What is Performance Marketing?

Building and operating a business or brand requires more than the ability to provide high-quality products and services. Understanding your target audience is key to getting your goods in front of the right eyes. And knowing how to create and craft successful marketing campaigns is essential to closing clients. Using performance marketing is one of the best ways to promote your business, an idea, or even a specific product while minimizing risk.

But not everyone knows what performance marketing really is. Let's go on a journey to answer some questions you may have about performance marketing and what it can mean for your company.

  • What Is Performance Marketing?
  • What Are Performance Marketing Channels?
  • How Does Performance Marketing Work?
  • What is a Performance Campaign?
  • What Is The Difference Between Affiliate And Performance Marketing?

What Is Performance Marketing?

Performance marketing is a simple concept: pay a partner only when they achieve the agreed-upon goal. End of story right? Not so fast, it's complicated.

Asking what is performance marketing is important for just about any business, regardless of size and industry. Performance marketing is a form of marketing that allows retailers and business owners an opportunity to promote a business, product, website, or another form of content to prospective visitors or customers while setting their own rules, terms, and conditions.
In this risk-limited process, you can learn more about the target demographics and audience you intend to reach.

Marketing campaigns that are based on “performance” do not require businesses and individuals who are advertising to pay for promotions that fall flat or short of expectations. You are only required to pay when the partner achieves their goal of a sale, click, or referral.

Once you understand the benefits of performance-based marketing, you will feel much more confident in answering the question “what is performance marketing” the next time you begin planning your digital marketing strategy.

What Are Performance Marketing Channels?

Before you can truly understand performance-based marketing, it is important to familiarize yourself with performance-based marketing campaigns. However, I am not going to list them all here. We will focus on the most common and popular channels. This will be an overview of the type of marketing campaigns you may use to promote your own business. Some of the most commonly used marketing channels made available for performance-based marketing campaigns include:

1. Search Engine Marketing (SEM).

  • Ideal to promote a business or brand's official website.
  • Drive traffic to a specific link for a product or service to be purchased.
  • Help to boost your website's search engine optimization (SEO) in less time.
    • *pending the placement of your ad and the URL you are promoting on your website.
  • It can be very costly if you don't know what you are doing.

2. Social Media Marketing (SMM).

  • Your brand's engagement with your audience.
  • One of the quickest ways to dive into the realm of performance-based marketing.
  • Websites such as Facebook and Instagram provide you with the opportunity to launch campaigns based on specific variables and requirements set by you.
  • Using an intricate advertising platform such as Facebook Ads is one of the fastest ways to begin launching a performance-based marketing campaign for any business, regardless of your competition and the industry you fall in.

3. Native Advertising.

  • Creating paid ads that match the look, feel and function of the media format in which they appear.
  • It allows businesses to be seamlessly integrated into a website, community, or online platform …naturally.
  • Often found in social media feeds, or as recommended content on a web page.
  • Don't really look like ads. They look like part of the editorial flow of the page.
  • Non-disruptive to the consumer it exposes the reader to advertising content without sticking out like a sore thumb
  • It helps to connect with your prospective audience or community without risking your entire marketing and advertising budget.

4. Affiliate Marketing.

  • The purest form of pay-per-performance marketing.
  • Sales reps are only paid on a commission basis.
  • A very popular channel used to promote products and services via a group of online influencers.
  • Has a negative connotation due to a history of fraudulent activity. Because of this, affiliate marketing has evolved into being renamed:
    • Performance marketing.
    • Influencer marketing.
    • Referral marketing.
  • It can be a very powerful and cost-effective channel…if it is run properly by a trained affiliate manager.

5. Sponsored Advertising and Marketing Opportunities.

  • Help to generate more leads, sales, revenue, and referrals with paid advertisement buys on available partner
  • Not as appealing due to upfront cost without guarantees.
  • Using performance-based sponsorship opportunities, this channel can provide you with valuable insight into the most influential individuals and brands in your market
  • It also allows you to learn more about the wants and needs of your prospective partners.

How Does Performance Marketing Work?

Before you can launch a performance-based marketing campaign strategy, you must first familiarize yourself with the components involved in the process, such as:

1. Identifying a Target Audience.

First, identify the target audience and demographics you intend to target with your new performance-based marketing campaign. What age range, gender, and location do you intend to reach? Does your audience have a specific interest or hobby that is relevant to the campaign you have in mind? Make some choices already and start testing!

2. Segmentation.

Segmenting your audience into different factions is highly advisable. And it is critical when you are working with a limited budget and testing the waters. Target highly-specific individuals in four different segmentations:

  • Demographic segmentation.
  • Psychographic segmentation.
  • Behavioral segmentation.
  • Geographic segmentation.

Target the audience that has naturally generated the most sales for your products to this point. Once you have that mastered, you'll be able to branch out and test your secondary demographic.

3. Bid Amount.

Setting the bid amount on each lead, sale, or click you receive is another factor to consider. Research average bid and ad amount in your market and industry to learn how to compete for top spots online. If you bid too low, your advertisement is more likely to appear on a low-quality website. Low bids might put your ads on non-relevant websites as well, wasting your money on the wrong target audience.

Performance marketing focuses on the right audience and bid amount of advertisements

4. Quality & Relevance.

Consider the quality of the websites you intend to advertise on. Take a sample of a few sites taht are getting impressions. Ask yourself “are these websites likely to generate website revenue, leads, new email subscribers, or conversions for your eCommerce store?” A low-quality network will reduce the overall ability to share your performance-based ad with a relevant and wanting audience.

5. Conversion Rate.

When an advertisement is working on a website, turn up the volume. Conversations make it is more likely to be displayed, ultimately boosting your overall conversion rate. If your conversion rate is extremely low, it may be time to rework or reconfigure the specific ad in question. Also, let's not burn money when there are lots of better ways to spend.

Using these factors when learning more about what is performance marketing is essential to maintain a competitive edge. If you are not continually moving forward with better conversions, your strategy needs to be revisited. When you are familiar with what performance marketing really is, choosing third-party advertisers and marketing platforms is much easier. Now you can ensure you receive the results and gains you envision for your business.

What is a Performance Campaign?

Performance campaigns are marketing ads that are based on successful results. They allow you to properly measure all the metrics needed to make an informed decision. Data-driven marketing has given advertisers valuable insight into the performance of each campaign. That data gives the business owner the power to make informed decisions on where the budget is utilized.

Advantages of Performance-Based Campaigns.

Launching a performance-based marketing campaign is highly advisable for new business owners. Bootstrapping entrepreneurs are usually working with limited funds, so maximizing the marketing budget is critical. Performance-based marketing campaigns do not always require individuals to pay for the full amount of exposure.

Some of the most notable performance-based marketing benefits and advantages for both startups and existing companies include:

1. Highly-Targeted Campaigns.

  • Gain access to developing highly-targeted ads and campaigns for your business and brand.
  • Learn more about your prospective customers.
  • Understand levels of engagement with consumers.
  • Find products or services of yours that are most likely to drive traffic and sales to your business.

2. Fit for Any Budget.

  • Performance-based marketing is ideal for startups, individual entrepreneurs, or any business with a limited marketing and advertising budget.
  • Set your own budget (as low as a few dollars a day) in place while also bidding on specific actions you want to have completed by visitors and prospective customers.
  • The marketing and advertising budget remain in your control.
  • Much easier to determine just how your budget is spent and which advertisements or campaigns are the most effective.

3. Pay Only for Results

  • Determine what qualifies as a victory (sale, lead, click, etc).
  • Only work with partners that agree to be paid for that victory.
  • Pinpointing what you will pay for only after the results have been delivered by publishers, websites, and online platforms.
  • Minimize wasteful spending when launching digital marketing campaigns.

What Is The Difference Between Affiliate And Performance Marketing?

Affiliate marketing started 30+ years (here is a short history of affiliate marketing). Through the years, affiliate marketers gained quite a reputation in this marketing channel with fraudulent activities. They would do anything it took to make money, not thinking about the repercussions of the future. Because of this, all of the affiliate industry gained a negative connotation.

In recent years, the affiliate world has evolved into something more than just links and banner ads. Influencer marketing has become a popular term for the industry. Affiliate marketing has also been called performance marketing as well. However, while all affiliate marketing is considered to be a form of performance-based marketing, not all performance-based marketing campaigns are considered affiliate marketing strategies.

Affiliate marketing requires that individuals promote a product, service, or even an online web link in exchange for a commission. Affiliates are often beholden to using specific forms of advertising and promotion to help with generating sales. They may also find themselves limited or restricted with the campaigns assigned to them.

The old way of affiliate marketing: choose your link and good luck.

The true difference between affiliate and performance marketing can be summed up into one word: partnerships. Affiliate marketing has a black eye because of the distance in partnership between merchant and affiliate; there is a link, a commission, and both parties were on their way. With performance marketing though, the true value stems from building a mutually beneficial partnership. Both parties work together to create campaigns that convert better than traditional banner ads.

Even though affiliate marketing has a tainted history, performance marketing is the path to bringing back legitimacy to this channel. Seeing affiliates as partners, rather than just websites, is the key to a successful campaign. A good affiliate manager will know how to develop these relationships.

Conclusion

Working with performance-based marketing as a business owner or entrepreneur provides you with virtually endless opportunities to promote and spread the word of your business and brand online. If a set of advertisements is not performing well, you can simply stop it and try something new. The creative and media used within the ad itself can always be tweaked to maximize your budget. Understanding the significance of proper marketing strategies is key for any business owner, manager, or marketing director.

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2 thoughts on “What is Performance Marketing?”

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    Keep up the good work– and hope you all take care of yourself during the coronavirus scare!

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