Performance marketing is a term for online marketing and advertising in which a business pays a performance marketing agency only when a specific action occurs. For instance, the company pays a percentage of a sale to the agency when that sale can be attributed to a B2B lead the performance marketing agency generated.
Back in the good ole’ days of digital marketing, a company blasted its brand and messaging across every website on Earth with display ads and text ads and hoped for the best. After burning through reams of cash with middling results, companies are now understandably concerned with attributing sales to their digital marketing budget. Performance marketing changes the focus from vanity metrics like more visitors or more clicks and instead focuses on actual conversions (sales or goals) from digital marketing efforts. This makes digital ROAS (return on ad spend) much easier to track and justify for senior leadership at the company.
For a business, performance marketing makes a lot of sense, as the marketing agency usually reduces or eliminates their retainer or hourly fees in exchange for a percentage of sales attributed to their efforts. This lowers the risk for the company and potentially improves their ROI, as the results are 100% measurable. It’s a shared risk model of compensation.
What digital marketing channels are used in performance marketing?
Performance marketing companies drive sales and conversions through various digital marketing channels, including:
- PPC advertising
- Search engine optimization (SEO)
- Sponsored content
- Content development and marketing
- Social media ads
- Email campaigns
- SMS marketing
PPC advertising is the placement of pay-per-click ads on Google, Bing, Yahoo or similar platforms. This also includes display advertising and remarketing. Each PPC ad is written and targeted to attract buyers interested in the company’s product or service. Typically, a custom landing page is created for each ad campaign to better track user activity. CPC (cost per click) and CPM (cost per mille) are the most common metrics used in a PPC campaign (mille is Latin for “thousand” – put simply, CPM is a cost per view of an ad).
Search Engine Optimization, also known as SEO, is the optimization of text on the company’s website, as well as technical modifications to the website code. SEO is used to improve page rankings in search results and drive more website traffic through organic search. When used in performance marketing, SEO follows a strategy to acquire and convert potential customers at various points along the purchase path.
Sponsored content, a form of native advertising, is the placement of articles or guest posts written by the performance marketing company and placed on 3rd party websites, usually for a fee. A notice indicating it’s sponsored content appears somewhere in the article.
Content development and content marketing follow a strategy to write, distribute, and market content based on a specific message the company wishes to communicate. This could be through blogs on the company website or 3rd party websites, white papers, case studies, use cases, podcasts, videos, eBooks, press releases, infographics, and many other types of content.
Social media ads appear on platforms like Facebook, Instagram, LinkedIn, Twitter, YouTube, and Pinterest. They’re a type of PPC ad, but in most cases they are only shown on the social media platform (Facebook and Google’s YouTube own associated properties and the ads may show there). Each social media platform provides performance metrics for its ads.
Email campaigns – a type of direct marketing – are sent to potential and current customers who have opted-in to the company’s email list. Emails can be customized in many ways, including with the recipient’s first and last name and business title. Email campaigns can be quite complex and offer many types of targeting and messaging opportunities.
SMS marketing is advertising via text messages to mobile phones, a fast-growing marketing channel.
How to measure performance marketing
Performance marketing agencies use free software like Google Analytics, Google Search Console, and Bing webmaster tools, and paid or custom software to monitor the performance of their marketing channels. The data from these tools help to track changes in keyword ranks, growth in website traffic, sources of website traffic, how many clicks an ad receives, actions users take on landing pages, how many opens and clicks an email receives, growth of social media pages, cost per conversion, client acquisition cost (CAC), how long a user spends on a website, and hundreds of other metrics to measure performance. With this data, they’re able to tie sales to leads generated and pivot from one channel to another when necessary.
The most important consideration for performance marketing
The most important consideration for successful performance marketing is to have clearly defined business goals. Yes, more revenue YOY or more customers are goals, but they’re too broad for the performance marketing agency. The goal should be to promote specific products or services for a specific length of time and then measure results. This is a discussion to have with your marketing team at the outset – clearly defined goals keep the marketing and measurement tightly focused.
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