks or months to get a campaign live. It can be difficult to suddenly modify it based on performance data. You may face questions in your mind such as:

  • When is it the right time to decide to make a change?
  • What data should you base your modifications on?
  • Do you take competitor performance data or customer feedback to make the change?

There’s no one-size-fits-all decision here. It’s important here thus to have sufficient data to help you analyze your campaigns. It’s important for you and your teams to gather data across all platforms as well as get subjective evaluation on it. Based on it, you’ll be able to make changes that drive significant conversions.

Not being able to Integrate Systems Together

Every marketing team have their own resources to execute campaigns – teams, tools, strategies, etc. On top of that, there are publisher relationships to monitor.

It’s not often that you’re able to integrate your tools and processes to launch seamless campaigns and gather uniform data from them. To help with things like ad detection and campaign performance monitoring, you’d need your reporting tools and processes to align.

Since most companies are not able to integrate their performance marketing operations, they lose several data points. This also means they are unable to make the necessary changes for efficient results. Tools that help break down traffic into granular data and offer ad hoc reports can help teams a lot.

Difficulty in calculating ROI

Marketers create plenty of impressions for their campaigns. However, when the platforms, channels, and strategies increase, it becomes difficult to keep the competition in check. With growing competition, retailers need even more data and budget to take assured decisions and bring results.

In this case, just impressions don’t cut it. It needs more metrics for analysis. For example, which audiences are interacting with your ads? Which stage of the customer journey are they in?

This is why it’s important to measure the ROI for each activity. This will not only let companies justify their budget and in the future but also be able to connect specific results to specific marketing activities.

So, it’s important to specify the metrics for each campaign and collect data from each of them. You also need to have the right resources to gather the data at regular intervals and in the right granularity.

Once you have the right metrics in place and align your campaigns with desired outcomes, you can track every single campaign touchpoint and their effectiveness. You’ll also be able to fix your data and budget as per your campaign requirements.

Performance Marketing Measurement & Metrics

One of the most important aspects of performance marketing is measurement or return on investment (ROI).

Performance marketing is all about getting measurable results. This happens when each single activity is measured against analyzed fixed business KPIs. Tracking metrics regularly will help in getting more data, which will bring in more insights.

Here are the key performance marketing metrics you need to track:

  • CPM – This refers to Cost Per Mille or Cost Per Thousand. This is the cost that the advertiser has to pay to receive 1000 impressions from their digital ad campaigns. Put more simply, to show your ad 1000 times to the customer, you’ll have to pay this cost. However, it’s important to remember that it simply reflects the cost to show the ad—it doesn’t include the actions taken by the viewers.
  • CPC – This refers to Cost Per Click. It refers to the cost for the number of times a visitor clicks on your ad. CPC is a better indicator of visitor engagement than CPM because in this case the visitor clicks on the ad and not just sees the ad. CPC is directly proportional to conversion i.e., a higher CPC means higher conversions.
  • CPA – This refers to Cost Per Action. In this case, the cost is for any specific action that you want the visitor to take. It can be signing up for a newsletter, downloading an eBook, or buying a product. This is one of the most popular metrics because it ties to a direct and actionable result.
  • LTV – This refers to Lifetime Value. It’s the predicted lifetime value of a single customer during their association with a brand or a company. LTV helps predict the approximate spend of customers based on their present spending activity. Innovative technologies such as predictive analytics help estimate the lifetime value. This helps brands frame strategies based on the data to boost ROI.

Performance Marketing Best Practices

Here are some of the things to keep in mind while crafting performance marketing campaigns to get the best results:

  • Build a strong landing page – Your ad is not the final landing point for your visitors. They are going to take the action on the landing page. So, a poor landing page can kill conversions. So, you have to design your landing page in such a way so that it relates to the ad as well as creates a good user experience for the customer. You must keep updating the content and keep auditing your page regularly for broken links or expired offers.
  • A/B test your goals – For long-term results, testing and measuring your campaigns are essential. With A/B testing, you can achieve various objectives such as conversion optimization, improving click-through rates, and increasing AOV.
  • Determine your traffic sources – Your traffic is an important element for performance marketing campaigns. You have to make sure that the traffic you’re getting is genuine and coming from reputed sources. If your traffic is spam, then you’ll lose credibility with your customers.
  • Always have a tracking mentality – Getting data should be your topmost priority. To get the most from your campaigns, you must keep testing, tracking, and analyzing. This will directly reflect in your sales and growth.
  • Don’t forget compliance – An underrated aspect of performance marketing is building strong relationships between brands and publishers. This is what helps you engage and convert your visitors. All of this falls apart when you don’t adhere to the advertising rules. Ensure that you keep an eye on the updated rules issued by The Federal Trade Commission (FTC).

How to build a performance marketing strategy

There are multiple performance marketing channels and platforms. Hence, it’s not easy to craft a strategy.

Here’s an easy to implement performance marketing strategy that you can customize as per your business needs:

Identify your business and campaign goals

Measurement and reporting for your performance campaigns depend on what goals you’re setting for them. Once you’ve set your goals, it’ll be easy to gather the data to see if you’ve met them or not. Whether it’s brand awareness or lead generation, setting goals is the key to performance marketing success.

Identify which channels you want to go for

A best practice in performance marketing is to go for multiple channels as it’ll help you diversify rather than putting all your eggs in one basket. This not only boosts the exposure and reach of your campaigns but also improves your chances of success.

Create and launch your campaign

Once you’ve crossed the planning stage, it’s time to finally create and publish your campaigns. There are some considerations to make at this point – identifying your audience, figuring out their pain points, and creating copy to meet those needs. Understanding your customers better is the key to success in this phase. You’ll also need to keep in mind the technical aspects of campaigns such as meeting ad and character sizes and limits.

Measure and optimize your campaign

This is where the data comes in. You’ll be able to access data from your performance marketing campaigns the moment you launch them. You may need to measure each campaign to gather the data from them. Stay on top of analytics and metrics to figure out the best-performing channels, proper utilization of funds, and audience engagement. This helps you not just to increase conversions and sales but also to determine which channels work best.

Correct the campaign errors

This step is for identifying the performance marketing challenges and improving on them. Some of the common problems are compliance issues, fraud problems, privacy regulation issues etc. By sticking to high-quality networks, you can avoid spams and frauds.

Want to take your business to new heights with performance marketing? Work with a digital marketing agency that prioritizes results over everything. Armed with a team of performance marketing experts and the latest technology, can help you get better conversions and more sales at lesser costs.

Start maximizing your revenue through performance marketing today. Schedule a call with the BrandStory team!