What is performance marketing and how your business can use it

Digital marketing continues to evolve in strides, and so new frontiers, new concepts, and new principles emerge in turn. Some of them reinvent the proverbial wheel to best address the new challenges marketers face. Others simply refine existing strategies, or consolidate various concepts under one umbrella. Performance marketing offers a notable example of the latter, as the term actually reflects multiple tried-and-tested marketing practices. But what exactly is performance marketing, and how can your business use it? Our New York digital marketing agency would like to devote this article to answering both of these questions.

What is performance marketing?

Initially, let us explore the term in some depth. Specifically, let us do so under 3 lenses:

  • What is its basic definition, and which existing marketing practices does it include?
  • Which payment models does it entail?
  • Which are this concept’s limitations?

To start with the basic definition, performance marketing is marketing that relies on outcome performance. In simple terms, it describes marketing where the advertiser only pays the advertising platform based on performance and results.

The performance marketing umbrella

Understandably, this definition alone should suggest that performance marketing is not a brand new marketing principle. Rather, it encompasses many existing marketing types and practices, starting with Pay Per Click (PPC) and its subsequent automation.

Depending on who you ask, and what definitions they use, this umbrella can reasonably include the following:

  • Search Engine Marketing (SEM).
  • Social Media Paid Ads.
  • Display Ads.
  • Sponsored content.
  • Affiliate marketing.

In brief, any marketing medium where the advertiser pays for results, not for simply being advertised, can constitute performance marketing.

Performance marketing payment models

To further illustrate this, we may next highlight common performance payment models. Marketers familiar with paid forms of marketing likely know them already, and they can all see use in this context.

  • Cost per Click (CPC). Perhaps the most notable, common paid advertising payment model, CPC has advertisers pay for generated clicks.
  • Cost per Lead (CPL). Similar to CPC, but a step further, this payment model has the advertiser pay for generated leads.
  • Cost per Thousand Impressions (CPM). Derived from “Cost Per Mille”, CPM has the advertiser pay a set amount per thousand impressions.
  • Cost per Install (CPI). A model specific to software, CPI measures total completed installations.
  • Cost per Sale (CPS). Finally, CPS has advertisers pay only for completed sales, regardless of impressions or clicks. Affiliate marketing offers the most common example of this model.

In all cases, performance marketing payments rely on specific, measurable results. Understandably, this shifts the burden of success to the advertising platform or partner, ensuring more safety and more predictable Return on Investment (ROI) for the advertiser.

Bluehost makes this point as well, as they explain PPC advertising in the following video:

The limitations of performance marketing

Nonetheless, despite its benefits, performance marketing also comes with some notable drawbacks and limitations. They are not insurmountable, by any means, nor do they take away from this principle’s promise. They do warrant attention, however, so let us note the 3 primary ones:

  • Vanity metrics. Advertisers may pay for vanity metrics that do not reflect actual success. A typical example of this comes with influencer marketing, where views may not equal engagement or sales.
  • Performance that does not equal in sales. For that matter, unless it’s CPS-based, performance marketing still relies on other marketing practices to secure conversions. Consider Conversion Rate Optimization (CRO) as a primary example.
  • Finally, performance marketing often has a more limited, campaign-specific, result-specific scope. This makes them relatively harder to align with broader marketing strategies.

Despite the advent of data-driven marketing, these drawbacks may still persist for years to come. It thus falls on each marketer and advertiser to always keep them in mind.

How your business can use performance marketing

With this context in mind, let us now explore how your business can approach performance marketing and leverage it effectively.

#1 Define your goals, audiences, and budget

First, as with all marketing endeavors, you may begin by answering 3 fundamental questions:

  • What do you intend to achieve?
  • Who are you marketing to?
  • How much budget can you devote to marketing?

While your exact budgeting will ultimately depend on you and your priorities, the other two offer universal metrics and tactics. First, you may craft SMART goals, as Ucop defines them:

  • What exactly do you intend to achieve?
  • How will you measure success?
  • Can your resources and market position secure your goals?
  • Do your goals align with your overall strategies?
  • Time-bound. When exactly should you expect your desired outcomes?

Next, you may identify your audiences and begin to segment them based on such characteristics as:

  • Demographics
  • Psychographics
  • Behavioral patterns
  • Perceived needs
  • Value

This will allow you to more accurately craft customer journey maps, in turn improving your marketing efficiency across journey phases.

#2 Pick your platforms

The next step, equally universal across marketing efforts, comes with selecting your platforms of choice. Here, you may begin considering both how each platform can best present your offer and reach valuable audiences.  As you do, you may note how your performance marketing can align with your organic strategies, as we will cover later.

This is a crucial step, as each platform differs significantly from the next. Consider, for example, the advertising options Twitter offers:

Thus, you may begin to evaluate your candidates through such questions as the following:

  • Where do your audiences reside? Do your valuable audience segments prefer Facebook, Twitter, Instagram, or another platform? If you’re a B2B business, perhaps LinkedIn?
  • What content do you produce? Next, consider how each platform frames your content. If you have great writers, you may opt for sponsored content. If you have robust SEO in place, perhaps SEM would serve you better.
  • Which goals are you prioritizing? Finally, which goals do you deem worthy of your budget? SEM might be better for leads, for example, while affiliate marketing may produce more sales.

These and similar questions should help you pinpoint which platforms and strategies to opt for. In turn, you may allocate your budget more wisely and secure better ROI.

For instance, if you aim for social media conversions over impressions, you may examine engagement rates instead of reach. In this regard, SproutSocial finds that Instagram actually has the advantage over the ever-popular Facebook, despite the latter’s larger audience base:

A graph on Instagram engagement rates.

#3 Engage meaningfully

Having done so, you may now begin refining your content to ensure meaningful engagement. Remember, each practice has its own unique characteristics; Facebook advertising is distinctly different from SEM, for example.

In all cases, however, some universal qualities help guarantee meaningful engagement. To illustrate, let us highlight the fundamentals:

  • Personalization. All marketing outreach hinges on personalization. This applies to inbound and outbound marketing tactics as well, from cold emails and LinkedIn sponsored InMails to SEO-friendly blog content. Thus, you may begin by tailoring your content to each individual audience segment to increase engagement probability and success rates.
  • Visual clarity. Next, ensure that your content immediately conveys your message and properly frames your proposition. If it is paid ads, examine your copy and refine it so it resonates with your audiences. If it is affiliate marketing, examine the layout, formatting, and tone. In all cases, be as clear and transparent as possible to entice your audiences to convert.
  • Authenticity. Finally, remember to embrace your platform’s aesthetic and shy away from “sales” language. Audiences increasingly value perceived authenticity, no matter your content type, which has given rise to influencer marketing over recent years.

As an example of the latter, Converse offers an excellent example of Instagram ads:

A Converse ad on Instagram.

#4 Align your performance marketing with other strategies

Finally, as we highlighted before, you may best leverage performance marketing when it aligns with your broader strategies. This is the “Relevant” aspect of SMART goals, and performance marketing exemplifies its value extremely well.

For examples of cross-strategy alignment, consider the following:

  • SEM and SEO. SEM may synergize excellently with SEO, by targeting keywords you cannot realistically rank organically for. Thus, aligning the two can significantly benefit your lead generation efforts.
  • Social media paid ads and organic activity. The same concept applies to social media advertising and organic activity. Namely, you may examine your activities’ results and insights, and complement them with specific paid practices.
  • Sponsored content and native content. Finally, sponsored content may align with your website’s native content as regards quality, tone, and even visual identity. Lead generation campaigns, for example, will benefit greatly from such refinements, as your sponsored content can effectively function as backlinks.

Of course, your final options in this regard will depend on your goals, resources, and practices in place.

Conclusion

In summary, performance marketing encapsulates various forms of paid marketing under pricing models that rely on results produced. This allows marketers to more easily measure their ROI, ensuring they only pay for demonstrable results. It does come with certain limitations, however, and it does require a thorough, prudent approach.

Hopefully, this exploration of the subject helped you get started. Should you need more help, please contact us and we will be happy to collaborate toward your goals.

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